Iraqi Kurds locked in battle against Islamic State extremists have financed operations through ship-to-ship oil sales off the coast of Malta, Reuters has reported.

The secretive oil exports from the semi-autonomous region of Kurdistan bypassed Baghdad after a dispute with the national government based in the Iraqi capital.

The oil was funnelled through Israel and transferred directly between ships off the coast of Malta. Decoy ships were also used to make it harder for Baghdad to track the movements.

Details of these exports were given for the first time by Kurdistan’s minister for natural resources Ashti Hawrami.

He said a ship would berth off Malta and wait for another to arrive to take the cargo to a final destination. Sometimes two ships would be sent – one sailing off empty and another full – to complicate cargo tracking.

This manoeuvre would disguise the final recipients of the oil and protect them from threats from Iraqi state oil firm Somo. The details of traders, shippers and buyers were not disclosed.

Kurdistan says it had been forced to bypass Baghdad and begin exporting oil directly because the authorities in the capital refused to respect budgets in 2014 and 2015. The current and former Iraqi central governments have both said the Kurds have failed to respect deals to transfer agreed volumes of oil to Baghdad.

Kurdistan is entitled to 17 per cent of Iraq’s overall budget, and argued it needed stable revenues to pay its bills, support over a million refugees fleeing the war in Syria and Iraq and finance its Peshmerga army fighting against Islamist militants.