Kurds halt oil exports: $6 billion owed to traders

The suspension of oil exports from Kurdistan has led to the interruption of repayments of six billion U.S. dollars in debt to energy traders such as Vitol and Petraco, trade sources told Reuters. Oil exports from semi-autonomous Iraqi Kurdistan to Turkey's Mediterranean port of Ceyhan were suspended on Saturday after Iraq won an arbitration case saying Turkey had violated an agreement by allowing Kurdistan to export oil without Baghdad's consent. The export ban means Kurdistan cannot pay its debts with crude supplies and no alternative solutions have been found.

The world's largest trader, Vitol, and its smaller rival, Petraco, each owe about $750-800 million, according to three trade sources, which estimate Kurdistan's total debt to traders who paid for the oil in advance at about six billion dollars. The Kurdistan government declined to comment. After the court ruling, the Kurdistan government said a delegation would soon travel to Baghdad to resolve the issues.

The suspension caused oil prices to rise, as Kurdish exports account for about 0.5% of the world's oil supply and are a major source of crude for Mediterranean refiners. Some oil companies began shutting down production in Kurdistan this week. Iraq, OPEC's second-largest producer, exports the lion's share of its oil from ports in the south of the country on the Middle East Gulf. Baghdad wants to run oil exports through its state marketing firm, SOMO, and requires that oil sales proceeds be deposited in an independent bank account controlled by the Kurdish government and overseen by Baghdad, an Iraqi Oil Ministry legal adviser said.