Iraq Negotiates with Iran to Reopen Vital Oil Shipping Route

The federal Iraqi government is in contact with Iran to persuade Tehran to allow some Iraqi oil tankers to pass through the Strait of Hormuz, Iraq’s Oil Minister Hayyan Abdul Ghani said on Tuesday.

“There is communication with Iran regarding allowing the passage of some Iraqi oil tankers,” the minister said in statements carried by the Iraqi News Agency (INA).

Iraq, unlike Saudi Arabia and the United Arab Emirates (UAE), doesn’t have any options – even partial – to bypass the Strait of Hormuz, which has been closed for over two weeks now, forcing Baghdad to slash oil production as storage sites and tankers available in the Gulf filled up.

Iraq was the first to announce more than a week ago it was slashing crude oil production amid the de facto blockade of the Strait of Hormuz.

Last week Iraq said it would maintain crude oil production at roughly 1.4 million barrels per day (bpd) as the war disrupting the Persian Gulf continues to cripple the country’s export routes. Before the war, Iraq, OPEC’s second-largest producer behind Saudi Arabia, produced more than 4.4 million bpd.

But with no way out of the Gulf for all these barrels, Iraq and the other major producers are forced to slash upstream production. Initial losses of about 5 million bpd have already hit about 10 million bpd, according to estimates by the International Energy Agency (IEA) in its monthly report published last week.

For Iraq, the situation is more critical than the other Gulf producers—its dependence on oil revenue is the highest in the region, and unlike Kuwait, the UAE, and Saudi Arabia, Baghdad doesn’t have a huge sovereign wealth fund to lean on.

So Iraq is also scrambling to restore a northern oil export route that would send crude from the Kirkuk fields directly to Turkey’s Mediterranean port of Ceyhan, as the southern export route via the Strait of Hormuz has been effectively closed for weeks.

By Tsvetana Paraskova for Oilprice.com

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