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Washington, July 9 (ANI): The smuggling of crude oil and refined products to Iran by Iraqi Kurds is not only undercutting recent American sanctions on Tehran, but also worsening tensions within Iraq over how to divide the country’s oil profits.

According to a senior American official in northern Iraq, the scale and organization of the trade has raised concerns in Washington, as officials fear that proceeds from the sales could be flowing to corrupt Iraqi politicians.

“The people are being scammed, but by whom, we do not know,” said Hamid Mohammed, an Iraqi tanker truck driver.

The smuggling of oil and other commodities along Iraq’s porous borders has been thriving since the 1990s, when Iraq was under international sanctions. The stream of tankers into Iran continued without interruption during an Iranian military campaign last month against 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 Kurdistan,” the paper quoted Kurdish officials, as saying.

While much of the refined product is used in Iran, which sorely lacks refinery capacity, the crude oil is trucked all the way down to the Persian Gulf ports of Bandar Bushehr, Bandar Imam Khomeini and Bandar Abbas, where it is emptied into reservoirs or loaded onto ships, according to drivers.

Kurdistan’s Oil Minister, Ashti Hawrami has said that only fuel oil and byproducts like naphtha were being sent to Iran after processing in the region’s own crude at two privately owned refineries to meet the internal market’s needs and run a local power plant.

“The trade is supported by an estimated 70 mini-refineries, known in the industry as topping plants,” Hawrami added.

Abdul-Karim al-Luaibi, Iraq’s Deputy Oil Minister for Production, said that he was unaware of oil exports to Iran from the Kurdistan region, and added that all mini-refineries were illegal.

“They bear responsibility for this,” Luaibi said referring to Kurdish authorities.

In May, the central government approved a tentative deal to resume crude oil exports of about 100,000 barrels a day to Turkey through Iraq’s pipeline network. Hawrami, however, has said that exports would resume only after a mechanism was worked out to pay the oil companies’ production costs.

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.

“Kurdistan is like an island with no rule of law when it comes to oil,” says Abdulla Malla-Nuri, a member of the region’s Parliament.

The Kurds have long been allied with the United States. Since the first Persian Gulf War, American and NATO forces had imposed a no-flight zone over Kurdish territory in northern Iraq, protecting the Kurds from Saddam Hussein and helping them to build a semi-autonomous region. (ANI)