Iraq Pursues New Tack in Bid to Seize Tanker Off Texas Coast

United Kalavrvta
A still image from video taken by a U.S. Coast Guard HC-144 Ocean Sentry aircraft shows the oil tanker United Kalavyrta (also known as the United Kalavrvta), which is carrying a cargo of Kurdish crude oil, approaching Galveston, Texas July 25, 2014. REUTERS/US Coast Guard

By Laurel Brubaker Calkins and Harry R. Weber

Sept. 6 (Bloomberg) — Iraq’s Oil Ministry has asked a U.S. judge for permission to change its legal arguments in a bid to seize $100 million in Kurdish crude waiting in a tanker off Texas since late July.

Stymied by the judge’s ruling last month that he didn’t have jurisdiction under admiralty law, the nation has come back with claims under maritime and Texas statutes.

U.S. District Judge Gray Miller in Houston threw out an arrest warrant that gave federal agents authority to take the 1 million-barrel cargo and store it, at Iraq’s expense, if the tanker entered U.S. waters. Miller said he had no authority to intervene in a foreign ownership dispute under U.S. laws governing property stolen on the high seas. Iraq cited those laws as the basis for to recover crude exported from wells in the northern Iraqi region of Kurdistan without permission.

Iraq’s Oil Ministry has now revised its complaint, citing different statutes to obtain a new arrest warrant aimed at preventing the Kurdistan Regional Government, or KRG, from selling the cargo in the U.S. Iraq now cites the Foreign Sovereign Immunities Act and state law governing stolen property.

“Such request is not made to re-hash previously pleaded arguments or factual allegations but for the purpose of addressing newly discovered information revealed since the” initial filing of the complaint, Iraq’s lawyers said in papers filed Sept. 4 in Houston federal court. Harold Watson, the KRG’s lawyer in Houston, declined to comment on the filing.

The proposed amended complaint names Kurdistan, which the U.S. doesn’t recognize as a sovereign nation, and the unknown “John Doe Buyer” believed to have purchased the cargo after it left Turkey in June.

Overdue Royalties

At a court hearing last month, both the Iraqis and Kurds told the judge they’d prefer to have ownership of the crude determined by Iraq’s Supreme Court. The sides are locked in a protracted legal battle there over billions of dollars in overdue oil royalties and unpaid war-damages reparations the central government owes Kurdistan, which the U.S. considers part of Iraq.

Iraq’s lawyers said the KRG has refused to appear in its courts to address a 2012 government lawsuit seeking to block the region from exporting oil for its own benefit. They said seizing the Kurdish cargo in Texas was their only leverage to get the KRG to show up before the Iraqi high court.

Moving

The United Kalavryta had been circling within a 350-yard radius of a spot 60 miles southeast of Galveston from July 26 through Sept. 1, when a vessel tracking service lost its signal.

The signal picked up again last night, and the ship has moved about 20 miles south from that spot, according to vessel tracking data compiled by Bloomberg.

Four firms that handle lightering services for vessels entering the ports of Houston, Corpus Christi, Galveston and Port Arthur said yesterday they haven’t been hired to offload oil from the stranded ship onto smaller ships and bring it to shore.

One of the firms, SPT Inc., wouldn’t take the job if it was offered, spokesman Simon Duncan said in a phone interview.

“I would honestly think no one would touch this ship,” Duncan said. “You’re inviting the potential for arrest of your own ship. It doesn’t make sense.”

A fifth firm, AET Inc., had originally been hired to lighter the oil and later dropped the job after the dispute over the cargo arose. Two officials at vessel operator Marine Management Services M.C. of Piraeus, Greece, didn’t immediately respond to e-mails yesterday seeking comment on the status of the vessel and its cargo. They also didn’t address the question in several e-mail exchanges.

The case is Ministry of Oil of The Republic of Iraq v. 1,032,212 Barrels of Crude Oil, 3:14-249, U.S. District Court, Southern District of Texas (Galveston).

–With assistance from Dan Murtaugh in Houston.

Copyright 2014 Bloomberg.