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Texas coast drawn into Iraqi oil dispute

The state that is known for its booming oil industry has become involved in an overseas business litigation dispute alleging the theft of a precious resource. Since the end of July, an oil tanker has been marooned off the Texas coast, seemingly unable to unload its cargo or move from its spot as the Iraqi and Kurdish governments fight to claim the right to sell the oil.

After a U.S. district judge in Houston said he lacked the jurisdiction to intervene in international business disputes regarding property stolen at sea, the Iraqi Oil Ministry changed its bid, asking for an arrest warrant to prohibit the Kurdistan Regional Government from selling the tanker's oil in the United States. Iraq's government cited the Foreign Sovereign Immunities Act and Texas law regarding stolen property. The Iraqi and Kurdish governments have lately been embroiled in a multibillion dollar dispute over oil royalties and war-damage reparations, as well as litigation to prevent the Kurds from exporting oil. Iraq claims that taking over the oil in the stranded ship will prompt the Kurdish government to show up in court.

So far, it appears the oil isn't going anywhere. Out of five lightering firms in the region, only one had been hired to transport the oil to the Texas shore, but backed out as soon as the dispute arose. A spokesman for one firm said he doesn't think anyone will take the job and risk having their ship arrested.

Due to differing laws and business practices, disputes involving a foreign company or government entity can be extremely complex and lengthy. It remains to be seen how this particular case will affect the oil importing industry in the U.S., as well as relations between Iraq and Kurdistan.

Source: Bloomberg Businessweek, "Iraq Pursues New Tack in Bid to Seize Tanker Off Texas," Laurel Brubaker Calkins and Harry R. Weber, Sept. 6, 2014

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