Ankara on Monday brushed off criticism from Baghdad that it is being "driven by greed" in an escalating row over oil pumped from Iraq's autonomous Kurdish region and shipped overseas via Turkey.

Hussein al-Shahristani, Iraq's deputy prime minister for energy affairs, on Sunday threatened legal action against firms that purchased what he called "smuggled oil", which Turkey started to export through its territory on Thursday.

His remarks represent a significant ratcheting up of rhetoric after Baghdad filed an arbitration case against Ankara in a widening dispute over Iraq's prized natural resources.

But Turkish Energy Minister Taner Yildiz dismissed claims that Ankara was trying to illegally profit from the exports, saying: "This oil is not Turkey's, it is Iraq's."

"The income to be yielded from here will be Iraq's income and will be distributed with a system that our Iraqi brothers established by themselves," he was quoted as saying by Turkey's Hurriyet Daily News.

"Therefore, I don't find it right to say things to Turkey that cannot be told to anybody else," Yildiz told reporters in Ankara.

Iraq has some of the world's largest deposits of oil and gas, and the central government insists it has the sole right to develop and export the country's natural resources.

The shipping of oil extracted from the three-province Kurdistan region last month has further chilled ties both between Baghdad and Ankara, and between the central government and Kurdish authorities in Arbil.

"We believe Turkey has been driven by greed to try to lay (its) hands on cheap Iraqi oil," Shahristani, a former oil minister, told AFP in an interview.

But Yildiz said Turkey would remain "positive" about the situation in Iraq and that he hoped Baghdad and Iraqi Kurdistan would find a common ground "among themselves".

"Would it be better for Iraq if Turkey wasn't letting Iraqi oil flow through it? It wouldn't. We are a neighbour, friend and brother country that is laying the basis for the transmission of Iraqi oil to world markets," he said.

Kurdish government operating according to rule of law with oil sales
Erbil, Iraq (UPI) Jun 2, 2013 - The government of the semiautonomous Kurdish region of northern Iraq said its oil policies are in line with the Iraqi constitution despite Baghdad's complaints.

The Kurdistan Regional Government announced a tanker loaded with more than 1 million barrels of crude oil departed a Turkish sea port May 22 bound for the European market. It was the first such sale of oil taken from the northern Kurdish region.

KRG Prime Minister Nechirvan Barzan met Saturday with U.N. special envoy to Iraq Nikolay Mladenov to stress his commitments to all obligations related to Iraq. This includes Iraq's commitments regarding oil, he said.

"The prime minister emphasized that the KRG oil policy is fully in line with the federal constitution of Iraq," the KRG said in a statement.

There was no statement from Mladenov or the U.N. Assistance Mission for Iraq on the May oil sale.

The central government in Baghdad filed a case at an international court of arbitration in Paris to challenge the export. The central government says any unilateral deals in the energy sector from KRG are illegal.