Iraqi Kurdistan minister says no link between oil sales and Islamic State

LONDON (Reuters) - The Iraqi Kurdish minister for natural resources said on Tuesday reports that the regional government was helping smuggle oil from fields controlled by Islamic State militants were "wild imagination and unsubstantiated". Speaking at a conference in London, Ashti Hawrami reiterated comments made in a statement by the Kurdistan Regional Government's ministry of natural resources on Monday that every drop of oil flowing through its system was accounted for. "We do everything to ensure that every barrel is accounted for," Hawrami told the conference. The ministry issued the statement in response to what it said were misleading reports that suggested some crude exports had originated from Islamic State-held territory. U.S. defense officials estimate Islamic State was earning about $47 million per month from oil sales prior to October. The State Department said it estimated production from Islamic State-held oilfields is around 40,000 barrels per day (bpd). "(These reports are) wild imagination and unsubstantiated," Hawrami said, adding that his government was working hard with allies to disrupt supplies from oil produced in the parts of Iraq that are under Islamic State control. Kurdistan began bypassing Baghdad and exporting oil directly in 2014 following a dispute with the federal government about its share of the budget. It is currently exporting more than 500,000 barrels per day (bpd) of oil. The region plans to increase exports to as much as 1 million barrels by the end of next year, Hawrami said. "We could have been at 1 million barrels per day by now if it hadn't been for (Islamic State) disruption of 2014, which slowed down the activities and stopped some of the work in Kurdistan ... We are running behind but it will happen in 2016," he said. The KRG said on Monday all crude oil that moved through its pipeline to the Turkish port of Ceyhan, as well as all cargoes loaded at that point, had been verified and there was no question as to their origin, in response to reports that it was enabling oil produced in Islamic State-held areas to be sold along with its own output. "We are dealing with Daesh on the front line. We have bombed their infrastructure. Not one drop of oil came in (from Daesh)," he said, using an Arabic acronym for Islamic State. (Reporting by Simon Falush; writing by Amanda Cooper; Editing by William Hardy)