Iraq, as one of the main oil-producing countries, has been severely affected by wars and political tensions in the region. Historically, this country derives more than 90% of its annual budget from oil, and nearly 95% of this amount must be transported to global markets through the Strait of Hormuz. After the closure of the Strait of Hormuz on the first day of Operation 'Epic Fury', this vital route for transporting oil to Iraq was blocked, leading to severe economic repercussions for the country.
Oil Production and Exports in Iraq
Despite a temporary agreement reached on March 17 between Tehran and Baghdad to ensure the safe passage of Iraqi oil tankers through the Strait of Hormuz, many global shipping companies refrained from sending vessels to the Persian Gulf due to extremely high premiums and security threats. This situation resulted in an 80% reduction in Iraq's oil production, and the country's oil reserves reached saturation. Iraqi officials have reported that oil production in October increased to 4.22 million barrels per day. Of this amount, 3.95 million barrels per day come from the areas controlled by the federal government of Iraq in the south, and 265,000 barrels per day from the fields managed by the Kurdistan regional government in the north.
Export Challenges and Logistical Issues
Oil exports have also increased by 9.5% compared to last month, averaging between 3.35 million barrels per day and 3.5 million barrels per day. Although these figures appear similar to pre-closure levels of the Strait of Hormuz, the actual state of Iraq's oil industry is extremely fragile. The prolonged closure of oil wells and infrastructural issues have severely damaged production capacity and oil reserves, with some wells being completely shut down, which could lead to permanent damage to them.
Iraq is trying to compensate for its 346% budget deficit by increasing oil production. However, logistical problems have added to the existing challenges. With the closure of the Kurdistan export pipeline on March 25, 2023, and infrastructural damage caused by drone attacks, Iraq has been forced to resort to unconventional methods for oil transportation, such as road transport to Turkey and the use of small vessels under military protection.
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