Jul 12 2012

Iraqi scenario in the event of Iran closing the Strait of Hormuz

By Shaymaa Adel

Azzaman, July 12, 2012

Iraq is calculating its losses if Iran carries out its threats of closing the Strait of Hormuz through which most of the country’s oil exports pass.

While Iraqi officials and analysts see the closure of the strait as highly unlikely, the government says it is wise to have a plan if it becomes a reality.

Asem Jihad the spokesperson for the Ministry of Oil says Iraq is considering all options and is working to lessen the adverse impact of such a measure, though if it happens it will have considerable negative implication on the economy.

Iraq currently exports 2.2 million barrels of oil a day and 1.7 million of them are loaded through terminals at the head of the Gulf and to reach their destinations they will have to pass through the Strait of Hormuz.

The only functional land route to international markets is via the twin pipeline ending with Turkish terminals on the Mediterranean.

This pipeline can handle half a million barrels a day.

Iraqi analysts, though saying the closure of the strategic maritime passage through which up to 18 million barrels of oil a day pass, should not even be hinted at by Iran.

However, they laud the government for considering its options to face such a possibility.

Jihad said the government was considering raising the capacity of the Turkish pipeline to 1 million barrel – its original capacity when it first started functioning in the 1980s. This pipeline was built in response to the eight-year with Iran (1980-1988) in which the Iranian navy blocked Iraqi oil exports from Basra and its terminals on the Gulf.

Iraq had also built a cross-Saudi territory pipeline to terminals on the Red Sea to make up for the closure of the pipeline via Syria.

If Iraq’s extensive pipeline network to the outside world functions properly, the country might compensate for most of its exports passing through the Strait of Hormuz.

Any closure of the passage, whether by Iran or as a result of military operations, is bound to lead to an exponential hike in oil prices, the thing, analysts say, will bring Iraq more income even if it exported less.

An extended closure, according to Isam al-Mahawili, an Iraqi analyst, will lead to “catastrophic consequences to the world economy and the collapse of some countries.”

However, Mahawili said the closure will be as detrimental to Iran as to others relying on the Strait of Hormuz to meet their energy needs or livelihood.

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