Trump Sanctions Threaten Iraq’s Oil: Iran’s Smuggling Hub

Trump Sanctions Threaten Iraq’s Oil: Iran’s Smuggling Hub

2024-12-02 04:46

Shafaq News/ A report specialized in oil and energy news stated that the maximum sanctions campaign planned by US President-elect Donald Trump against Iran may extend to Iraq, which is considered the second largest oil producer in OPEC, and is known as a stronghold for oil smuggling, which will also harm China, the main competitor of the United States .

A report by the “SP Global” website, translated by Shafaq News Agency, was based on statements by 3 sources familiar with the ongoing discussions, adding that imposing secondary sanctions on Baghdad, like those imposed by the United States on Iran, would threaten Iraq’s oil production of more than 4 million barrels per day and about 3.6 million barrels per day of exports.

The report quoted Bob McNally, president of the Washington-based consulting firm Rapidan Energy, as saying that Trump’s measures could target specific entities and individuals linked to Iran, including the state oil marketing company SOMO .

According to the sources, the exemptions from sanctions imposed on Iraq to import Iranian gas and energy will be ended, which will have dire consequences on Iraq’s ability to generate electricity .

The report pointed out that the sanctions aim to limit Iranian influence in Baghdad, where political groups and militias allied with Tehran largely control the Iraqi government and the oil sector .

The report quoted McNally, who was a former director of energy at the US National Security Council during the Bush administration, as saying that he was advising clients that “a second Trump administration would put the increasingly pro-Iranian Iraqi government in the crosshairs of sanctions, but would not necessarily impose export restrictions .”

Despite having some of the largest oil and gas reserves in the world, Iraq suffers from frequent power outages, making it dependent on Iran for energy imports .

On November 24, Iran reduced its gas exports to Iraq from 25 million cubic meters/day to 7 million cubic meters/day, causing a loss of 5.5 gigawatts of electricity in Iraq .

While the report pointed out Iraq’s dependence on Iran in the field of energy to generate electricity, it quoted sources as saying that dependence on Iran, in addition to the torn political system and widespread corruption, contributed to enabling the militias allied with Tehran to impose themselves within SOMO and the Iraqi Ministry of Oil .

The report, citing eyewitnesses, American officials and industry sources, said that this led to the emergence of a “grey market” trade in Iraqi oil, generating millions of dollars in revenues that are laundered for the benefit of Iranian-backed forces .

The report stated that the United States had previously urged Iraq to get rid of Iranian influence, but it was likely that the incoming Trump administration would stop providing any cover for Baghdad, and might instead use sanctions to pressure Prime Minister Mohammed Shia al-Sudani and his government .

While the report noted that it was not possible to contact Trump’s transition team to comment on this information, it mentioned that Trump had said in past years that he wanted to “take the oil” from Iraq, and he told the Wall Street Journal in 2011, saying, “I will not leave Iraq and allow Iran to seize the oil .”

The report also noted that during his first term, Trump announced in 2018 that Washington was withdrawing from the Iran nuclear deal negotiated by his predecessor Barack Obama. In January 2020, Trump also said, “Iran is the leading state sponsor of terrorism, and its pursuit of nuclear weapons poses a threat to the civilized world, and we will never let that happen,” adding that the United States, the world’s largest oil and gas producer, does not need Middle Eastern oil .

The report considered that such punitive measures, which will affect the flow of Iraqi oil, will cause the greatest damage to China and India, noting that Iraq pumped 4.14 million barrels of oil per day during October, as China and India are considered the largest buyers of both Iraqi crude and Iranian crude, which is subject to severe sanctions .

The report explained that China received 41% of Iraq’s seaborne oil exports in October, while India received 28% of Iraqi oil shipments, noting that the majority of Iraq’s government revenues come at 95% from oil exports according to International Monetary Fund figures, and that Iraq’s oil revenues in 2022 amounted to $131 billion .

The report considered that the potential sanctions may cause a freeze on Western investments in the Iraqi oil sector, at a time when Baghdad seeks to achieve its goal of raising oil production capacity to 7 million barrels per day by 2027, in addition to increasing the use of associated gas that can be used in power generation stations to reduce the deficit in electricity .

Beyond Iran, the outgoing Biden administration’s keen interest in encouraging Western investment in Iraq stems from the United States’ desire to contain growing Chinese influence, as Chinese companies operate 7.27% of current and future oil and gas development projects in Iraq, while American companies own only 1.82% of shares in Iraqi projects .

The report concluded that Trump had actually pledged to take a tough stance towards China, which he considers the main geopolitical and commercial competitor of the United States, and sanctions on Iraq could constitute another battleground on this front.

shafaq.com