Iraq is in contact with Iran to secure safe passage for its oil tankers through the Strait of Hormuz, as Opec’s second-largest producer scrambles to restore exports halted by the outbreak of war.
“There is ongoing communication with Iran regarding allowing the passage of some Iraqi oil tankers,” Iraqi Oil Minister Hayyan Abdul Ghani told the state news agency on Tuesday.
The Strait of Hormuz, through which 20 per cent of global crude passes, has been effectively shut to commercial traffic since the war broke out on February 28.
China, India and Pakistan are among the countries reported to have separately secured arrangements with Iran allowing their tankers safe passage through the waterway, although Iraq has yet to reach a similar agreement.
Securing safe passage via the Strait of Hormuz would benefit Iraq, which has been forced to cut production and take fields offline due to limited available storage capacity.
Iraq's crude output has fallen to 1.4 million barrels per day, less than a third of the 4.3 million bpd produced before the conflict. Exports, which averaged 3.3 million bpd pre-war, with the bulk shipped through Basra, have been brought to a near halt. Oil revenue accounts for nearly 90 per cent of Iraq's national budget, making the disruption an existential economic threat.
Iraq’s energy facilities have been targeted directly by Iranian drone strikes. On Monday, two drones targeted the Majnoon oilfield for a second time. Last week, explosive-laden boats struck two tankers off the Port of Basra, the Marshall Islands-flagged Safesea Vishnu and the Malta-flagged Zefyros, setting them on fire and killing one crew member.
Iranian drones have previously targeted Iraq’s largest producing field, the BP-operated Rumaila and Erbil's Lanaz refinery.
Iraq is also working to resume exports through the Kirkuk-Ceyhan pipeline to Turkey as an alternative northern route. The Iraq-Turkey Pipeline, idle for more than a decade following damage by ISIS and other armed groups, is undergoing final inspections with about 100km of hydrostatic testing remaining. The oil ministry said the line could carry between 200,000 and 250,000 barrels per day once operational – a fraction of prewar export volumes.
Talks with the Kurdistan Regional Government to use its pipeline network through to Ceyhan have stalled, however, over a financial dispute. The KRG has refused to pump oil until Baghdad lifts a ban on dollar transfers to the region imposed in January. Erbil says the ban has strangled trade by cutting Kurdish businesses off from the hard currency needed to pay for imports.
