Iraq's northern Kurdish region is cracking down on fuel oil smuggling through the area and across Iraq's borders, the government of the semi-autonomous region said on Sunday.
The Kurdish Regional Government (KRG) issued a statement in response to a New York Times story on Friday that said hundreds of millions of dollars worth of crude and refined products were smuggled through the mountains of Iraqi Kurdistan every year.
The sales were blunting the impact of U.S. sanctions on fuel sales passed into law earlier this month that aim to curb supplies to the Islamic Republic, the NYT reported.
The KRG said that the only crude exported from the Kurdish region flowed through the official route, Iraq's northern pipeline to the Turkish Mediterranean terminal of Ceyhan.
Still, smugglers had shipped fuel oil refined outside the Kurdish region over the Kurdish region's borders, according to the statement. Subsidised fuel oil sales elsewhere in Iraq, while designed to support the economy, had created an opportunity for profiteering, the KRG said.
"The KRG is committed to working with the Federal Government to eliminate permanently all such profiteering in fuel oil, not only in the KRG but also along the entirety of Iraq's international borders," the statement said.
Among the measures would be mandatory licensing of all fuel oil tankers entering the Kurdish region, the statement said.
Iraqi Oil Minister Hussain al-Shahristani said only the central government, through the State Oil Marketing Organisation (SOMO), had the right to export Iraqi crude.
"Any other arrangements to export oil to any country is smuggling," Shahristani told reporters at an investment conference in Baghdad. "It's forbidden by Iraqi laws and we will be taking action if we are made aware of it."
Subsidies throughout the region have created opportunities for smuggling, and sources in top oil exporter Saudi Arabia said on Sunday that it was investigating the export of products intended for domestic use.