Iraq would be drastically affected should Iran block the Hormuz Strait. Most of the oil Iraq produces is exported via the Strait. The scenario is seeing Iraq, distinct because of its good relations with both the US and Iran, practice its new diplomacy again.
Iran’s threats to block seagoing traffic in the Hormuz Strait, one of the most important waterways in the world, have caused strong reactions in Iran’s neighbour, Iraq, as well. Iran has made the threats in response to possible European and US economic sanctions. And despite the current internal political turmoil in Iraq, it has also led to another significant attempt by Iraq at international diplomacy.
Around one fifth of all crude oil passes through the narrow shipping channel, which lies between the Gulf of Oman and the Persian Gulf. Iraq is currently heading OPEC (the Organization of the Petroleum Exporting Countries) and as such, Iraq’s Minister of Oil Abdul-Kareem Luaibi announced that he would be travelling to Tehran this week in order to extract assurances from Iran that they wouldn’t block the Strait.
In terms of diplomacy, this is another notable attempt at mediation by Iraq. The most recent involved Iraq’s intervention between the Arab League and Syria, which continues this week with Iraq declaring further intentions to continue to assist in trying to defuse the Syrian crisis.
In terms of the Hormuz Strait issue, Iraq is really the only nation that can do this kind of thing, as it has good relationships with the US and Iran. Iraq also sits in the middle between the nations like Saudi Arabia who are friendly towards the US and nations that consider themselves resistant to US influence, such as Iran. It’s hard to say whether this diplomatic role will continue in the future – some believe that Iran’s influence will grow and lead Iraq into that country’s corner whereas others say that US influence will remain strong.
“Iraq now has a big role to play in resolving this crisis and saving OPEC from collapse,” Ibrahim Bahr al-Ulum, the previous Iraqi oil minister, told NIQASH. “The situation in the Arab Gulf is catastrophic because of Iran’s threats to close the strait.”
Bahr al-Ulum believes that Iraq should use its regional and international contacts to convince Iran to abandon its threat to close the vital waterway. “Iraq could also call on the [OPEC] member states to convene an extraordinary meeting to discuss this issue,” he suggested.
According to statistics from Iraq’s Ministry of Oil, the country is currently exporting around 2.6 million barrels of oil a day. Of this around 2.2 million are coming from out of the Basra region, which boasts several large oil fields - and most of this oil is being transported through the Hormuz Strait. The rest tends to travel through the land locked Kirkuk-Jihan pipeline in the north of Iraq, by the Turkish border. There are other ports in Iraq but most of them remain out of use or unsuitable for oil exports.
“Closing the Strait of Hormuz would undoubtedly affect Iraq,” Kurdish MP Farhad al-Atrushi, a member of Iraq’s parliamentary committee on oil and gas, explained. “Two thirds of exported Iraqi oil is transported through this strait.”
Oil revenues make up around 96 percent of Iraq’s national income, making it heavily dependent on oil exports; the country simply cannot deal with any delays or blockades in its exports. Additionally the Iraqi government is the biggest employer of its own people and needs the oil money to pay wages.
“The national budget for 2012 depends on oil revenues and if exports decrease even for few days Iraq will suffer,” al-Atrushi continued. “Most of the Iraqi budget goes to pay the salaries of nearly five million government employees. Any imbalance in oil revenues will impact on this class of the society and also on the prices of items like food.”
Should an impasse develop and Iran decide to block the Strait of Hormuz, an anonymous source close to Iraq’s Prime Minister Nouri al-Maliki told NIQASH that Iraq had been looking at other options for keeping oil exports flowing.
One option is sending more oil through the Jihan-Kirkuk pipeline in the north. Another was the Baniyas-Kirkuk pipeline, which goes from the Kirkuk to port of Baniyas in Syria. “Despite the problems in that country, we are optimistic about using this pipeline,” the source said.
Another option was a currently defunct pipeline that went between Iraq and Saudi Arabia, the source added.
However as al-Atrushi was quick to point out, these were only theories at the moment. “We’d need months, or even years, to actually apply these solutions,” he said, noting also that the Arab Gulf countries are better placed to find solutions to any Hormuz Strait blockade. “Saudi Arabia has access to the Red Sea and the United Arab Emirates have access through the Sultanate of Oman. As for Kuwait, it has a financial surplus which would protect the country from any budget deficit [due to oil export issues].”
Meanwhile in other parts of the Iraqi government, politicians are advocating a diplomatic solution. “Iraq can use its special relationship with Iran to deter any closure of the Strait of Hormuz,” Iraqiya bloc MP Liqa Wardi, told NIQASH. “Members of the government are allied with Iranian officials and this relationship could be utilized to safeguard Iraq’s interests.”
Wardi’s political bloc, Iraqiya, is in opposition to Prime Minister Nouri al-Maliki’s State of Law coalition, which is dominated by Shiite Muslim interests – Iraqiya MPs often accuse the State of Law MPs of being overly influenced by the Iranian government, which is also Shiite Muslim dominated.
The US has also been interested in getting Iraq to work diplomatically in this case. The US government often works with Swiss intermediaries when contacting their Iranian counterparts. But recently the US passed on a letter to Iraqi President Jalal al-Talabani, who is also known to have strong links with Iran, asking him to deliver it to Iranian officials.
A spokesperson for Iran’s Foreign Ministry, Ramin Mehmanparast, reported that the letter had duly been delivered. Three copies were received and one was delivered by al-Talabani. The next step in Iraq’s diplomatic journey will be the Iraqi Minister of Oil’s visit to Tehran Thursday.
Officially Iraq’s Foreign Ministry has yet to make any statement on this issue as parliament remains in recess.
On the whole though, it seems that hardly anyone believes the Iranians will carry out their threat. Military analysts from both the West and the Middle East have said they feel it is really just sabre rattling, an attempt to discourage sanctions being imposed upon them.
In fact, they note that Iran has been making similar threats since the 1980s and throughout the 1990s. They also point out that Iran would be doing itself a major disservice if it did close the Strait of Hormuz. Iran too relies heavily on oil sales; closing the Strait would be economic suicide. Recently Russia’s foreign minister said that, in his opinion, the potential sanctions by the West were just an effort to try and create public antipathy toward the Iranian leaders inside Iran. There is an election due to be held in Iran in early March.
Overall in Baghdad now, many Iraqi politicians think the scenario also offers up another opportunity: to rethink how oil is exported out of the country.
MP Mutashar al-Samarrai, also a member of the parliamentary commission on energy, agreed. He told al-Alam, a Baghdad newspaper, that this issue with the Hormuz Strait should be encouraging the Iraqi government to look beyond the troubled waterway and into other transport options, toward perhaps working with nations like Syria and Jordan.
“If you want to produce more oil, as the government says it does, then you need to look into other windows of opportunity for exporting,” al-Samarrai concluded.