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Iraq-Iran Oil Swap Deal Delayed Due To Security Concerns

Iraq oil production

An Iraqi-Iranian oil swap deal under which Iraq would truck 60,000 bpd of Kirkuk oil to Iran in exchange for Iranian oil to southern Iraq cannot be currently fully implemented because of security issues, an Iranian official said on Monday.

Iraq and Iran have been considering for months starting the oil swap deal that would initially run for one year. The time period can be additionally renegotiated, Iraq’s Oil Minister Jabbar Al-Luiebi said in early December. The deal envisages the swap of up to 60,000 bpd of crude oil, with the Iraqi oil coming from the Kirkuk field in northern Iraq, which until recently was under the effective control of the Kurdistan Regional Government.

After the Iraqi offense against Kurdistan following an independence referendum that Baghdad rejected, the central government of the country resumed control of the Kirkuk field, but no oil flowed from it. Plans have been that Baghdad will transport between 30,000 and 60,000 bpd of Kirkuk crude by tanker trucks to the border with Iran, at Kermanshah. In exchange, Iran will supply the same amount of similar-grade crude to Iraq’s southern ports.

In the future, the partners plan to build a new pipeline from the Kirkuk field to the border with Iran, to replace the tanker trucks. This suggests that although the initial term of the deal is just one year, there are plans to make it a longer-term deal.

The start of the oil swap deal was first set for January this year, then it was delayed to February, but the trucking of oil from Kirkuk to Iran has not begun yet.

At the beginning of February, Iraqi security forces started clearing the area along the oil route to Iran, but now Iran says it faces problems in implementing the deal due to security issues.

“Iran does not have X-ray machines to scan the trucks coming from Iraq,” Hamid Hosseini, the Iranian secretary-general of the Iran-Iraq Chamber of Commerce, was quoted as saying by the ISNA news agency.

Iran is now in talks to use Iraq’s X-ray facilities to scan the trucks, according to Hosseini.

By Tsvetana Paraskova for Oilprice.com

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