A high-stakes dispute over a tanker carrying $100m in Iraqi Kurdish crude oil took a surprising turn when a US judge said she lacked jurisdiction given the ship's distance from the shore and urged that the case be settled in Iraq.
Baghdad's lawyers had laid claim to the oil in a lawsuit, saying the country's autonomous Kurdistan region sold the oil without permission from the central government.
The central government insists it has the sole right to export Iraqi resources, including those from the northern Kurdish region, which gained de facto autonomy after US-led forces defeated Saddam Hussein in 1991.
Federal magistrate Nancy K Johnson said that because the tanker was some 100km off the Texas shore, and outside territorial waters, an order she issued late on Monday for US Marshals to seize the cargo could not be enforced.
She said the dispute between the central government and the Kurdistan region should be resolved in Iraq.
Overnight, Johnson had signed an order directing the marshals to seize the 1 million barrels of crude from the United Kalavryta tanker anchored in the Gulf of Mexico.
The ship could simply sail away, though it also could offload its cargo for delivery at another US Gulf of Mexico port outside of Texas, lawyers said.
The latest dispute over exports reflects Iraqi Kurds' emboldened steps toward seizing greater political and economic autonomy, with oil sales seen as central to Kurdish dreams of independence that Baghdad opposes.
Iraq warned companies against trying to buy other shipments of Kurdish crude after it won the seizure order, while Kurdish leaders asserted their right to sell the oil but said they would face obstacles.
A lawyer in Houston for the Kurds said the regional government would file its own claim of ownership for the cargo, a sign the legal standoff might continue.
Washington has publicly opposed direct oil sales by the autonomous region, fearing they could contribute to the break-up of Iraq. It has stopped short of banning US companies from buying the oil while warning them of potential legal risks.
Officials from the State Department and the US Marshals Service said the judge's order could only be applied if the ship entered US territory.
In this case, that would be 12 nautical miles from shore, said Martin Davies, a law professor and the director of Tulane University's Maritime Law Center in New Orleans.
If the oil's owner wants to stay out of US courts, "they just have to order the ship to stay out", he said.
While the rulers of Iraq's northern Kurdish enclave have long aspired to independence, their position has strengthened in recent months as Kurdish Peshmerga troops have outperformed Iraqi soldiers against Sunni rebels led by the Islamic State group.