The still largely untapped gas resources of Iraq will be the key focus of a sixth round of exploration and development, with the announcement last week of the 11 gas (and oil) sites that will see licences assigned to bidding firms. Three elements in this new round of licensing are particularly striking. First, the exploration and development of these sites are supposedly to enable Iraq to finally reduce the influence of Iran in all its critical state organs – political, economic, and military. Second, many of the licence sites are close to the Iraq-Syria border, an area of vital strategic importance to Russia. And third, the remaining sites are close to the Iraq-Saudi Arabia border, an area of vital strategic importance not just to Russia (by dint of the ‘OPEC+’ alliance) but even more so to China. In short, the stakes for all the world’s major powers, all the Middle East’s major hydrocarbons producers, and the oil and gas price could not be higher.
For the U.S., Iraq’s failure to reduce its dependence on Iran for up to 40 percent of its power needs – through the longstanding importation of gas and electricity – has been source of constant extreme annoyance to it. Even worse has been the consistent playing by successive Iraqi prime ministers of the U.S. in order to extract hundreds of billions of dollars from it on the basis of a bright, shining lie, as analysed in depth in my new book on the new global oil market order. The game has been simple, but highly effective, and it is this: every single year, whoever is Iraqi prime minister at the time, goes to Washington to ask for money to bail out its perennially-beleaguered budget, in exchange for which he guarantees that Iraq will end its energy dependence on Iran. Washington then sends billions of dollars to Iraq, whereupon Iraq banks the money and continues to import exactly the same amount – or more – electricity and gas from Iran as ever. Simple but effective, as mentioned.
The fanciest moves in this ‘Baghdad Ballet’, as a legal source close to the U.S. government referred to it to OilPrice.com, came from the ultra-smooth Mustafa al-Kadhimi. He had danced the usual dance with the U.S. so well that in May 2020 Washington gave him even more money than before and the longest waiver ever given – 120 days – to keep importing gas and electricity from Iran, on the usual proviso that Iraq stopped doing it soon. Once the money had been banked and al-Kadhimi was safely back on home territory, Iraq signed a two-year contract – the longest to date – with Iran to keep importing gas and electricity from it. The U.S. has many fine qualities, but a tolerance for being made being made to look stupid is not one of them. Consequently, after the huge new gas and electricity supply deal had been signed between Iraq and Iran, Washington let the formidable then-State Department spokeswoman, Morgan Ortagus, out of her room, and she let fly.
Not only was the next waiver to Iraq the shortest ever – 30 days – but also at the press conference in which it was announced, Ortagus let it be known that the U.S. was hitting 20 Iran- and Iraq-based entities with swingeing new sanctions. She cited them as being instruments in the funnelling of money to Iran’s Islamic Revolutionary Guards Corps’ (IRGC) elite Quds Force, which was entirely true. She added that the 20 entities were continuing to exploit Iraq’s dependence on Iran as an electricity and gas source by smuggling Iranian petroleum through the Iraqi port of Umm Qasr and money laundering through Iraqi front companies, which was also true. Washington was also extremely concerned that Iraq was continuing to act as a conduit for Iranian oil and gas supplies to make their way out into export markets in southern Europe and, in much greater volume, to Asia, especially China. This was true as well, as additionally analysed in my new book on the new global oil market order.
Offering up new licences for gas fields supposedly to reduce Iraq’s power dependence on Iran, then, is just a part of this Baghdad Ballet. This time around, though, not only is it exceptionally unlikely that Iraq’s dependence on Iran will be reduced – of course not – but even worse for the U.S. is that it is highly probable that many, if not all, of the licences will go to Russian and Chinese firms. Russian firms are likely to dominate the licence awards for areas close to the Iraq-Syria border, which is vital to Moscow for four key reasons, as also analysed in my new book on the new global oil market order. First, it is the biggest country on the western side of the Shia Crescent of Power, which Russia has been developing for years as a counterpoint to the U.S.’s own sphere of influence that had been centred on Saudi Arabia (for hydrocarbons supplies) and Israel (for military and intelligence assets). Second, it offers a long Mediterranean coastline from which Russia can send oil and gas products (either its own or those of its allies, notably Iran) for export. Third, it is a vital military hub, with one major naval port (Tartus), one major air force base (Latakia) and one major listening station (just outside Latakia). And fourth, it shows the rest of the Middle East that Russia can project its on-the-ground power somewhere outside what it consider its own backyard, which includes Ukraine. Fourth, and the proverbial icing on the cake for Russia in Syria, is that it has significant oil and gas resources that can be developed and used by the Kremlin to offset part of the costs it incurs as part of its geopolitical manoeuvring. Before July 2011 when, inspired by the Arab Spring revolutions, defectors from the Syrian army formed the Free Syrian Army and commenced armed conflict across the country, Syria was producing around 400,000 barrels per day (bpd) of crude oil from proven reserves of 2.5 billion barrels, not to mention its considerable gas reserves as well.
China has been happy to leave the highly visible mess of Syria to Russia, but the Iraqi gas licence awards close to the border with Saudi Arabia are a different matter. China is fresh from brokering the landmark resumption of relationship deal between former foes Saudi Arabia and Iran, another key part of the new global oil market order as analysed in full in my new book of the same name. From the moment in 2017 when China made the face-saving offer to Saudi Crown Prince Mohammed bin Salman (MbS) to quietly buy the entire 5 percent stake then on offer in the disastrous initial public offering of Saudi Aramco, it has been working to expand its influence in the Kingdom. It has done so through countless new agreements analysed in the book and has in recent years cemented this with several landmark deals, including Saudi Arabia’s very public announcement that its cabinet had approved a plan to join the Shanghai Cooperation Organisation (SCO) as a ‘dialogue partner’. This development runs alongside the China-brokered Saudi Arabia-Iran deal. China’s hold over Iran – and, therefore, Iraq – was cemented back in 2018 through the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’. The full contents of this Agreement were first revealed anywhere in the world in my 3 September 2019 article on the subject and are analysed in depth as well in my new book on the new global oil market order.
All the gas (and oil) sites being offered by Iraq are in these key strategic areas for Russia and China. Covering an area between 6,000 and 9,000 square kilometres, they are spread across 11 locations, specifically: Tal Al-Hajar (Nineveh governorate), Al-Khalisiya (Nineveh and Al-Anbar governorates), Al-Anbar District (Al-Anbar governorate), Patch of Anna (Anbar governorate), Raqat Al-Anz (Al-Anbar governorate), Ukashat (Al-Anbar governorate), North of Al-Rutba (Al-Anbar governorate), South of Al-Rutba (Al-Anbar governorate), Tubal (Al-Anbar governorate), Raqat Al-Walid (Al-Anbar governorate), and Al-Qurainan (Al-Anbar and Al-Najaf governorates). In the previous round to develop six border gas and oil fields, awards went to two Chinese companies and one UAE firm.
By Simon Watkins for Oilprice.com
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