The Iranian military has officially exempted Iraq from its ongoing shipping restrictions in the Strait of Hormuz. The declaration has the potential to unleash up to 3 million barrels a day of Iraqi oil cargoes.
Iraq, the second largest oil producer in OPEC behind Saudi Arabia, saw its oil exports plunge by roughly 97% down to a daily average of 99,000 barrels in March. It is not immediately clear if the exemption applies to all Iraqi crude exports or strictly to tankers flagged to Iraq, nor has Iran clarified how this rule will be enforced.Despite the political exemption, immense logistical challenges remain.
An Iraqi official cautioned that the actual usefulness of this policy depends entirely on whether commercial shipping companies and tanker operators are willing to risk their vessels entering the strait to collect cargoes.Given the weeks of shipping turmoil, it is also unclear how much tanker capacity will be immediately available to load and haul Iraqi crude from Persian Gulf ports, or how quickly the nation’s oil fields can ramp production back up.
Prior to the conflict, approximately one fifth of the world’s oil and liquefied natural gas (LNG) passed through the Strait of Hormuz. Today, transit numbers remain a fraction of the preconflict.
However, vessel traffic through the vital maritime corridor has ticked up slightly. A handful of Asian nations are actively negotiating safe passage, and recently, a French container ship and a Japanese owned LNG tanker successfully navigated the strait.