What is behind the cries of bartering Iraqi oil for Iranian gas?
What is behind the cries of bartering Iraqi oil for Iranian gas?
7-19-2023
Less than twenty-four hours passed, after the tenth of July, after the Iraqi Prime Minister, Muhammad Shia’a al-Sudani, issued a ballistic statement passing through Iranian gas, heading towards an Arab alternative… and another from Central Asia (Qatar and Turkmenistan), until his statements returned to the flow of influence. Iranian, announcing a deal to barter the country’s crude and black oil for Persian gas.
President Muhammad Shia al-Sudani also revealed, in conjunction with the Qatari-Turkmenistan coup, and then the return to Iranian time, and through the periodic meeting of his government cabinet, last week, the approval to import gas from the Iraqi “Kormor” field! It is a “free” gas field, meaning that its extraction is not associated with the extraction of oil. It is located in Sulaymaniyah, under the custody of the Patriotic Union of Kurdistan. Of course, most of the “free” gas fields in the Kurdistan region of Iraq are located in the geographical grip of Al-Yakti, far from Erbil.
The barter deal, and the purchase of gas from Kormor, are both suitable to be a pipeline, to pass some understanding, about the motives of the first, and some of the expected results from its application. So what is the motive behind a trade-off that seems to hit the feet of analysis with a “flat foot” and renders it incapable of moving the body of understanding?
The close relationship between Tehran and Al-Yakti was able to hit the Iranian wall with the Iraqi constitution, especially since the former Iraqi Prime Minister Nuri al-Maliki had ridiculed the possibility of the region exporting gas.
We start first, if there are side effects, from Tehran’s use of Iraqi oil (crude and black). A spokesman for Iranian customs, Ruhollah Latifi, had stated that Iraq imported “34 thousand tons of gasoline, from last March to June.” This amount almost covers the Iraqi monthly deficit, amounting to “15 million liters” of it, according to the assessment of the Iraqi National Oil Company, which also indicated that “the country’s need reaches 30 million liters, per month.”
Iraq, according to the data of this institution, imported $3 billion worth of oil derivatives in 2021, in order to cover the local demand for them. In addition to Iraq spending $2.1 billion in subsidies for oil products, especially gasoline and white oil.
Iran also exports about 3 million liters of diesel fuel to Iraq, and it is not known whether it has reached its ambition of exporting 5 million liters of it to the country. In general, and according to my conversation with Louay Al-Khatib, who held the portfolio of the Ministry of Electricity, during the time of former Prime Minister Adel Abdul-Mahdi, the amount of government support for the electricity sector reached $20 billion in 2023. Thus, we can comfortably conclude that government support for the electricity sector , and oil derivatives, an ocean of dollars, filled with very fast Iranian boats of opportunity.
In the barter deal, Iran will control more government subsidies for the electricity sector. The increase in its percentage of control will happen by controlling the local “brokerage companies”, which buy fuel from the Iraqi government, to resell it to the Iraqi Ministry of Electricity, and thus, its control over the electricity market, known in Iraq as “civilian generators”.
The size of the loss of the Ministry of Electricity, according to the “Chatham House” coverage, for the period from 2003 to 2011, is estimated at 200 million dollars per month. Therefore, it was not surprising that a source from SOMO announced that, according to the recent barter deal, it would “sell crude oil and fuel oil to companies selected by Iran.” “Brokerage firms”, most of which are fronts for government officials’ partnership with foreign companies, which cannot obtain contracts without them. The Iraqi-Norwegian expert, Ahmed Musa Jiyad, and in the letters exchanged between us, considered it evidence of “thieves’ governance” in running the country.
Iran will also benefit from using this deal to market more of its black oil, under the cover of the Iraqi counterpart. This Iranian fraud was revealed for the first time in March 2020. Tehran used the Iraqi Khor al-Zubayr for this activity. It is helped by the absence of specific US sanctions on its export of “black oil” through a third party.
It is very likely that Iran, as a result of the increase in its black oil stocks, thanks to the barter deal, will consider persuading the Iraqi government to establish electric power generation stations using this type of fuel, thus increasing the share of the electricity it sells. It is currently selling 1200 megawatts to the country. Of course, there are Iranian companies like “Mapna” that get seventy-eight percent! From the proceeds of selling electricity to the Basra Gas Company, that is, we are talking here about expansion, not the principle that was originally applied.
The barter deal, then, does not cause side effects on Tehran. But what is the real motive for allowing the Iraqi “Kormor” gas to crowd out its Aryan gas?
The Prime Minister announced the purchase of gas from the “Kormor” field, located in Sulaymaniyah. This is not new in principle. The only difference is that it was announced in a more direct manner and coincided with the announcement of the barter deal.
When scraping the surface of the official statement, the deeper layer of it will reveal to us that what the government is doing is giving the influential forces in the region, including the “Al-Yakti” party, a “legal precedent” by dealing with its gas fields as pure property.
Iranian gas
The close relationship between Tehran and Al-Yakti was able to hit the Iranian wall with the Iraqi constitution, especially since the former Iraqi Prime Minister Nuri al-Maliki had mocked, in a previous statement, the possibility of the region exporting gas specifically to Erbil, without enacting the oil and gas law!
This is explained by the heat of some local satellite stations, affiliated with the Kurdistan Democratic Party “Parti”, inviting Baghdad, on television, in the past days, to buy gas from the region, specifically Erbil, instead of Iran, in order for this to become a precedent, to be added to the fait accompli policy. Al-Hawrami” – in reference to the former Minister of Natural Resources in the region, Ashti Hawrami – in dealing with Iraqi energy resources. Failure to respond to the invitation prompted the “Al-Parti” satellite bulb to leak the scandal of Iran’s theft of oil from the fields shared with Iraq, equivalent to 17 billion dollars annually.
Weaken the expected belief that the price of Kormor gas will not drop much from the price of one million British thermal units, which Tehran sells to Iraq! Thus, Iran will be able, through its ally, to maintain its control over the Iraqi gas market and, in the future, through local proxies. As for the allegations that the Iraqi government will not pay Iran for the gas it buys, it can only be framed as blatant lies. The Iraqi Minister of Electricity had announced last June that the Iraqi government had paid all dues!
Iran, according to the Financial Tribune, produces 850 million cubic meters of gas per day. And it can only export ten percent of it. That is 85 million cubic metres. Also, because of its gas export contracts with other countries, such as Turkey and Armenia, and its growing domestic need, it was and still is unable to meet Iraq’s needs of 50-55 million cubic meters per day, based on these data.
The price of Iranian gas purchase by Iraq remains a mystery. The Iraqi purchase price, according to Louay al-Khatib, depends on the formula of “eleven percent of the selling rate of a barrel of Brent crude oil for six months, plus 0.08.” This equation makes Iraq pay 11.23 US dollars, according to a political expert.
Al-Khatib, who worked in several international oil companies, prior to his retirement, performed an interpretive surgery on the equation, “It is variable, because it depends on many factors, for example, if the gas is exported via LNG tankers or through pipelines, and the distance And it was entrusted to condense it at the export centers, then re-liquefy it at the receiving centers, and the quantities purchased. Al-Khatib proposed this comparison to clarify, “If the Iraqi government imported gas from Qatar, as it announced a few days ago, it would pay twice what it paid to Iran, for every million British thermal units.”
The barter deal, then, does not cause side effects on Tehran. But what is the real motive for allowing the Iraqi “Kormor” gas to crowd out its Aryan gas?
Hamza Al-Jawahiry, an oil expert, considered that the purchase price was “very unfair,” and that the price formula related to crude oil “has been abandoned by the world.” It was pointed out that because of the Russian invasion of Ukraine, most countries in the world preferred to adopt a price formula linked to the price of a barrel of Brent crude oil, and to long-term contracts, that ensure price stability. And about the appropriate price for Iranian gas, according to Al-Jawahiri, “2.50 dollars per million thermal units, as Russia used to sell it to Germany, before the Ukrainian event.” As for the cost of importing gas from Qatar using LNG tankers, he commented, “The price per million units will be less than the purchase price of its Iranian counterpart.”
The short distance between Iraq and Iran, and the difficulty of classifying the type of “future contracts” between the two capitals, as long-term contracts are for a period exceeding five years, makes us see that they are “short-term” contracts, whose duration usually ranges from 1-4 years. In addition to the absence of sanctions on the Iranian side, in the event that it does not supply the amount of gas agreed upon with the Iraqi side, and the Iraqi side clarifies the method of payment. That is, for example: Is the payment made after every six months, a year, etc.? She tells us with eloquence: The gas contract between Iraq and Iran is a contract based on sectarian blessing. That is why the contract may have been renewed, last May, for a new five years, even though the Iraqi government had claimed in 2023, east and west, that it would reach the country to gas sufficiency, after three years!
It remains for me to recall that Iranian gas affects forty-five percent of Iraq’s electricity, which does not exceed 15,000 megawatts, according to estimates by energy expert Harry Stepanian, published on May 28, 2021, which the government claimed is 26,000 megawatts per year. 2023.
Official statements about oil and electricity in Iraq in general are “taxless talk.” The government’s resignation, for example, or its silence on its very scandalous sincerity! As she clarified that “one of the reasons for the barter deal is to drain the 450,000 barrels of Iraqi Kurdistan’s oil, which were stipulated in the 2023 budget, and which cannot currently be exported to Turkey.” Although Erbil started, since the twenty-fifth of last June, to deliver only 50 thousand barrels! The fight against corruption in Anbar has nothing to do with the Akkas gas field, or the deterioration of Diyala’s security has nothing to do with the Mansouriya field.
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