Iraq's Energy Sector Caught in US-Iran Confrontation

Washington and Tehran's confrontation over Iraq's energy sector has reached new heights as Baghdad struggles to find alternative export routes for its oil. The crisis in the Strait of Hormuz, which saw oil prices plummet from $6.8 billion to around $1 billion per month, has exposed deep structural constraints across the oil industry.

The refining sector was particularly hard hit, with Iraq's conventional refineries producing large quantities of fuel oil that accumulated in storage and forced some facilities to reduce their operating rates due to a lack of export outlets.

Baghdad turned to the Syrian route, transporting around 650,000 metric tonnes of fuel oil each month by road tanker for re-export through the Mediterranean port of Baniyas. The government also plans to export approximately 50,000 barrels of crude oil and naphtha per day via the same route.

The crisis has taken a toll on Iraq's finances, with monthly oil revenues plummeting from $6.8 billion to around $1 billion. To cover public-sector salaries and pensions, the government requires about $5.8 billion each month, leaving it struggling to meet its financial obligations.