News / Middle East

Mideast Wary Over Iraq-Iran Plan to Unite in Oil Market

Mideast Is Wary Over Iraq, Iran Plan to Unite in Oil Marketi
X
February 05, 2014 9:03 PM
Iraq is planning to triple its oil producing capacity by 2020, hoping to leverage its natural resources in a power arrangement with Iran that could challenge Saudi Arabia’s domination of the world oil market. VOA's Jeff Seldin reports.
Iraq is planning to triple its oil-producing capacity by 2020, hoping to leverage its natural resources in a power arrangement with Iran that could challenge Saudi Arabia’s domination of the world oil market.
 
So far, most of the talk has come from Iraqi officials who have been expressing confidence the country can again become a major regional player despite an upsurge in violence that killed 1,000 people last month, and nearly 9,000 last year.

In London last week, Iraq's Deputy Prime Minister for Energy Hussain al-Shahristani announced that Iraq plans to triple its oil output to nine million barrels per day by the end of the decade. And he hinted that is just part of Iraq’s plans.

"Iran has been in touch with us," al-Shahristani told the London Telegraph. "They want to share our contracts model and experience."

OPEC control

Oil industry and Middle East experts believe the comments were meant to send a message to OPEC [Organization of Petroleum Exporting Countries], which oversees about 70 percent of the world’s proven oil reserves and about 40 percent of the total world oil supply .

“The game here is for control of the OPEC cartel,” said Simon Henderson at the Washington Institute for near East Policy. “Baghdad and Tehran get on very well together and they are vying against Saudi Arabia, which is the other major power in the Gulf. The energy side of it is that oil and gas is the main component, the main weapon which these countries can use against each other.”

Officials with OPEC have downplayed the impact of increased production from Iraq and Iran, which is hoping to use progress in nuclear talks with world powers to get sanctions lifted on its oil industry.

Long-time dominant OPEC member Saudi Arabia is not yet likely to be rattled.

“The Saudis are very experienced in oil policy, and usually from their own point of view, call it right,” said Henderson. “They are not embarrassed by anybody else’s antics in the oil market.”  

Saudi concern

The math is worrying for the Saudis, however, according to some analysts.

The latest data from the United States Energy Information Administration shows that Saudi Arabia has a proven oil reserve of about 267 billion barrels, far ahead of Iran’s 151 billion barrels worth of reserves and Iraq’s 143 billion barrels of proven reserves. But combined, Iran and Iraq would have the capacity to possibly shift the balance of power.

It is cause for concern, given the Saudis and the Iranians have already been facing off in a proxy war in Syria -- Saudi Arabia helping to arm rebels groups while Iran has backed the Syrian regime, helping keep it in power.

"The cooperation between Iran and Iraq is more than just oil because both governments are Shi'ite-dominated governments, and they share some strategic interests,” said Nader Habibi at at Brandeis University's Crown Center for Middle East Studies.

“Obviously, Saudi Arabia and the other Sunni governments are concerned. We have seen that the uprising in Syria has not been successful now and Iran and its allies have been able to support the Assad regime," said Habibi. "So I am sure other countries in the region are closely watching the level of cooperation between Iran and Iraq.”

For now, though, experts like Habibi expect Iran to keep the focus on oil.

"Especially because Iran has economic problems and the government is more focused on trying to resolve those issues and improve the economic conditions,” he said. “And that requires a more moderate foreign policy."

Iran's leaders have said little publicly so far about cooperating with Iraq on oil. International sanctions have taken a toll on Iran’s production, which the U.S. says has fallen to about 1 million barrels per day.

Iran's ambitions

Iranian officials have reached out to Russia about potential oil deals, and have expressed hopes that if sanctions are lifted, they could ramp up production to as much as four million barrels per day.  

Iraq’s comments about working with Tehran, however, have gotten notice in Washington, which has been supportive of Iraq’s desire to boost oil output.

"As we've made very clear, not just to Iraq, but to any country in the global community as a matter of policy, engaging with Iran's energy sector runs risks including violating and running afoul of U.S. and international sanctions," said U.S. State Department spokeswoman Jen Psaki.

Oil industry experts say while Iraq can certainly boost oil production, it is far from certain Baghdad can triple its output by 2020.

The Washington Institute’s Henderson also cautioned that for all the noise, Iraq and Iran will want to be careful about just how far they push Saudi Arabia and other OPEC members by boosting production.

“The big question is, to what extent, will countries like Iraq, be able to maintain some sort of leverage on the price of oil so that the price doesn’t plummet and all their efforts to produce a greater amount of oil lead to roughly the same revenues or frankly even less revenue,” he said.

Jeff Seldin

Jeff works out of VOA’s Washington headquarters covering a wide variety of subjects, from the nature of the growing terror threat in Northern Africa to China’s crackdown on Tibet and the struggle over immigration reform in the United States. You can follow Jeff on Twitter at @jseldin or on Google Plus.

You May Like

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing More

This forum has been closed.
Comment Sorting
Comments
     
by: Bakhtiar from: Iraq
February 08, 2014 11:17 AM
Throughout Iraq history oil is a major curse this saying has been a message of some political analysts . But i believe denying the Kurdish legitimate cause for practicing their right of self-determination is major factor of instability the region. What Mr.Jeff referred to in the article , is on the one hand gulf states wants to keep the balance of power in the region for their interest, on the other hand they want to use oil revenue in keeping status quo in the interest of dominant ethnicity .


by: MikeBarnett from: USA
February 05, 2014 3:19 PM
This deal would benefit the US, EU, China, Japan, and all other oil consumers by reducing oil prices significantly below $100 per barrel. However, there is a Sunni-Shia civil war in Iraq, and the US has sanctions on Iran over WMDs that don't and won't exist to make Israel and its US supporters happy. Therefore, the deal probably won't work as planned, so Russia will continue to develop the world's biggest oil and gas station in Siberia to serve China's growing industrial, commercial, and military needs.

In Response

by: Nafji Fatina from: USA
March 03, 2014 4:53 PM
After WWII tag of war still going on with Two superpowers , now other power is on broad. Same thing happen when WWII started when third power (Germany) came in power . Shia-Sunni, protestant - catholic are the source of colonialism, but super power don't like third power , they will still divide the world into east west north south population of world will suffer and super power will enjoy the chess game.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US: Response to Sony Hack Will Be Proportionali
X
Aru Pande
December 19, 2014 1:45 AM
The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video US: Response to Sony Hack Will Be Proportional

The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid