Kurdish Peshmerga fighters in northern Iraq
Kurdish Peshmerga fighters in northern IraqReuters

Israel has imported as much as three-quarters of its oil from Iraq’s semi-autonomous Kurdish north in recent months, The Financial Times reported on Sunday.

The move provides a vital source of funds to the cash-strapped region as it fights Islamic State (ISIS) jihadists, according to the report.

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, the newspaper noted. 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.

The report was based on shipping data, trading sources and satellite tanker tracking. This data found that Israeli refineries and oil companies imported more than 19 million barrels of Kurdish oil between the beginning of May and August 11. This would be worth almost $1 billion based on international prices over the period.

That is the equivalent of about 77 percent of average Israeli demand, which runs at roughly 240,000 barrels per day, according to The Financial Times. 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 told the newspaper.

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.

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 in Baghdad.

Baghdad, like many Middle Eastern capitals, refuses to recognize Israel and has no official ties with the country. The United States, a close ally of both Israel and the KRG, has urged Erbil to work with Baghdad on oil sales.

The KRG made clear it did not sell oil to Israel “directly or indirectly”, but The Financial Times noted 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, adding, “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 said it continues to import oil from Azerbaijan, Kazakhstan and Russia, its main suppliers for much of the past decade.

According to The Financial Times, Israel is by no means the only country that has been buying more Kurdish oil. Since May, Italian refineries imported about 17 percent of supplies from northern Iraq, which have averaged more than 450,000 b/d over the period, while Greece and Turkey took 8 percent and 9 percent respectively.

Another 17 percent 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, according to the newspaper.

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.