Iraq’s Kurdish region, which has halted crude exports in a row with Baghdad, owes the central government more than $5 billion and is smuggling the oil it produces through Iran, Iraqi officials said Monday.

"Kurdistan does not have any refineries to refine oil, so the biggest part is being smuggled outside Iraq, especially through the Iranian border," Deputy Prime Minister for Energy Affairs Hussein al-Shahristani told a news conference.

Oil Minister Abdelkarim al-Luaybi said the government had detailed information on trafficking routes being used, including to Afghanistan.

"We have detailed reports on the areas from which the oil is being smuggled, going in the direction of Iran, and which then goes to the Gulf through Bandar Abbas and Bandar Khomeini, and is being sold at lower prices than global prices," Luaybi told the same news conference.

"There are some quantities (of oil) that are going to Afghanistan through Iran," he added.
Kurdistan on Sunday stopped its crude exports entirely after arguing the central government had withheld $1.5 billion owed to foreign oil companies working in the region.

"After consultation with the producing companies, the ministry (of natural resources) has reluctantly decided to halt exports until further notice," the Kurdistan regional government said in a statement on its website.
"There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming."

The statement said exports would be diverted to the local market for processing and refining.

Shahristani said Kurdistan had deprived the central government of billions of dollars by its reduced exports.

"The total value of oil which has not been exported in 2011 is $3.547 billion, and for the year 2010, the value of oil that has not been handed over by the region is $2.102 billion," he said.

"The government must look into procedures to protect the wealth of Iraqis and to take back this right," he said, adding the funds lost should be cut from Kurdistan’s allocation in the federal budget.

Source: Zawya & AFP