UPDATE 1-Second tanker of Kurdish oil leaves Turkey despite Baghdad protest

Mon Jun 9, 2014 3:28pm EDT

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(Adds Iraq oil minister paras 4-7)

By Orhan Coskun and David Sheppard

ANKARA/LONDON, June 9 (Reuters) - A second shipment of Iraqi Kurdish crude has sailed from the Turkish port of Ceyhan, industry and government sources said, increasing the stakes in a battle with Baghdad over control of oil sales from the autonomous region.

The United Emblem suezmax tanker, carrying 1 million barrels of crude, sailed from the harbour on Turkey's Mediterranean coast on Monday, Reuters AIS Live ship tracking showed.

The shipment is the second to leave Ceyhan in three weeks after arriving by pipeline. At least 2 million barrels of Kurdish crude are now at sea, despite protests from Baghdad that only the central government has the right to sell Iraqi oil.

Iraq's oil minister condemned the exports.

"What happened in my view was the biggest mistake that has been made by the Kurds and the Turks...and the Iraqi government will take severe measures," Abdul Kareem Luaibi told a news briefing in Vienna on Monday.

He repeated that Baghdad would sue the Turkish government and Turkish state owned pipeline operator Botas for facilitating the sale of the crude. Baghdad was in the process informing the United Nations about Ankara's role in the shipment, he added.

"We have no choice but to go to arbitration and they (Turkish government) have been informed," Luaibi said.

The Kurdish Regional Government has said the oil shipments are designed to show Baghdad it will exercise control over its own oil sales, but so far it has failed to find a buyer for its first tanker shipment, which left Ceyhan over two weeks ago.

Neither Kurdistan's Ministry of Natural Resources nor a spokesman for the regional government were immediately available to comment.

THE HUNT FOR BUYERS

Last week the first tanker, the United Leadership, sailed away from Morocco after the North African country declined to let the vessel unload its 1-million-barrel crude cargo at the Mohammeddia refinery.

Italy has also warned oil traders they face potential legal action if they buy the Kurdish crude, after discussions with the Iraq central government at its embassy in Baghdad.

The regional government originally said the oil would be sold to German or Italian refiners, but so far the United Leadership has not sailed towards those destinations. On Monday, it remained about 30 miles (48 km) off the Moroccan coast.

The United Leadership and the United Emblem are listed in tanker tracking as "For Orders", an industry term indicating that a final buyer of the crude has not yet been arranged.

Until last month, Kurdish oil exports were constrained to a small volume sent by truck to two Turkish ports on the Mediterranean. Iraq's state marketer made threats of legal action but did not follow through.

But the start of deliveries on a new Kurdish pipeline that currently pumps around 100,000 barrels per day to Ceyhan means significantly higher revenues for the region.

Iraq and Kurdistan have been trying to reach a political agreement over oil sales, but five months after the pipeline started up there had still been no final decision, prompting the regional government to go it alone.

Kurdish crude stored at Ceyhan had reached 2.8 million barrels at the end of last week, Turkish Energy Minister Taner Yildiz said on Friday. (Additional reporting by Humeyra Pamuk in Istabul, Isabel Coles in Erbil and Ahmed Rasheed in Baghdad, Rania el Gamal and Peg Mackey in Vienna; Editing by Dale Hudson)

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