Report: Majority of Israeli oil imported from Kurdistan

Importing crude from Erbil could be geopolitically, economically favorable for Jerusalem, says expert.

AUGUST 24, 2015 02:41

Updated: AUGUST 25, 2015 04:08

A Kurdish oil tanker is seen off the coast of Ashkelon (photo credit: REUTERS) — A Kurdish oil tanker is seen off the coast of Ashkelon

(photo credit: REUTERS)

Israel may be importing some NIS 3.84 billion-worth of oil from the semi-autonomous northern Iraqi region of Kurdistan, a move that could have geopolitical and economic ramifications for both parties.

On Sunday night, The Financial Times reported that Israel had imported as much as 77 percent of its oil supply from Kurdistan in recent months, bringing in some 19 million barrels between the beginning of May and August 11. During that period, more than a third of all northern Iraqi exports, shipped through Turkey’s Ceyhan port, went to Israel, with transactions amounting to almost $1b., the report said, citing “shipping data, trading sources and satellite tanker tracking.”

In response to the claims, Israel’s National Infrastructure, Energy and Water Ministry said it “does not deal with the sources of oil imported by private companies.”

Nonetheless, Dr. Amit Mor, CEO of the Eco Energy Financial and Strategic Consulting firm, confirmed to The Jerusalem Post that “for some time, Kurdish oil [has been arriving] to the Ashkelon petroleum port.” In all likelihood, he explained, the oil was being stored at the Eilat-Ashkelon Pipeline Company facilities for commercial reasons, by international trading firms and investors. Israel’s refineries may then be purchasing the oil from the international companies, he added.

Importing Kurdish oil could be beneficial to Israel from both geostrategic and economic perspectives, according to Mor.

“Although I don’t think the Kurds are having major difficulties in exporting their oil these days, it is very sensible for the Israeli refineries to purchase Kurdish oil via Turkey’s Ceyhan petroleum port, as it takes only one day of sailing for oil tankers to reach the Ashkelon petroleum port. Such is also the case for [Azerbaijani] oil,” he said.

“In addition, from a geopolitical perspective, it should be considered a favorable supply source for Israeli consumers, since by utilizing this oil, they indirectly support the Kurdish cause.”

The Financial Times report suggested that some of the oil might be in storage tanks in Israel or re-exported to other destinations.

Citing traders and industry analysts, the report also said that Israel could be acquiring the oil at a discounted price – a claimed denied by the Kurdistan Regional Government – or purchasing the resource as a means of providing financial support to the Kurds.

Although the regional government told The Financial Times that it did not sell oil to Israel either “directly or indirectly,” a senior government adviser said the country did “not care where the oil goes once we have delivered it to the traders.

“Our priority is getting the cash to fund our Peshmerga forces against Daesh [ISIS] and to pay civil servant salaries,” the adviser added.

Many other countries besides Israel have been increasing their Kurdish oil purchases, with Italian refineries importing about 17% of their supplies from northern Iraq, Greece importing 8%, and Turkey importing 9%, the London-based paper reported.

While the shipments are likely dominated by Kurdish oil, the report said that some of the crude might have come from Baghdad’s state oil marketer, with the exception of that heading to Israel.

The Financial Times report also discussed how an additional 17% of northern Iraqi exports went to Cyprus, where oil is often conveyed from ship to ship in order to mask the final destination of the product.

Regardless of their trading status today, Israel and Kurdistan have a history in the oil trade that precedes even the establishment of the State of Israel.

In 1933, the British Mandate commissioned a pipeline from the Kirkuk oil field in Kurdistan, to Haifa, via Jordan, explained Yashar Ben Mordechai, a private consultant in the energy industry, who served as the CEO of Oil Refineries Ltd. (ORL Bazan) for 11 years. The infrastructure was administered by the Iraqi Pipeline Company, he said.

Five years later, an oil refinery in Haifa began operations, running on the Kirkuk oil until 1947, he told the Post. Flow of the oil stopped, and never resumed, when the War of Independence began, he said.

“The Kurdish oil was the only oil that the refineries were operating on when they were built for about nine years,” he added.

Although he said that he is unaware of the current makeup of the Israeli oil mixture, because he left his ORL position several years ago, Ben Mordechai explained that Israel typically uses a basket of oil available in the region – depending on pricing and other factors.

“It always depends on the mixture of the crude oils that the oil refineries need at a certain amount of time,” he said. “It’s a matter of optimization.”

The Foreign Ministry, meanwhile, had no response to the Financial Times report and would not confirm whether the figures quoted were correct.

Interior Minister Silvan Shalom, who served as the national infrastructure, energy and water minister in the previous government, said that Israel as a country no longer bought oil and had not done so for dozens of years, with oil being bought instead by private concerns.

These companies, he said, do what they want and have the ability to purchase oil wherever they want in the world for the lowest price possible.

“Buying cheap oil is legitimate, legal and the right thing [to do],” he said.

Herb Keinon contributed to this report.