Israel turns to Kurds for three-quarters of its oil supplies
David Sheppard, John Reed and Anjli Raval

Guards protect an oil refinery near Erbil, in Iraqi Kurdistan (Photo credit should read SAFIN HAMED/AFP/Getty Images)©AFP
A section of an oil refinery is guarded as it is brought on a lorry to the Kawergosk Refinery, some 20 kilometres east of Arbil, the capital of the autonomous Kurdish region of northern Iraq, on July 14, 2014. The International Energy Agency (IEA) said on July 11, that an offensive by jihadists in northern Iraq had cut output by 260,000 barrels a day in June to 3.17 million, after fighting forced the closure of the country’s biggest refinery and slashed production from the giant Kirkuk field. 
Israel has imported as much as three-quarters of its oil from Iraq’s semi-autonomous Kurdish north in recent months, providing a vital source of funds to the cash-strapped region as it fights militants of the Islamic State of Iraq and the Levant (Isis).
The sales are a sign of Iraqi Kurdistan’s growing assertiveness and the further fraying of ties between Erbil and Baghdad, which has long harboured fears that the Kurds’ ultimate objective is full-scale independence from Iraq.
The imports highlight the significant inroads that oil from Iraqi Kurdistan is making into world markets, with Italy, France and Greece also emerging as big buyers. It is a trade conducted through secretive pre-pay deals brokered by some of the world’s largest oil trading companies, including Vitol and Trafigura.
Israeli refineries and oil companies imported more than 19m barrels of Kurdish oil between the beginning of May and August 11, according to shipping data, trading sources and satellite tanker tracking. This would be worth almost $1bn based on international prices over the period.
That is the equivalent of about 77 per cent of average Israeli demand, which runs at roughly 240,000 barrels per day. More than a third of all of the northern Iraqi exports, which are shipped from Turkey’s Mediterranean port of Ceyhan, went to Israel over the period.
Some of the oil may have been re-exported from Israel or put into storage tanks, industry sources say.
Traders and industry analysts have suggested that Israel may be acquiring the Kurdish oil at a discounted price, though officials in the Kurdistan Regional Government (KRG) deny this. Others have suggested it may be a way for Israel to funnel financial support to the Kurds.
Revenues from the oil sales have provided a lifeline to the Kurdistan authorities in Erbil. The KRG reached a deal with the Iraqi federal government last year to jointly export crude from the region, with the Kurds receiving a portion of the national budget in exchange. But that deal has come under strain as a result of the fall in oil prices.
Baghdad, which is struggling with a budget crisis, has made only limited payments to Erbil in recent months and, as a result, the KRG has sold more oil on its own account. Baghdad says Erbil did not send it enough oil.
The emergence of Israel as one of the biggest buyers of oil from Iraq’s north illustrates another fissure between Erbil and the federal government. Baghdad, like many Middle Eastern capitals, refuses to recognise Israel and has no official ties with the country. The US, a close ally of both Israel and the KRG, has urged Erbil to work with Baghdad on oil sales.
We do not care where the oil goes once we have delivered it to the traders. Our priority is getting the cash to fund our Peshmerga forces against Daesh [Isis] and to pay civil servant salaries
– Kurdish government adviser
The KRG said it did not sell oil to Israel “directly or indirectly”, but ties between Erbil and the country stretch back several decades, with both sides finding common ground as non-Arab, western-allied states.
“We do not care where the oil goes once we have delivered it to the traders,” a senior Kurdish government adviser in Erbil said.
“Our priority is getting the cash to fund our Peshmerga forces against Daesh [Isis] and to pay civil servant salaries.”
Israel’s government does not comment on the source of energy supplies, which it views as a matter of national security. Insiders say it continues to import oil from Azerbaijan, Kazakhstan and Russia, its main suppliers for much of the past decade.
Israel is by no means the only country that has been buying more Kurdish oil. Since May, Italian refineries imported about 17 per cent of supplies from northern Iraq, which have averaged more than 450,000 b/d over the period, while Greece and Turkey took 8 per cent and 9 per cent respectively. A minority of shipments will have been from Baghdad’s state oil marketer, with the exception of those going to Israel.
Another 17 per cent of northern Iraqi exports sailed to Cyprus, where it is normally transferred ship-to-ship — a tactic sometimes used by traders to disguise the final destination of oil sales.
Oil industry sources, including some close to the sales, said Vitol, the world’s largest independent oil trader, has been helping the KRG market its oil since early this year. Vitol declined to comment for this story.
Trafigura, which was identified as a major trader of Kurdish oil last year, did not comment.
Oil trader Petraco was also identified by three sources as helping the KRG with the sales. In an emailed statement, the company denied that it was currently working with the KRG.
Both Vitol and Trafigura had paid the KRG in advance for the oil, under so-called “pre-pay” deals, the sources said, helping Erbil to bridge its budget gaps.
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