The Anglo-Turkish Genel Energy Co. said it expects to truck up to 20,000 barrels per day from its Taq Taq field in the coming weeks after the semi-autonomous Kurdistan Regional Government in Erbil, the Kurdish capital, approved the export scheme.
"Analysts think Genel's move could presage much more extensive exports from the region," the Financial Times observed.
"Many think Erbil's ultimate aim is to create a new export route directly through Turkey, circumventing Baghdad's monopoly on oil shipments."
The mushrooming dispute between Erbil and Baghdad over who control's Kurdistan's energy resources, including 45 billion barrels of oil, could trigger a major confrontation between the two, possibly even a civil war.
Large formations of KRG security forces, consisting of battle-hardened fighters who aided U.S. forces during the 2003 invasion that toppled Saddam Hussein, are squared off against the Iraqi army along Kurdistan's southern boundary.
That confrontation stems from Kurdish claims to the Kirkuk region and its oilfields, which hold around one-third of Iraq's proven oil reserves of 143.1 billion barrels. Baghdad refuses to relinquish control of the region.
Both sides have tanks and artillery in place along the nebulous border between Kurdish and Arab territory and show no sign of backing off.
After a heavy Nov. 16 clash, Iraqi Prime Minister Nouri al-Maliki created a new military command for the region, seeking to assert Baghdad's authority.
The Kurds saw that as provocation and built up their forces in the disputed zone to emphasize their assertion Kirkuk and the restive northern city of Mosul were Kurdish territory during 400 years of Turkish Ottoman rule, which ended after World War I.
The KRG's decision to start exporting oil directly to international markets, rather than through Baghdad, has heightened the prospect of open conflict 13 months after U.S. forces withdrew from Iraq.
The oil dispute became potentially explosive in October 2011 when U.S. oil giant Exxon Mobil defied Baghdad and signed an exploration deal with Erbil.
Other international oil majors like Chevron of the United States, Total of France and Gazprom Neft of Russia followed suit, frustrated with Baghdad's bureaucratic logjams and corruption, abandoned major operations in southern Iraq to add immense corporate weight behind the KRG's breakaway policy.
It was never really clear whether the U.S. administration of President Barack Obama supported Exxon's crucial move but the unfolding drama in northern Iraq, and the threat of civil conflict, appears to be causing some concern in Washington.
The Americans fear this will accelerate Iran's efforts to establish domination of its old enemy Iraq now that U.S. forces have gone.
To make matters worse, some of Exxon's six exploration zones lie in the disputed corridor in northern Iraq.
Exxon is expected to start drilling this summer, an event that, if it takes place, could have explosive consequences that could seriously impede Iraqi Prime Minister Nouri al-Maliki's ambitious plans to boost Iraqi oil production to 10 million bpd by 2020.
Ankara's efforts to muscle into Kurdistan, thereby bolstering the Kurds' long-held dream of their own state, have also annoyed Washington, industry sources report.
Turkish Undersecretary at the Foreign Ministry Feridun Sinirlioglu is to visit Washington soon for talks with Deputy Secretary of State William Burns on the issue.
Sinirlioglu will discuss other issues in Washington but his delegation is dominated by energy experts.
Energy-poor Turkey wants to exploit the Kurds' oil wealth and it's discussing construction of oil and gas pipelines from Kurdistane to Turkey's Mediterranean export terminal at Ceyhan.
The Ankara government, which seeks to transform Turkey into a major regional power, also wants to establish joint energy ventures between the KRG and Turkish companies.
Maliki's government bitterly opposes the KRG making independent deals with the Turks, which it claims are illegal under Iraq's 2005 postwar federal constitution.
Baghdad fears that energy deals which establish a firm economic base for an independent Kurdistan could trigger similar breakaway moves by other regions of Shiite-majority Iraq.
These include the minority Sunni provinces in the center and even the Shiite-dominated south, where two-thirds of Iraq's proven oil reserves lie.