Iraq has started selling oil outside the Persian Gulf by transferring a shipment of nearly 318 million liters across the Strait of Hormuz. The Iraqi Oil Tankers Company (IOTC) executed the first operation of crossing a shipment through the Strait of Hormuz in decades using a giant tanker carrying two million barrels of crude oil.
Transformation in Oil Export Model
This action represents a shift from Baghdad's traditional model and a practical step towards selling and delivering oil outside the Persian Gulf basin. According to a video published on the Facebook page of the Iraqi Ministry of Oil, Ali Qais Abdul Jabbar, the director general of the Iraqi Oil Tankers Company, announced that this company has taken direct responsibility for loading and directing a supertanker from the Strait of Hormuz for the first time in decades.
Read more: Tankers in the Strait of Hormuz Reach 80% of Pre-War Levels
Previously, Iraq's marketing mechanism was based on delivery on board at the origin; meaning that foreign buyers were responsible for sending their tankers to southern Iraqi terminals such as Basra in the northern Persian Gulf. The acceptance of the risk of crossing Hormuz by the Iraqi state company allows access to refineries that are reluctant to enter the Persian Gulf for security reasons.
Economic and Security Implications
This change in approach could simultaneously enhance Baghdad's bargaining power in discovering higher prices and negate the necessity of offering heavy discounts to attract customers to southern terminals. The consequences of energy security disruptions caused by the Iran war have forced oil producers in the Middle East to equip their transit fleets to stabilize the flow of crude oil and fuel product exports.
In this context, the transportation and logistics arm of the Abu Dhabi National Oil Company has also sought to increase the capacity of its owned tanker fleet. Basem Mohammed Khudhair, the Iraqi Minister of Oil, stated in an interview with the country's official news agency that the government is seeking to attract credit lines and financing for the purchase of new tankers. He emphasized that possessing this fleet guarantees the continuity of foreign currency revenues and the growth of the economic yield from oil exports.
Ali Qais, the CEO of the Iraqi Oil Tankers Company, reminded that the purchase of tankers has strengthened Baghdad's control leverage over the supply chain of shipments and increased its competitiveness against regional rivals. However, he refrained from disclosing the name of the tanker used in this operation, the identity of the ship's owner, the final destination of the shipment, and the buying company.
According to data from the Iraqi Ministry of Oil, the average crude oil exports of this country reached about 2.6 million barrels per day in the period ending September 21. This volume, while indicating a jump from the 2 million barrel low in August, still significantly lags behind the usual export levels before the war (between 3.3 to 3.5 million barrels per day).
Alongside activating the shipping fleet, the Iraqi government is also considering options for land routes; the development of the northern pipeline route through Turkey and the plan to construct and revive the oil pipeline leading to the Baniyas port in Syria are two alternative land routes that Baghdad is examining to reduce vulnerability at the Hormuz chokepoint.
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