* Sale revenue heading to Turkey's Halkbank
* Turkish ministry says no word on arbitration yet
* Kurdish crude cargo sold to Mediterranean spot
(Adds analyst comment, context)
By Ahmed Rasheed and Isabel Coles
BAGHDAD/ARBIL, Iraq, May 23 Iraq filed for
arbitration against Turkey on Friday to stop exports of oil from
Kurdistan after European markets bought the first load of oil
piped from the autonomous region.
The move raises the stakes again in a long-running game of
political brinkmanship as Baghdad seeks to thwart Kurdistan's
moves towards greater self-sufficiency.
The request was filed with the Paris-based International
Chamber of Commerce and also targets Turkish state-owned
pipeline operator BOTAS for its role in facilitating oil exports
from Kurdistan without the Iraqi federal government's consent.
"By transporting and storing crude oil from Kurdistan, and
by loading that crude oil onto a tanker in Ceyhan, all without
the authorization of the Iraqi Ministry of Oil, Turkey and BOTAS
have breached their obligations under the Iraq-Turkey Pipeline
Agreement," the government said in a statement.
Both BOTAS and Turkey's Ministry of Energy said they had yet
to receive any information about the arbitration from either the
ICC or the Iraqi government.
Earlier on Friday the Kurdistan Regional Government (KRG)
said the tanker, carrying more than 1 million barrels of crude,
was bound for Europe, and that revenue from the sale would be
deposited in Turkey's Halkbank.
Kurdistan finished building the pipeline to Turkey late last
year and has been using it to pump oil into storage tanks at
Ceyhan, as well as exporting smaller volumes by truck.
"This is the first of many such sales of oil exported
through the newly constructed pipeline in the Kurdistan region,"
the KRG said in a statement.
The inaugural sale is likely to put further strain on
relations between Baghdad and the region at a time when
negotiations to form a new government are getting underway.
Baghdad has already cut funds to the Kurds this year as
punishment for their moves to export crude independently,
throwing the region into economic crisis.
The KRG said the oil revenue would be treated as part of the
region's share of the Iraqi national budget and vowed to comply
with United Nations obligations by setting aside 5 percent of it
in a separate account for reparation for Iraq's invasion of
Kuwait in 1990.
The KRG said it remained open to negotiations with Baghdad,
but analysts said the arbitration was likely to push the region
"Baghdad's legal challenge will likely accelerate the
Kurdistan region's movement towards full independence," said
Jordan Perry, principal MENA analyst at Maplecroft.
Turkish Energy Minister Taner Yildiz said on Friday the
first cargo had been sold into the Mediterranean spot crude
market: "This crude oil will possibly go to Italy or Germany,"
he said in comments broadcast on TRT television.
The pipeline brings a new oilstream onto global markets, one
which will compete with well-established sour grades.
The Kurdish crude in tanks at Ceyhan is a mixture of two
grades, Taq Taq and Tawke, market sources said. The tanks
contain a small amount of Kirkuk, which was left over in the
pipeline when it was shut down at the beginning of March.
The stream is currently a medium sour grade. The oil in
storage has an API gravity of around 31.3 degrees with a sulphur
content of about 2.7 percent, according to laboratory reports by
a local shipping agent that were seen by Reuters.
The grade is close to Iraq's Kirkuk grade, which has an API
gravity of around 31-32 degrees and a sulphur content of around
2.0 percent to 2.5 percent.
Russian Urals, the most traded sour grade in the
Mediterranean market, has a much lower sulphur content than the
Kurdish oil but its API gravity is quite similar. Urals has a
sulphur content of around 1.1 percent to 1.3 percent and an API
gravity of around 30-31 degrees.
(Additional reporting by Seda Sezer and Orhan Coksun in
Istanbul, Julia Payne in London; editing by Keiron Henderson and