Iraq fights to block Kurd oil from entering Texas


An oil tanker docked off the coast of Texas may struggle to unload 1 million barrels of controversial Kurdish crude oil destined for an unknown buyer in the United States, as Iraq's lawyers work feverishly to stop the sale process.

Kurdish oil tanker to offload in US

The tanker, United Kalavryta, was cleared on Sunday by the U.S. Coast Guard to unload its cargo onto smaller vessels that can navigate the Houston Ship Channel. But a sale would likely enrage the Iraqi government in Baghdad, which sees oil from Kurdistan as its own.

The U.S. government still officially recognizes the Kurdish north of Iraq as part of Iraq's sovereign territory, though the Kurdish regional government has wrangled repeatedly over the last year with the largely Shiite government in Baghdad about exporting oil—and generating profits—on its own.

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In recent months, the Kurds have expanded their control of oil facilities in the north further after a Sunni-led uprising effectively wiped out central government authority there.

While much of the world's focus is on the Sunni insurgency in the northwest of the country, international observers say the bigger threat that could break up Iraq is Kurdistan. The Kurds have long desired to have their own country, and if they are able to sell their own oil, they will have revenue independent of Baghdad.

'Stolen property'

At least one Houston-based maritime company, SPT, was notified by lawyers for the Iraqi government that it would consider any U.S. firm that aids the offloading of the crude oil to be "in wrongful possession of our client's crude oil."

A letter from U.S.-based law firm Vinson & Elkins states that the oil "is considered to be stolen property" because, according to the Iraqi Constitution, "all crude oil belongs to the people of Iraq, under the management of the federal government, which is represented by the Ministry of Oil." 

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Reached by CNBC, Vinson & Elkins declined to comment.

The United Kalavryta.
Source: United States Coast Guard

Simon Duncan, president of SPT Marine, said his company had not been contacted to help transport the oil, and even if it is, "We won't do it." 

It's believed that other Houston-Galveston-area firms that specialize in "lightering," or the offloading of oil from one vessel to smaller ones, have been served with the same notice.

—By CNBC's Michelle Caruso-Cabrera.