Iraqi Kurds say will sue Baghdad if it blocks oil sales
* Letter threatens suit if Baghdad continues to hamper KRG exports
* Iraq's Supreme Federal Court blocks injunction attempt
* KRG, Baghdad disagree over meaning of court ruling
LONDON, July 3 (Reuters) - Iraq's autonomous Kurdish region has hit back at Baghdad over independent oil exports, a letter from the Kurdistan Regional Government (KRG) showed, threatening to counter sue the central government for trying to block its sales.
The strongly worded letter shows growing confidence from the Kurdish capital Arbil in the long-running oil sales dispute, as Baghdad struggles to regain control of swathes of territory lost to a Sunni Islamic militant insurgency.
The letter, addressed to Iraqi Oil Minister Abdul Karim Luaibi from KRG Natural Resource Minister Ashti Hawrami, said the Kurds would pursue legal action by the middle of this month if Baghdad does not stop its "interference".
"(The) KRG will bring civil, and where necessary, criminal proceedings against your Ministry and any person, foreign advisor, or any entity conspiring with your Ministry in any form," Hawrami wrote, in the letter dated June 29 and carried on a KRG website. He did not specify a court for the action.
The autonomous Kurdish region has been trying to establish greater financial independence from Baghdad by selling its own oil production directly on international markets. It has largely been spared the violence affecting much of Iraq.
Baghdad has cut the KRG's budget since January over the dispute, arguing the sales are illegal, and has repeatedly threatened to sue any firm that buys oil from the autonomous region.
But since the KRG took control of the northern oil hub of Kirkuk amid the retreat of the Iraqi military from the Islamic State-led insurgency, the autonomous region has been emboldened.
On Thursday, the president of Iraq's Kurdish north asked the region's parliament to prepare the way for a referendum on its long-saught goal of independence.
In the letter, Hawrami said Baghdad has treated the 2005 Iraqi constitution with "contempt", arguing it was designed to allow the autonomous Kurdish region to export its own oil.
"These actions of your Ministry are clearly politically motivated, hostile, illegitimate, and without constitutional basis, and contrary to the fundamental interests of the people of Iraq," the letter said.
BAGHDAD SUPREME COURT
The KRG has also been buoyed by a ruling by Iraq's Federal Supreme Court, which denied Iraq's Oil Ministry request for a preliminary injunction against the KRG's exports.
Hawrami said this is evidence they are permitted to export their own oil under the country's 2005 constitution, though Baghdad has dismissed their interpretation of the Supreme Court ruling.
"This Court decision requires you to ensure that your Ministry immediately desists from any further actions to directly or indirectly interfere with the KRG's export of crude oil," Hawrami said in the letter.
Iraq's oil ministry called the KRG's stance on the ruling "false and misleading" saying in a statement the court made "no ruling on the substance of the case".
Tensions between the Kurdish regional capital Arbil and Baghdad have increased since the start-up of a new KRG-controlled pipeline to the Turkish port of Ceyhan in May.
The autonomous region has been exporting around 125,000 barrels per day to Ceyhan on the line, with plans to shortly double that number, but so far it has struggled to sell some of the tankers as potential buyers come under pressure from Baghdad.
Of the four tankers that have loaded the KRG's pipeline oil since May, only one has successfully delivered into an Israeli port after executing a ship-to-ship transfer in the Mediterranean. The buyer has not yet been revealed.
The KRG has denied selling oil to Israel. (Additional reporting by Dmitry Zhdannikov in London, editing by William Hardy)