Photo: Shutterstock\/Sven Hansche<\/p>\n
Iraq and Pakistan Strike Iran Transit Deals to Move Oil and LNG Through Hormuz<\/p>\n
By Marwa Rashad and Ahmed Rasheed<\/p>\n
LONDON\/BAGHDAD, May 12 (Reuters)\u00a0\u2013\u00a0Both Iraq and Pakistan have cut deals with Iran to ship oil and liquefied natural gas from the Gulf, according to five sources with knowledge of the matter, in a demonstration of Tehran\u2019s ability to control energy flows through the<\/p>\n
The U.S.-Israeli\u00a0war with Iran\u00a0has slashed energy exports from a region that normally supplies 20% of the world\u2019s crude oil and LNG. The U.S. has blockaded Iranian\u00a0ports in recent weeks. And though Iran initially sought to halt traffic through the strait, that stance is now changing, said Claudio Steuer of the Oxford Institute for Energy Studies.<\/p>\n
\u201cIran has shifted from blocking Hormuz to controlling access to it \u2026 Hormuz is no longer a neutral transit route, it is a controlled corridor,\u201d he said.<\/p>\n
With most of its crude exports typically shipped through the strait, Iraq was among the producers worst-affected by its closure, while Pakistan, which has sought to mediate in the conflict, depends heavily on Gulf energy imports and has faced surging fuel costs.<\/p>\n
In a deal between Baghdad and Tehran that has not been previously reported, Iraq secured safe passage for two very large crude carriers, each carrying about 2 million barrels of crude, that\u00a0passed through the strait\u00a0on Sunday.<\/p>\n
Iraq is now working to secure Iran\u2019s approval for more transits, an Iraqi oil ministry official familiar with the initial deal and current talks told Reuters, as the government seeks to safeguard the oil revenues that make up 95% of its budget.<\/p>\n
\u201cIraq is a close ally of Iran, and any deterioration in Iraq\u2019s economy would also damage Iran\u2019s economic interests in the country,\u201d the official said.<\/p>\n
A second Iraqi oil ministry official and a\u00a0shipping\u00a0industry source also confirmed the talks with Tehran. All of the sources asked not to be named as they were not authorized to speak on the matter.<\/p>\n
An Iraqi government spokesperson did not immediately respond to a Reuters request for comment.<\/p>\n
QATARI LNG FOR PAKISTAN<\/p>\n
Similarly,\u00a0two tankers\u00a0loaded with Qatari LNG are headed to Pakistan following a separate bilateral agreement between Islamabad and Tehran, two industry sources with knowledge of the matter told Reuters, also asking not to be named as they were not permitted to speak with media.<\/p>\n
Pakistan received roughly 10 LNG cargoes a month before the war and now must meet high summer electricity demand for cooling.<\/p>\n
Neither Iraq nor Pakistan has made direct payments to Iran or its Islamic Revolutionary Guard Corps (IRGC) in relation to the transits, the sources said.<\/p>\n
Qatar was not directly involved in the bilateral deals, the two industry sources said, but it informed the United States ahead of the shipments to Pakistan.<\/p>\n
Pakistan\u2019s petroleum and information ministries did not immediately respond to requests for comment. Neither did Qatar\u2019s foreign ministry.<\/p>\n
IRAN TIGHTENS ITS GRIP<\/p>\n
Other countries are exploring similar deals, according to sources familiar with the discussions, as rising energy costs and supply disruptions weigh heavily, particularly on Asian economies.<\/p>\n
\u201cAs more governments become willing to cut deals with Iran for passage, it risks normalizing the idea that Iran will control the Strait of Hormuz on a more permanent basis,\u201d said Saul Kavonic, head of research at consultancy MST Marquee.<\/p>\n
Before the war, about 3,000 vessels passed through Hormuz each month. Traffic is now around 5% of that level, according to\u00a0shipping\u00a0data.<\/p>\n
The disruption has sent Brent crude\u00a0LCOc1\u00a0surging by more than 50% since the outbreak of the conflict at the end of February. LNG prices in Europe and Asia have jumped by roughly 35% to 50%.<\/p>\n
Iran says it wants to retain control over the strait after the war. It has demanded reparations, sanctions relief and access to frozen assets as part of any settlement, conditions U.S. President Donald Trump\u00a0described as \u201cgarbage\u201d, dashing hopes of a deal to end the conflict.<\/p>\n
In the meantime, Iran is formalizing its control over the strait, industry sources said. And it has asked Iraq to submit documentation for each tanker to facilitate transit via designated maritime routes under the supervision of its naval forces, one of the Iraqi oil ministry officials said.<\/p>\n
Specialized teams at the Iraqi oil ministry are providing Iranian authorities with detailed information on individual vessels, including destination,shipping\u00a0details, ownership and cargo specifications, to help avoid incidents.<\/p>\n
A Pakistani source aware of negotiations with Iran over the passage of vessels said there had been some hiccups with the process.<\/p>\n
\u201cThe IRGC sometimes changes the goalposts, so it is hard to keep things on track, but we are working through it,\u201d he said.<\/p>\n