Iraq Shifts Strategy with First Major Strait of Hormuz Oil Transfer in Decades

The Iraqi Oil Tanker Company has completed its first major shipment of 2 million barrels of crude oil through the Strait of Hormuz in decades. The state-run company used a ship-to-ship transfer method to deliver the oil to buyers waiting outside the strategic waterway. The company's president stated that this approach provides greater flexibility in sales and pricing, a shift from the traditional delivery method via the southern port of Basra.

Despite offering discounts of over $20 per barrel to encourage buyers to pick up cargo outside the Strait of Hormuz, Iraq has faced sluggish sales. The head of Iraq's oil marketing organization attributed this to fierce regional competition, with neighboring producers like Kuwait and Qatar offering steeper discounts of up to $35 per barrel. Additionally, Saudi Arabia and the United Arab Emirates have already adopted ship-to-ship transfers to bypass the strait.

Iraqi Oil Minister Bassim Mohammed Khudair has alleged that Saudi Arabia has bought up oil tankers to monopolize shipping capacity and drive up Iraq's transport costs, a claim denied by Saudi Arabia. With oil exports accounting for roughly 90 percent of Iraq's state revenue, the country remains highly vulnerable to disruptions in the Strait of Hormuz. As a result, Iraq has been forced to trim oil production and seek alternative export channels, including routes via Türkiye and Syria, to reduce its reliance on Gulf shipping lanes.