http://www.nytimes.com/2010/07/09/world/middleeast/09kurds.html?_r=1
Key excerpts:
“Even as the United States imposes new sanctions on Iran, one of the biggest gaps in the American strategy is on full display here in Iraq, where hundreds of millions of dollars in crude oil and refined products are smuggled over the scenic mountains of Iraqi Kurdistan every year.”
“Smuggling of oil and other goods and commodities along Iraq’s porous borders thrived in the 1990s, when Iraq was under international sanctions. But the semiofficial nature of the current trade
underscored how business interests had trumped the messy politics of Iraq and the region.”
“The stream of tankers into Iran continued without interruption during an Iranian military campaign last month against Iranian Kurdish separatists operating at the border. Hundreds of tankers, each with a capacity of at least 226 barrels of crude oil and refined products, enter Iran every day from Penjwin and two other border posts in Iraqi Kurdistan, Kurdish officials say.”
“The trade is supported by an estimated 70 mini-refineries, known in the industry as topping plants, said the Kurdistan region’s oil minister, Ashti Hawrami. They are dotted around the Kurdistan region and Kurdish-controlled areas in nearby Kirkuk and Nineveh Province, he said, and many of them are unlicensed”
In a rare interview in May, Mr. Hawrami said only fuel oil and byproducts like naphtha were being sent to Iran after processing the region’s own crude at two privately owned refineries to meet the internal market’s needs and run a local power plant. He said any extra revenue that accrued to the region from this business was being kept out of the Kurdistan government’s finances and deposited in a separate bank account to be reconciled with Baghdad in the future, once the two sides resolved their differences.”
“Analysts say that the Kurdish region’s oil trade with Iran provides a revenue source that it does not have to share with Baghdad, at least for now, diminishing its reliance on exports to Turkey. It also grants them leverage in resolving oil and internal border disputes with Baghdad.”
“Mr. Malla-Nuri wants revenue from the Iran trade to flow into the region’s budget after deducting what is owed to the rest of Iraq — 83 percent, according to current arrangements.The region’s prime minister, Barham Salih, is also reportedly pushing for this but is being met with fierce resistance, even from his own party, which is headed by Iraq’s president, Jalal Talabani.”
“Mr. Salih’s task is further complicated by an acrimonious
relationship with the regional oil minister, Mr. Hawrami, who is backed by the region’s president, Massoud Barzani.”
“Mr. Talabani’s party has had a so-called strategic agreement with Mr. Barzani’s party since 2005, allowing them to divide the region’s political, economic and military power. This applied to the oil trade with Iran as well, according to a top Kurdish official who requested anonymity because he belonged to one of the governing parties.”
The Kurds along with a lot of other people have been smuggling oil since the 1990s sanctions, and lots of people have known about it as well. The article in the NY Times was obviously done for political reasons to pressure Baghdad into letting the KRG export oil.