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

VOA Exclusive: Interview With Myanmar President Thein Sein

Thein Sein calls allegations that minority Muslim Rohingya are fleeing alleged torture in Rakhine state a media fabrication More

Video Better Protective Suit Sought for Ebola Caregivers

Current suit is uncomfortable, requires too many steps for removal, increasing chance of deadly contact with virus More

UN Rights Commission Investigates Eritrea

Three-member commission will start collecting first-hand information from victims and other witnesses in Switzerland and Italy next week 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.
Ebola Economic Toll Stirs W. Africa Food Security Concernsi
X
November 19, 2014 11:39 PM
The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.
Video

Video What Jon Stewart Learned About Iran From 'Rosewater'

Jon Stewart, host of the satirical news program "The Daily Show" talks with Saman Arbabi of Voice of America's Persian service about Stewart's directorial debut, "Rosewater."
Video

Video Lebanese Winemakers Thrive Despite War Next Door

In some of the most volatile parts of Lebanon, where a constant flow of refugees crosses the border from Syria, one industry continues to flourish against the odds. Lebanese winemakers say after surviving a brutal civil war in the 1970s and 80s, they can survive anything. Heather Murdock has more for VOA from the Bekaa Valley in Lebanon.
Video

Video China's Rise Closely Watched

China’s role as APEC host this week allowed a rare opportunity for Beijing to showcase its vision for the global economy and the region. But as China’s stature grows, so have tensions with other countries, including the United States. VOA’s Bill Ide in Beijing reports on how China’s rise as a global power is seen among Chinese and Americans.

All About America

AppleAndroid