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Iran wary of Iraqi plans to increase oil exports

Though its own exports are limited by international sanctions, Iran has criticized Iraq’s intentions to fill the market gap by increasing its own oil exports.
Policemen check oil pipelines during a patrol in Shueiba refinery in Iraq's southern province of Basra August 26, 2010. Baghdad has signed multi-billion deals with oil firms to boost output capacity to 12 million barrels a day in seven years, rivalling top oil exporter Saudi Arabia. That could give Iraq the money it needs to rebuild after decades of war, sanctions and economic degradation. But everything depends on whether the OPEC member can secure its vital oilfields, refineries and other infrastructure a

BAGHDAD — Iraq’s aspirations to increase its oil exports to close to 7 million barrels per day by 2017 drew criticism from the Iranian Ministry of Petroleum. Iranian Petroleum Minister Bijan Namdar Zangeneh regarded the move, which seeks to make up for the lack of oil exports from his country as a result of sanctions, as “absolutely unfriendly.”

The Iranian Embassy in Baghdad concurred with the opinion of the petroleum minister.

“Iraq’s oil policies will be harmful to the interests of Iran, especially given its aspirations to increase its crude oil exports to compete on the market and to establish a place for itself on the international scene,” Iranian Deputy Ambassador to Iraq Aziz Salihi explained to Al-Monitor. “Iran’s oil exports have gone down due to sanctions from 2.5 million barrels to 1.2 million barrels per day.”

“Iran enjoys good and solid relations with Iraq, and we do not anticipate for this to be compromised because of oil policies,” he continued, pointing out, “We can hold a dialogue with concerned Iraqi parties to establish some sort of understanding in this regard.”

Amid this criticism and fear of increased Iraqi oil exports, the Iranian nuclear deal with the major Western powers has emerged as a promising step toward a powerful economic revival that will be witnessed by the Gulf. It will also spark competition between oil-producing countries in a way that may lead to disputes over shares, granting facilitations and preferences to consuming countries, especially in East Asian countries

Oil expert Hazem al-Fartousi explained to Al-Monitor that the results of the agreement will have two trajectories. One will be toward quelling the markets from the geopolitical conditions related to the Iranian nuclear file, including the instability in prices it caused. The other will have to do with the return of Iranian [oil] exports, thus increasing the amount of oil available on the market in a way that would bring relative oil stability in Iran. This will also decrease Iranian fears of increased oil exports from Iraq that Tehran spoke of not long ago.

For its part, the Iraqi Ministry of Oil saw statements by Iranian officials on Iraq’s intention to increase its oil exports as being more political than technical. It described the increase in Iraqi production as normal.

The official spokesperson for the Iraqi Ministry of Oil, Assim Jihad, said in a statement to Al-Monitor, “Iraq by its very nature does not compete with anyone and does not wish to compensate or take the place of the exports of any country, particularly those of its neighbors.” He explained, “Iraq’s crude oil production is not the same as its reserves in the first place. Its [production] is also less than the shares allotted to it by OPEC,” referring to the Organization of Petroleum Exporting Countries.

“We do not deny that Iraq has plans to increase its oil exports up to a maximum of 7 million barrels per day by 2017, which is our right as guaranteed by OPEC law,” Jihad explained. He asserted, “The ministry has already been working on procedures and plans for its oil exports to be 2.9 million barrels per day in 2013. We were not, however, able to reach this number for two reasons: acts of terrorism that have affected oil facilities and the central government’s inability to acquire 250,000 barrels per day from the Kurdistan Regional Government after past agreements with it were withdrawn.”

Moayyed al-Shaliji, an expert in the fields of oil and gas, affirmed to Al-Monitor that OPEC is aware of the sanctions imposed on Iran that affect its oil trade. According to him, there must be some other country that can make up for the gap these sanctions create and prevent the market from collapsing. He said, “The Kingdom of Saudi Arabia usually takes on this role since it has competitive reserves and a surplus that can compensate for any dependent country in exportation for whatever reason.”

Shaliji explained, “Iraq does not have the ability to export enough to make up for the gap in the oil market left by Iran,” and added, “Iraq’s plans to increase its oil exports may have some sort of impact on Iran. However, this impact will be made up for by the different Iranian goods that will enter into Iraq.”

Ali Saeedlou, assistant to the Iranian president for International Affairs, asserted to Al-Monitor that the volume of commercial trade with Iraq would increase to $14 billion, exceeding last year's volume of $12 billion. He explained that his government had formed a committee that seeks to reinforce economic cooperation between the two countries, called the Economic Growth Committee of Iran and Iraq.

The Iraqi Council of Representative’s Oil and Energy Committee regarded Iran’s statements as coming at an inappropriate time, as Iraq finds itself in need of a great deal of support in different fields.

Qassem Mohammed, a member of the committee, told Al-Monitor, “Talk of increased oil exports is still mere ink on paper. We have not seriously taken on the issue.” He explained, “The Ministry of Oil did not fulfill its promises to increase crude oil exports to fill in the gap in the federal government’s budget, 92% of which is reliant on these oil exports.”

“The increase in exports will surely reflect positively on Iraq. Neighboring countries, including Iran, should understand Iraq’s need for this increase to develop its infrastructure that is nearly in its worst condition in years because of insufficient oil exports,” Mohammed added. He called on neighbors to “support Iraq instead of pressuring it, as other countries have done to it in years past.”

He brought up that by developing its oil fields and making them available to international companies, Iraq seeks to increase its production to at least 11 million barrels per day over the next six years, or 12 million barrels after adding the amounts produced in other fields.

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