The ongoing crisis in Iraq has revived fervid calls for Kurdish independence, and yet the immediate viability of a future Kurdish state depends overwhelmingly on a single factor: stable oil exports.
Baghdad froze the Kurdistan Regional Government’s (KRG) budget allocation at the beginning of March, in retaliation to Erbil signing an oil export deal with Turkey. This threw the KRG’s economy into turmoil, and explains why the recent sale of Kurdish oil from Turkey’s Ceyhan port—and Israel’s purported purchase—is so contentious. Though the first tanker carrying Kurdish oil still sits at anchor off the Moroccan coast, Reuters reported two weeks ago that the SCF Altai unloaded at Israel’s southwestern port of Ashkelon. Days later, the KRG confirmed receipt of sale revenues in its accounts at Turkey’s Halkbank.
Reactions were as swift as they were predictable. Hussain al-Shahristani, Iraq’s deputy prime minister for energy, called the sale a conspiracy. The Kurds denied selling Israel oil “directly or indirectly.” For its part, Israel kept mum—citing its policy not to comment on energy imports to private refineries. The independent dealer, which has a vested interest in not baring itself to Baghdad’s retribution, remains anonymous.
The story, as reported, leaves several questions unanswered. Did Israel purchase the oil, and did Kurdistan know Israel was the buyer? What does the purchase signify about the Israel-KRG relationship, and how might it complicate Israel’s relations with the U.S.? Sifting through the narrative clarifies the material and strategic benefits for both Israel and the KRG, and augurs the beginning of a vocal Israeli policy that defies the U.S’s declared interests in Iraq.
The KRG denied direct or indirect sales to Israel for obvious reasons. Though Kurdistan has pursued bolder, more autonomous policies in recent years, foreign policy remains the exclusive domain of Baghdad. Iraq maintains neither diplomatic nor economic relations with Israel, and flouting this policy might be deemed incendiary. Therefore, Kurdistan requires plausible deniability, and its oil sales through independent broker-dealers are as much precautionary as they are convenient. The “directly or indirectly” denial may have led every news story, but KRG officials left themselves considerably more wiggle room. The KRG sold to “different, reputable buyers,” with the goal “to maximize revenues for Kurdistan and Iraq.”
More plainly, the KRG sold to distributors, with neither control nor concern over the final destination. This formulation—denial of sale to Israel, followed by mannered obliviousness vis-à-vis the end buyer—has been reiterated by multiple government officials. Kurdistan’s primary objective is to lubricate the market for its product, and one reliable end purchaser may be all that is required to drive other dealers and countries into this lucrative market for competitively priced oil.
The view from Israel is hazier, but begins with the SCF Altai’s port of call—Ashkelon, Israel. Ashkelon is located a mere 20 kilometers south of Ashdod, the main commercial port in the area. So why would the SCF Altai unload at a secondary port? Because Ashkelon boasts one distinguishing feature: oil storage facilities.
If Israel received Kurdish oil with the intention of storing it, two scenarios are plausible. In the first, Israeli companies—with government consent—purchased the oil because the price was simply too good to pass up. Currently, Israel receives most of its 280,000 barrels-per-day from Azerbaijan, Russia, and some undisclosed sources. Since Kurdish oil arrived at a substantial discount—due to the Kurds’ eagerness to sell and the shallowness of the market—Israeli companies may have purchased and stored the oil for domestic consumption.
If Kurdish oil develops into a reliable source, Israel gains negotiating power in its future energy contracts. And if Kurdistan’s relations with the Iraqi government continue to devolve—or if Iraq continues its descent into violent chaos—the Kurds may substitute access to Basra’s ports for an Israeli route to the Red Sea, via the Trans-Israel pipeline between Ashkelon and Eilat, and onward to the lucrative, energy-thirsty markets of Asia.
In the second scenario, the sale of Kurdish oil may be technically correct yet effectively misleading. Israel may be storing the oil because the Kurds have not yet found an end buyer. The money transferred to KRG accounts at Halkbank would then mean Israel has either informally loaned KRG money or Israel has assumed the liquidity risk of the Kurdish oil shipment.
Both scenarios suggest that the Kurdish-Israel relationship has matured significantly. At least since the 1960s, Israel has provided intermittent security assistance and military training to the Kurds. This served mostly as an anti-Saddam play—keeping him distracted as Israel fought two wars against coordinated Arab neighbors—but mutual understanding of their respective predicaments bred Israeli-Kurdish affinity as well. All signs point to this security cooperation continuing today. Israeli procurement of affordable Kurdish oil would not only indicate a strengthening of economic ties, but also an Israeli lifeline to budget-starved Erbil that suggests a strategic bet on the Kurds in an evolving region.
With the U.S. still adamant about a unified Iraq, Israel’s strategy places it at loggerheads with its foremost ally. As has been the case with the negotiations over Iran’s nuclear program, Israel’s leaders have not hesitated to highlight their policy divergence from the U.S. over Iraq, too. President Shimon Peres, in his meeting with President Obama, spoke of recognizing true friends and holding them close, and included the Kurds as a prime example. Days later, in a speech at Israel’s Institute for National Security Studies, Prime Minister Benjamin Netanyahu said, “It is upon us to support the Kurds’ aspiration for independence. They deserve it.”
It is implausible that Israel believed it could lead international opinion on Kurdish independence; more likely, Israel aimed its statements at the U.S. When the 80,000-ton SCF Altai docked in Ashkelon, it remained in port for more than two and a half days—a moderately protracted stay for a tanker of that size unloading a shipment. Did Israel face U.S. pressure not to receive the Kurdish crude, with the tanker idling in port? It is one plausible explanation. If so, the dual Peres-Netanyahu statements constitute a sharp riposte. Israel proclaimed its support for a longtime covert friend. With so few reliable friends remaining, it seems to have publicly challenged the U.S. to do the same.