UPDATE 1-Tanker with Iraqi Kurdish crude cleared to unload cargo off Texas

Sun Jul 27, 2014 7:20pm EDT

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(Updates with Coast Guard saying ship meets standards, State Department official comment)

By Erwin Seba and Terry Wade

HOUSTON, July 27 (Reuters) - A tanker carrying crude oil from Iraqi Kurdistan was cleared by the U.S. Coast Guard to unload its cargo at sea off Texas on Sunday as a State Department official signaled Washington would not intervene to block delivery of the controversial crude.

Coast Guard officials went aboard the tanker United Kalavrvta on Sunday and verified the ship and crew's ability to safely offload the oil, a Coast Guard spokesman said.

The ship set sail from the Turkish port of Ceyhan in June with a load of crude oil supplied by a new pipeline from the Kurdish oilfields.

Trading sources in Texas, New York, London and Geneva have been unable to identify the buyer of the United Kalavrvta's cargo. The oil could go to any one of the many refineries located along the U.S. Gulf Coast.

The ship carries approximately 1 million barrels of crude, which would fetch more than $100 million at international prices.

Sale of Kurdish crude oil to a U.S. refinery would infuriate Baghdad, which sees such deals as smuggling, raising questions about Washington's commitment to preventing oil sales from the autonomous region.

The U.S. government has expressed fears that independent oil sales from Kurdistan could contribute to the breakup of Iraq as the government in Baghdad struggles to contain the ultra-hardline Islamic State, a group of Sunni Islamist insurgents who have captured vast areas of the country.

But it also has grown frustrated with Iraqi Prime Minister Nuri al-Maliki's handling of the crisis.

The tanker anchored on Saturday night in an area off the port of Galeveston, Texas, where ships too large to transit the Houston Ship Channel offload oil to smaller tankers for delivery to the U.S. mainland.

Throughout Saturday and Sunday, the Coast Guard was in communication with the U.S. National Security Council, and departments of State and Homeland Security, said Petty Officer Andy Kendrick.

To deliver the crude the tanker only had to show it could do so in compliance with Coast Guard regulations, Kendrick said.

"We didn't have any extra stuff to impose on them," he said.

Crude offloading could begin as soon as the ship arranges a contract with a company that performs lightering, as the process is called, he said. Lightering, depending the size of the cargo, can take several hours and even days.

Attempts to contact the ship's owner and the vessel itself were unsuccessful.

A State Department official, speaking on condition of anonymity on Sunday because of the sensitivity of the issue, said officials were well aware the ship's location and cargo.

"This is a private commercial matter," the official said. "Our policy has not changed. Iraq's energy resources belong to all of the Iraqi people. As in many cases involving legal disputes, the United States informs the parties of the dispute and recommends they make their own decision with advice of counsel."

Washington has pressured companies and governments not to buy crude from the Kurdish Regional Government (KRG), but it has stopped short of banning purchases by U.S. firms.

The KRG has renewed its push for an independent state amid the latest violence roiling Iraq. Its relationship with Baghdad has deteriorated over what it sees as Maliki's role in stoking the crisis and the long-running dispute over oil sales.

Baghdad has threatened to sue anyone that buys Kurdish oil. (Additional reporting by David Brunnstrom in Washington, David Sheppard in London, editing by David Evans and Cynthia Osterman)

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