Reuters - By Ahmed Rasheed
BAGHDAD - Iraq's Oil Ministry has cut supplies of some fuel products to the northern Kurdish region by 50 percent in response to the Kurds selling what they say is excess kerosene, fuel waste and naptha to Iran, officials said.
The move threatened to aggravate already tense relations between Iraq's minority Kurds and the Arab-led government in Baghdad, at a time when U.S. forces which have acted as a buffer between the two since the 2003 invasion are starting to leave.
The decision to cut supplies to the semi-autonomous Kurdish Regional Government was ordered by Oil Minister Hussain al-Shahristani, Oil Ministry documents obtained by Reuters showed.
"Based on instructions from the oil minister, it was decided to cut the allocation of kerosene and diesel fuel sent to provinces in the Kurdish region by 50 percent until further notice," one document said.
An Oil Ministry official who declined to be named said the decision was taken in response to an acknowledgement last month by Kurdish natural resources minister Ashti Hawrami that the region was selling surplus oil products to private companies.
Those private companies were exporting the products through neighbouring Iran, a challenge to U.S. efforts to impose sanctions on Iran.
The exports have put further strains on Kurd-Arab relations.
Shahristani has said any exports of crude oil would be illegal because the law only allows the State Oil Marketing Organisation to sell crude abroad. But he has also complained about the resale of refined products because Iraq does not produce enough to be self-sufficient and has to import.
NEW OIL FIELDS
"The Kurdish regional government is allowing the illegal export of refined products to take place while the federal government has to spend millions importing refined fuels because of a shortfall," the Oil Ministry official said.
Kurdish officials condemned the decision to restrict kerosene and diesel supplies to their region, and said they would make every effort to ensure fuel prices did not rise.
"The decision to cut fuel supplies is unjust and we will do our best to stop any negative implications," Serwan Abu Bakir, a senior official at the Kurdish natural resources ministry, told Reuters on Sunday.
Iraqi Kurdistan and Baghdad have been at loggerheads for months over oil deals the Kurds signed independently with foreign firms. The Arab-led government in Baghdad refuses to pay the firms, and oil exports from Kurdistan stopped last year.
Baghdad's hand has been strengthened by a series of deals to develop oilfields outside the Kurdish region that could turn Iraq into one of the world's top three crude producers. That has made the government feel less dependent on potential revenues from the export of Kurdish oil.