On Monday Aug. 13, an Iraqi official said that Iraq had warned French oil company Total that it must either freeze its agreements with the Kurdistan region or sell its stake in the Halfaya oil field. Parliamentary sources, which asked not to be named, told Azzaman that Iran is pressuring the Iraqi government into constructing a gas pipeline that passes through Iraqi territory to Syrian ports. That pressure was made clear when senior Iranian officials visited Iraq to work out details relating to the export of natural gas from Iran to Iraq. This raised doubts within economic circles because the Iraqi Oil Ministry had already announced that a number of natural gas fields had been assigned for exploitation by international companies, including Shell, Pakistan Petroleum and a coalition of Russian and Kuwaiti companies. The Iranian pressure comes in the wake of international economic sanctions imposed on the Islamic Republic. Iran sees Iraq as an outlet for its oil and gas exports and lessen the sanctions' effect on the Iranian economy.
According to the Iraqi Oil Ministry, local natural gas production will completely satisfy local needs and exports will start at the end of 2013, prompting many Iraqi lawmakers to question the purpose of a gas pipeline from Iran to Iraq. The MPs warned of the move, saying that the economic sanctions imposed on Iran are considered international resolutions issued by the UN Security Council and binding for all states, and therefore if Baghdad agrees to extend the Iranian pipeline through its territory it will be held accountable for violating UN resolutions and will be subject to international sanctions.
Last year, Iraq signed an agreement with Iran and Syria to extend the pipeline to export Iranian gas through Iraqi territory and down to Syrian ports. Many news sources say that Iran has been using Iraq to export its low-quality merchandise as well as its oil and gas since 2003. Iran now controls the Iraqi market, which is heavily affecting the Iraqi economy and the exchange rate of the Iraqi dinar.
Iraqi Deputy Prime Minister Hussain al-Shahristani said that Iraq had become the second-largest oil producer in the Organization of Petroleum Exporting Countries (OPEC), ahead of Iran. Iraq has raised its production to 3.2 million barrels per day while Iranian production fell to less than 3 million barrels per day for the first time in more than two decades, to 2.9 million barrels.
It should be noted that Iraq exceeded Iran's oil production once in 1980. This shows how severe the impact of Western sanctions have been on Iran, while Iraq's energy sector is recovering. The International Energy Agency announced Friday that last month Iraq produced more than 3 million barrels per day, the highest level since the 2003 U.S. invasion of Iraq.
Centre for Global Energy Studies analyst Manouchehr Takin said that several factors combined last month to cause a drop in Iranian oil production to its lowest level in 20 years. The most important of those factors were US and European sanctions as well as the barring of insurance coverage for Iranian oil tankers.
Officials, analysts and decision makers say that despite the significant progress in Iraqi oil production, the main reason why it surpassed Iran’s oil production was the drop in the latter for the first time in decades.
Last month, Total followed the path of the two American oil giants, Exxon and Chevron, and signed a contract with the Kurdistan region while ignoring Iraqi warnings of possible sanctions.
Faisal Abdullah, a spokesman for al-Shahristani, said that Iraq formally asked Total to either freeze its contracts with the Kurdistan region or sell its stake in the Halfaya oil field. He added that Baghdad made it clear to Total that it only has these two options. He did not specify a time limit for Total to implement Iraq’s request.
The oil deals have worsened the already tense relations between Baghdad and the Kurdish Regional Government over differences on land and oil rights.
In July, Total said it had won a 35% stake in two oil exploration blocks in Kurdistan. Iraqi authorities reacted by warning Total that it will be blacklisted for violating Iraqi law.
The French company had been interested in Kurdistan since early 2012 and indicated that the contracts with the central Iraqi government were less attractive. The company has an 18.75% stake in the Halfaya oil field, which is managed by a consortium made up of PetroChina and Petronas and the Iraqi Southern Oil Co.