Previous reports in 2020 from a senior attorney in Washington state revealed “Just like Pakistan was with Al Qaeda and us, we know the Iraqis are misleading about Iran, but we still have to give them cookies when they visit”. Iraq’s latest prime minister rocked up to the White House with oil, finance, trade and electric ministers along with various businessmen, the president of the central bank and five assorted businessmen. Supposedly they arrived to discuss security, trade, economic and energy issues and broader security concerns related to the region, but in reality according to a senior source working closely with the Iraqi Oil Ministry exclusively, “It was to promise a reduction in imports of gas and electricity from Iran, and gas flaring, in exchange for sanctions waivers and money from the U.S. – no change.“ Given that Iraq had just signed a five-year deal (their longest-ever) to keep importing significant quantities of gas and electricity from Iran, it must have been challenging for prime minister Mohammed Al Sudani to control his expressions – perhaps the mustache helped hide any smirking. Nonetheless, he offered hollow promises with the usual additional one about including more U.S. companies in Iraq’s oil and gas sector development. These are typically restricted to engineering, procurement, and construction contracts given to predictable heavy-hitter U.S. companies that never succeed due to the widespread corruption at the heart of these Iraqi sectors. Western firms are unable and unwilling to comply as analyzed fully in a new book about the new global oil market order. Each major Western firm withdrawal from Iraqi oil and gas sector contracts comes down to this. Such recent withdrawals include ExxonMobil exiting West Qurna I and the Common Seawater Supply Project, Shell exiting West Qurna 1, Majnoon, and the Nebras Petrochemical Project, and BP intending to dispose of its interest in Rumaila, among others. Highlighted by the independent non-governmental organization Transparency International in its ‘Corruption Perceptions Index,’ Iraq has been described as: “Among the worst countries on corruption and governance indicators, with corruption risks exacerbated by lack of experience in the public administration, weak capacity to absorb the influx of aid money, sectarian issues, and lack of political will for anti-corruption efforts.” The report continues: “Massive embezzlement, procurement scams, money laundering, oil smuggling, and widespread bureaucratic bribery have led the country to the bottom of international corruption rankings, fueled political violence, and hampered effective state-building and service delivery.” It concludes: “Political interference in anti-corruption bodies and politicization of corruption issues, weak civil society, insecurity, lack of resources, and incomplete legal provisions severely limit the government’s capacity to efficiently curb soaring corruption.” Aside from the lack of appeal in doing business with Iraq for Western firms, the US government is fully aware first-hand that various Baghdad governments regularly promise one thing, then do quite the opposite. The same commitments are made (to reduce gas and electricity imports from Iran, and gas flaring), and the U.S. provides the same incentives (money for both purposes and waivers to continue importing resources from Iran in the interim). Afterward, Iraq invariably goes back on its word after securing the funds. Before signing the five-year gas and electricity import deal with Iran, the most shocking betrayal of US trust by Iraq involved the former Iraqi Prime Minister Mustafa al-Kadhimi. He had performed the necessary actions to please the US so well that in May 2020, Washington gave him more money than ever before and the longest waiver ever granted – 120 days – to continue importing gas from Iran, with the standard provision being that Iraq would stop doing so shortly. But after securing the funds and safely returning to his home territory, Iraq then signed a two-year contract with Iran – the longest such agreement to date – to continue importing gas. Washington responded by giving Iraq the shortest-ever waiver – 30 days – to maintain this arrangement with Iran before it needed renewal. They also imposed harsh new sanctions on 20 Iran and Iraq-based entities, accurately citing them as instruments for funneling money to Iran’s Islamic Revolutionary Guard Corps (IRGC) elite Quds Force. The statement further revealed the 20 entities continued to exploit Iraq’s dependency on Iran as an electricity and gas source by smuggling Iranian petroleum via the Iraqi port of Umm Qasr and laundering money through Iraqi front companies. Washington also expressed grave concern that Iraq acted as a conduit for Iranian oil and gas supplies to reach the world’s major export markets. This claim has also been confirmed and further analyzed in a new book about the new global oil market order. Iraq has actually been Iran’s primary ally, enabling it to evade various international sanctions imposed since its 1979 Islamic Revolution, initially through shared oil fields. There are numerous such shared fields operated by the two countries with the most notable being Azadegan (on the Iranian side) / Majnoon (on the Iraqi side), Azar (Iran) / Badra (Iraq), Yadavaran (Iran) / Sinbad (Iraq), Naft Shahr (Iran) / Naft Khana (Iraq), Dehloran (Iran) / Abu Ghurab (Iraq), West Paydar (Iran) / Fakka / Fauqa (Iraq), and Arvand (Iran) / South Abu Ghurab (Iraq). The oil on the non-sanctioned Iraqi side of the border is often extracted from the same reservoirs as the oil extracted on the sanctioned Iranian side, in some cases even via long-distance horizontal directional drilling. Even if Americans, Europeans, or their most trusted appointees stationed personnel at every single rig in every shared field in Iraq, they wouldn’t be able to determine if the extracted oil originated from the Iraqi or Iranian side. This has allowed Iranian oil to be rebranded as Iraqi oil at the source for decades, then shipped to various international destinations as needed. Iraq has also consistently failed in its promise to minimize flaring of natural gas produced during oil drilling (‘associated gas’), which could instead be used for power generation or exported for revenue. In 2017, they signed onto the ‘Zero Routine Flaring initiative’ to stop incinerating this associated gas. At the time, Iraq was second only to Russia in terms of the amount of gas wasted in this manner. Six years later it still holds that position – flaring over 17 billion cubic meters of associated gas last year. As also thoroughly analyzed in a new book about the new global oil market order, every few years Iraq announces the exact same plan to address gas flaring, but with different companies involved. The most recent announcement came in 2020 when Iraq’s Oil Ministry signed a natural gas capture deal with the U.S. oil services provider Baker Hughes to harness 200 million cubic feet per day (mmcf/d) from the Gharraf oil field (and neighboring ThiQar site, Nassiriya), plus other oil fields north of Basra. The initial phase would involve deploying advanced modular gas processing solutions at the Integrated Natural Gas Complex in Nassiriya to dehydrate and compress flare gas to generate over 100 mmcf/d of gas. In the second phase, the Nassiriya plant would expand to become a complete natural gas liquid (NGL) facility, recovering 200 million standard cubic feet per day of dry gas, liquefied gas, and condensate. However, the U.S. signed two more agreements last week to assist Iraq with reducing gas flaring, which they now claim will be accomplished by 2028. Just last month, Iraq needed a waiver from the U.S. for its gas and electricity imports from Iraq and pledged to collaborate with Siemens Energy and SLB (formerly Schlumberger) to that end. They also announced plans to achieve energy self-sufficiency by 2030. By Simon Watkins for Oilprice.com
Iraq’s Broken Promises: Despite Pledges to the US, Gas and Electricity Imports from Iran Continue
