Prashant Rao, AFP
Last updated: 1 April, 2012

Iraq working on Strait of Hormuz tension, says deputy PM

Iraq is “working very hard” with Washington and Tehran to reduce tensions over Iran’s threat to close the Strait of Hormuz, a key global oil chokepoint, Baghdad’s top energy official said on Sunday.

Deputy Prime Minister for Energy Affairs Hussein al-Shahristani said such a move would lead to a “great shortage” in supply from oil producers like Saudi Arabia, Kuwait and Iran itself, and added that closure of the waterway would drive prices sharply higher.

Shahristani said he thought current oil prices were “reasonable” and added that as Iraq increased its oil production, it would offer more crude to the market, while noting that Iraq would consider “very seriously” requests from customers impacted by sanctions against Iran over its nuclear programme.

“Iraq is working very hard on the political level with the US and with Iran to try to avoid” hostilities around the Strait of Hormuz, Shahristani told AFP in an interview in English in his Baghdad office.

He added: “Iraq depends to a large extent on its exports from the southern terminals that go through the Strait of Hormuz, so of course we’ll be very concerned. We are taking all actions possible politically, to discuss this issue, to defuse any possible military activities in the area.”

Shahristani said Iraq was looking to increase exports along a pipeline to Turkey and repair another pipeline connecting the country to the Mediterranean via Syria, but admitted such moves “would not substitute … our major export route through the Strait of Hormuz.”

Last month, Iraq’s cabinet moved to diversify its oil export routes and guard against a closure of the strait.

Baghdad said on Sunday that its oil exports in March were the highest for a single month since 1989, and energy officials hope to ramp up output dramatically in the coming years.

Iran has threatened retaliation for fresh Western sanctions over its nuclear programme, including a possible disruption of shipping through the Strait of Hormuz, a Gulf chokepoint for global oil shipments, including 80 percent of Iraq’s oil exports.

Shahristani noted: “If there is closure of the Strait of Hormuz … there will be great shortage in the supply of crude oil from a number of countries, including Saudi Arabia, Kuwait, Iran itself and the Emirates. And we expect the price of crude oil will be much higher than where it is now.”

The deputy premier said, however, that oil prices at their current levels, just above $100 per barrel in New York, were “reasonable.”

“The oil price has not really hindered the economic recovery in different parts of the world,” the former Iraqi oil minister said.

“Yes, of course there are economic hardships in Europe, the euro crisis, elsewhere, but this hasn’t been due to oil prices.

“For the time being, we neither find any visible effect of the oil price on economic development, neither do we see any shortage of supply on the market,” he said.

“On the contrary, we believe there is sufficient oil in the market, and there is really no crisis, or there is no imbalance in the supply and demand. If, however, we reach that point, of course, we will have to take actions as necessary.”

Asked whether Iraq was benefiting from sanctions against Iran by picking up Tehran’s former crude clients, he replied: “It has always been our policy to look for customers for our Iraqi oil, and whoever comes to us, we will look at their request very seriously.”

“I don’t think these are customers who are coming because of the sanctions on Iran, but there has always been a line up of customers for Iraqi crude oil,” he added.