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Any disruption in the oil exports flowing through the Strait of Hormuz will be a “major obstacle” for Iraq’s economy, Iraq’s Prime Minister Adel Abdul Mahdi said on Tuesday as tensions continue to flare up in the Middle East, Reuters reported on Tuesday.
Iraq has been studying ways around the vital chokepoint for oil exports for some time, but its options for doing so are limited.
Iraq has the fourth largest oil reserves in OPEC, behind Saudi Arabia and Iran and Venezuela—the latter two which remain under strict US sanctions with their oil exports. Iraq is OPEC’s second largest producer and relies heavily on these oil exports—as do most OPEC nations—and any disruption to its oil revenues would be of grave consequence. Its oil industry provides the country with 89% of its revenue, according to the EIA.
Iran has threatened to close the Strait on numerous occasions in response to US or EU actions.
Most of Iraq’s oil is shipped through southern terminals, Abdul Mahdi said. Iraq’s landlocked positioning in the Gulf means that all of its southern exports must travel through the precarious Strait of Hormuz.
US President Donald Trump has vowed that if Iran did manage to close the Strait of Hormuz, that it “wouldn’t be closed for long.” He later added that the United States wasn’t up for protecting oil tankers in these increasingly dangerous shipping lanes forever, or for free.
“China gets 91% of its Oil from the Straight, Japan 62%, & many other countries likewise. So why are we protecting the shipping lanes for other countries (many years) for zero compensation,” President Trump tweeted at the end of June as tensions started to run high after two oil tankers were attacked in the Gulf of Oman.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.