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Iraq plans to sell oil through Iran

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Iraq’s government would consider selling crude through Iran should talks with the autonomous Kurdish region on an oil revenue-sharing agreement fail, a senior oil ministry official in Baghdad told Reuters.

Iraq’s State Oil Marketing Organisation (SOMO) plans to hold talks with the Kurdish Regional Government (KRG), possibly next week, about Iraqi oil exported through Turkey, Deputy Oil Minister Fayadh al-Nema said in an interview on Friday evening.

“If the negotiations come to a close” without an agreement “we will start to find a way in order to sell our oil because we need money, either to Iran or other countries”, he said by telephone.

Iraq, OPEC’s second-largest producer after Saudi Arabia, depends on oil sales for 95 percent of its public income. Its economy is reeling under the double impact of low oil prices and the war against Islamic State militants.

The Kurdistan region produces around 500,000 barrels per day (bpd) on its territory and exports those volumes via Turkey. Baghdad would not be able to reroute those volumes to Iran but could order shipments of some 150,000 bpd via Iran that are being produced in the nearby province of Kirkuk.

An agreement between Iran and Iraq could function in a similar fashion as oil-swap deals Tehran has had with Caspian Sea nations, according to an oil official who asked not to be identified.

Iran would import Iraqi oil to its refineries and export an equivalent amount of its own crude on behalf of Baghdad from Iranian ports on the Gulf. Iraq has ports on the Gulf but they are not linked to the northern Kirkuk fields by pipeline.

Iraq’s state-run North Oil Company resumed pumping crude through the Kurdish-controlled pipeline to Turkey last week as “a sign of goodwill to invite them (the Kurds) to start negotiations,” Nema said.

He said pumping had resumed on the instruction of Prime Minister Haider al-Abadi following “some understanding” between Baghdad and Erbil. Abadi said on Tuesday the decision had been made to avoid damage to reservoirs.

The flow of crude extracted from Kirkuk by North Oil and pumped in the pipeline has been running at about 75,000 bpd since last week, or half the rate before it was halted in March, Nema said.

Should there be an agreement with the Kurds, flow through the pipeline would be increased to more than 100,000 bpd, not to the previous level of 150,000 bpd, he added.

Nema said about 20,000 bpd would be supplied to the refinery of Suleimaniya, in the Kurdish region, and 30,000 bpd would be refined locally in Kirkuk.

The pipeline carries crude to the Mediterranean port of Ceyhan, where the Kurds have been selling it independently on the international market, along with oil produced in their northern region.

The Kurdish government has been calling on Baghdad since March to resume the pumping of Kirkuk crude in full to help Erbil fund its war against Islamic State. Sources in Erbil have said splitting the Kirkuk flows would divide the Kurds and complicate the task of fighting the ultra-hardline militants.

A KRG spokesman in June told Reuters the Kurds are ready to strike an agreement with Baghdad if it guarantees them monthly revenue of $1 billion, more than double what they make currently from selling their own oil.

The dispute revolves around Kurdish oil exports that Baghdad wants to bring under its control.

“If Baghdad comes and says ‘OK, give me all the oil that you have and I’ll give you the 17 percent as per the budget’, which equals to 1 billion, I think, logically it should be the thing to accept,” KRG spokesman Safeen Dizayee said in June.

“Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn’t make any difference,” he added. “We are ready to enter dialogue with Baghdad.”

The Kurdish government stopped delivering crude oil to the central government about a year ago, a decision taken when Baghdad’s payment fell under $400 million a month, Dizayee said.

It is also in a dispute with the central government over Kirkuk, where North Oil produces its crude and which the Kurds claim as part of their territory. The Kurds took control of the region two years ago, after the Iraqi army disintegrated when Islamic State overran a third of the country.


6 Comments on "Iraq plans to sell oil through Iran"

  1. joe on Sat, 27th Aug 2016 9:56 am 

    PNAC long ago formed their views on these points. It seems that the Iraq war is going exactly as planned. See, they have to WANT the new borders designed for them….

    Nepoleon was right, war is politics by other means.

  2. rockman on Sat, 27th Aug 2016 10:27 am 

    The situation is may be more economic then political. Whether Iraq transports its northern oil via a Kurdish or Iranian outlet will be a function of which one charges the lower fee. That oil is stranded with the cooperation of either group…and that’s the negotiation leverage. And secondarily the long term stability.

  3. shortonoil on Sat, 27th Aug 2016 12:55 pm 

    Best guess is that at about $30 the entire Middle East goes up in flames. None of these depots will be able to hold their territories together below that level. So we are looking at 2 to 3 years max for production out of that area. How is Washington going to handle that little problem?

  4. Survivalist on Sat, 27th Aug 2016 7:48 pm 

    Iran, Iraq, Syria, Turkey and Russia all have one interest in common; stopping the Kurdish ascent of power. All are cautious and understand that a drastic fragmentation of the region would trigger unpredictable consequences. Russia in its interest to court the regions leaders and promote stain lite in their sphere of concern will oppose Kurdish consolidation. USA backs the Kurds and this will alienate them from the regions leaders who will pursue stronger relationships with Russia. USA back the Kurds, they say, because the Kurds are fighting ISIS. But you know who else is fighting ISIS; Iran, Iraq, Syria and Russia. Turkey has just recently figured out who shares their common interest and this is why the region will pivot to Russia. USA is as usual playing a weak and misguided hand.

  5. Survivalist on Sat, 27th Aug 2016 7:56 pm 

    I meant stability not ‘stain lite’ lol fat thumbed it and spell check doesn’t help!

    On further reflection, perhaps the American plan IS to fragment and destabilize the region. That would be a good reason to support Kurds. If that’s the plan then I guess it’s going really well. What better way to fuck over the competition, Russia and Iran, than by taking a big shit in their backyard.

  6. Anonymous on Sun, 28th Aug 2016 5:06 am 

    “On further reflection, perhaps the American plan IS to fragment and destabilize the region”

    Just realizing that now Surv?

    For the uSraelis, and their lesser ‘partners’, france UK etc, keeping the ME in a state of constant war and turmoil is not a ‘bug’ in western strategy, but a feature. For example, the fact that Iraq technically only exist on paper these days was the goal of uS ‘policy’ all along, not some unfortunate, unintended consequence as uS apologists like to tell us. uS War-makers, err, ‘policy’ makers had hoped to wrap up the destruction of Syria by now, but that project is waaaay behind schedule and a little over budget.

    Reading this rooters bullshit further, highlights one dimension of uS war-planers goals. Its to make everyone, ‘friend’ and foe alike, in the ME, use their oil revenues(already depressed by uSraeli manipulation), paying to battle the uSlamic state. An entity the uS and Israel created and control of course.

    Or as the saying goes, the War is not meant to be won, it’s meant to be continuous. And it definitely is….

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