By Marwa Rashad and Ahmed Rasheed LONDON/BAGHDAD, May 12 (Reuters) – Iraq and Pakistan have made agreements with Iran to transport oil and liquefied natural gas from the Gulf, as reported by five sources familiar with...
By Marwa Rashad and Ahmed Rasheed
LONDON/BAGHDAD, May 12 (Reuters) – Iraq and Pakistan have made agreements with Iran to transport oil and liquefied natural gas from the Gulf, as reported by five sources familiar with the situation. This highlights Iran’s influence over energy supplies through the Strait of Hormuz.
The ongoing U.S.-Israeli conflict with Iran has drastically reduced energy exports from a region that usually provides 20% of the world’s crude oil and LNG. Recently, the U.S. has blocked Iranian ports, and although Iran initially aimed to stop traffic through the strait, its approach is evolving, according to Claudio Steuer from the Oxford Institute for Energy Studies.
“Iran has moved from blocking the Strait of Hormuz to controlling access to it. Hormuz is now a managed corridor rather than a neutral transit route,” Steuer explained.
Sitting on most of its crude exports being shipped through the strait, Iraq has been one of the hardest-hit producers by its closure. Meanwhile, Pakistan, which has tried to mediate in the conflict, relies heavily on imports from the Gulf and has experienced rising fuel costs.
In an arrangement between Baghdad and Tehran, previously unreported, Iraq secured safe passage for two large crude carriers, each carrying about 2 million barrels of oil, which passed through the strait on Sunday.
Iraq is now seeking Iran’s consent for further shipments, according to an Iraqi oil ministry official who is aware of the initial deal and ongoing discussions. The Iraqi government aims to protect the oil revenue that constitutes 95% of its budget.
“Iraq maintains a close alliance with Iran, and any decline in Iraq’s economy would also harm Iran’s interests there,” the official stated.
QATARI LNG FOR PAKISTAN
In a similar development, two tankers loaded with Qatari LNG are on their way to Pakistan following a separate agreement between Islamabad and Tehran, according to two industry sources who wished to remain anonymous. They mentioned that Pakistan received about 10 LNG shipments each month before the war and now needs to address high electricity demand during the summer.
Neither Iraq nor Pakistan has made direct payments to Iran or its Islamic Revolutionary Guard Corps (IRGC) regarding these shipments, the sources confirmed. While Qatar was not directly involved in the agreements, it notified the United States ahead of the LNG shipments to Pakistan.
IRAN TIGHTENS ITS GRIP
Other nations are also considering similar arrangements, with sources indicating that rising energy costs and supply interruptions are increasingly burdensome, especially for Asian economies.
“As more governments are willing to negotiate with Iran for passage, it risks normalizing the scenario where Iran controls the Strait of Hormuz more permanently,” commented Saul Kavonic, head of research at consultancy MST Marquee.
Before the conflict began, about 3,000 vessels passed through Hormuz each month. Current traffic is now around 5% of that amount, based on shipping data.
This disruption has caused Brent crude prices to rise by over 50% since the conflict began in late February, while LNG prices in Europe and Asia have surged by about 35% to 50%.
Iran has expressed intentions to maintain control over the strait after the war. It is demanding reparations, easing of sanctions, and access to frozen assets as part of any peace settlement—a set of conditions that U.S. President Donald Trump dismissed as “garbage,” making a deal to end the conflict seem unlikely.
In the meantime, Iran is formalizing its authority over the strait. Sources in the industry have mentioned that Tehran has requested Iraq to provide documentation for each tanker to facilitate transit using designated maritime routes overseen by its naval forces.
The Iraqi oil ministry's specialized teams are supplying Iranian authorities with detailed information about individual vessels, including their destinations, shipping details, ownership, and cargo specifications, to prevent any incidents.
A Pakistani source aware of the ongoing negotiations with Iran regarding vessel passage noted some challenges along the way. “The IRGC sometimes changes the requirements, making it difficult to keep everything on track, but we are working to resolve it,” he stated.