Top Energy Stories

Iraq is using the launch of its new Basra Medium crude grade as an occasion to revamp the specifications for its flagship Basra Light and Basra Heavy, too. The creation of a third grade is expected to help Iraq deliver a more predictable product and attract buyers, while the new specifications should help SOMO avoid so-called "de-escalation" adjustments and obtain a higher price per barrel. Iraq needs to squeeze all the revenue it can from oil exports because the government is suffering from a severe financial crisis, and is also constrained in its ability to increase oil sales because of a quota agreement with the OPEC-plus coalition. For all of the details on the new specifications, including the API gravity and sulfur content of each grade, read the full story on Iraq Oil Report.

The Oil Ministry is looking for a new investor in the Fao refinery project. The ministry first announced the project in 2017, and pursued negotiations with a Chinese consortium. But they failed to reach a deal, according to Hossam Hussein Wali, the director general of the state-run South Refineries Company (SRC). "There were attempts to negotiate with Chinese companies to build a 300,000 bpd refinery in Fao, but it wasn't successful," Wali said in an interview with Iraq Oil Report last month. "At the final stages, the Chinese company backed off from the contract." Now the ministry has announced it will "re-invite international companies" to bid on the project.

Australian authorities arrested a former managing director of Leighton Offshore on charges of conspiracy to commit bribery in Iraq. The charges against Russell Waugh are the latest fallout from a scandal that broke in 2016, when an investigation by The Age and Huffington Post revealed a scheme through which the company Unaoil was bribing Iraqi officials in an effort to help various clients, including Leighton, win $1.7 billion worth of projects. In October, a London judge sentenced Unaoil's Basil al-Jarah to more than three years after he pled guilty; the UK's Serious Fraud Office investigation previously led to a guilty plea from David Lufkin, the former global head of sales for the UK-listed oil services company Petrofac. The Australian Federal Police said that, while only one arrest has been made so far, it has issued warrants for two other men, and that ongoing investigations could lead to more arrests and charges. The Iraqi officials accused of taking bribes — including former Oil Minister Hussein al-Shahristani, former Oil Minister Abdul Karim Luaibi, and former South Oil Company Director General Dhia Jaffar — have not yet faced any consequences.

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National News

Iran does not want to provoke a fight with the lame-duck Trump administration. That was the message from Gen. Esmail Ghaani — the head of Iran's Quds Force and successor to Qassim Soleimani — who met with Iraqi paramilitary and political leaders in Baghdad this week, according to Qassim Abdul-Zahra and Samya Kullab, reporting for the Associated Press. Citing two senior Shia politicians who attended the meetings, Abdul-Zahra and Kullab say the message was clear: "Stand down to avoid giving Trump the opportunity to initiate a fresh tit-for-tat round of violence." Iran is sounding notes of caution after the New York Times reported that U.S. President Donald Trump asked advisors for military options for a potential strike against an Iranian nuclear site, and after Trump administration officials told CNN that "their goal is to set so many fires that it will be hard for the Biden administration to put them all out."

Iran isn't just motivated by fear of Trump lashing out. In the medium term, Iran doesn't want to spoil some impending opportunities to achieve key goals in both Iraq and in its relationship with the U.S. For nearly two decades, one main objective of Iranian policy in Iraq has been to expel U.S. forces from its doorstep, and Trump is already inclined to take steps in that direction, having recently approved a plan that includes withdrawing 500 troops from Iraq, bringing the total number to about 2,500. The impending inauguration of U.S. President-elect Joe Biden also offers some hope for diplomatic re-engagement, since Biden has expressed willingness to explore a return to the Iran nuclear deal — which would bring with it relief from some U.S. sanctions that have decimated Iran's oil exports, government revenues, and the broader economy.

Ghaani's visit comes after a rocket attack targeted the U.S. embassy and a nearby military installation in Baghdad on Tuesday. Four rockets landed inside the Green Zone — one within 600 meters of the embassy — while three others fell in other parts of the city, killing an Iraqi girl and injuring five other civilians, according to the Associated Press. An armed group called Ashab al-Kahf claimed responsibility. The little-known group is likely a subsidiary or affiliate of a larger paramilitary group, created for the purpose of launching attacks while maintaining plausible deniability. The rocket attack raised concerns that Iran-backed armed groups were walking away from a detente that was declared in October, prompted by U.S. threats to close its Baghdad embassy.

Ceasefire — or not? Ghaani's visit appears to have been an effort to enforce some unity and discipline among various Iran-backed armed groups, which had been sending conflicting signals. Before the meetings with Ghaani, a spokesperson for Kataib Hezbollah, which has been blamed for previous rocket attacks, said the “Islamic Resistance” was not responsible for Tuesday’s incident, in remarks to Al Jazeera English. On Thursday, however, Qais al-Khazali, the leader of Asaib Ahl Al-Haq, told Iraqi state television that the conditions of the October ceasefire had not been fulfilled, and that “we will demonstrate the full right to military confrontation with the foreign forces.”

One Iraqi legislator even claimed the U.S. government was behind the attack on its own embassy. Mukhtar al-Musawi, a member of Parliament from the pro-Iran Fatah coalition, told al-Mirbad Radio that "America has full knowledge of the group that committed the attack on the Green Zone, and it itself instigated it in order to falsely accuse the Hashid." Musawi called for security forces to arrest those responsible and publicize their names. Similar allegations were aired on Kataib Hezbollah’s al-Ettejah TV, where commentator Abbas al-Jibbouri said, "I believe that what happened yesterday shows clear American fingerprints.... They want to besmirch the name of the resistance in the eyes of its supporters. It’s impossible that resistance fighters who fought Daesh and achieved these victories, who gave these sacrifices, could fire rockets that kill innocent people.... The Americans are determined to stay in Iraq, so they have contacts and pawns and agents, pushing towards hitting the embassy so that they can repeat this kind of thing." While such claims are neither plausible nor supported by evidence, they reflect a dilemma faced by Iran-backed armed groups, which have vowed to expel U.S. forces from Iraq but are constrained by both Iraqi public opinion and Iran's geopolitical calculations.

Economic News

The U.S. has granted Iraq a 45-day sanctions waiver to continue importing Iranian energy. Over the past two years, Iraq has depended on waivers to purchase Iranian gas and electricity accounting for up to one-third of the country's power supply. The Trump administration has used the waivers as diplomatic leverage toward a range of policy goals: to encourage the Iraqi government to reduce its dependence on Iranian energy, to advocate for contracts with American companies, and to pressure Baghdad to take action against Iran-backed armed groups. The unusually short extension enables the Trump administration to retain leverage in Baghdad through the remainder of its term, since Iraq will need one more waiver between now and Biden's inauguration on Jan. 20, 2021. Read the full story on Iraq Oil Report.

Iraq and Saudi Arabia opened a land border crossing for the first time in 30 years. The Arar crossing, in Anbar province, is now open to both goods and people, according to AFP. It will likely become a major trade route for consumer goods and materials, as well as for Iraqi pilgrims visiting Mecca in Saudi Arabia, and for Saudis visiting the shrine cities in Iraq. The Arar crossing had been shut since Riyadh cut diplomatic ties with Baghdad in 1990, after Saddam Hussein invaded Kuwait. Since then, relations have been difficult, exacerbated by Saudi Arabia’s suspicion of post-2003 Iraqi governments and Iran’s influence in the country. Baghdad and Riyadh have negotiated over re-opening the crossing for years; the breakthrough follows the visit of a high-level Saudi delegation to Baghdad last week, and a visit by Iraqi Finance Minister Ali Allawi to Riyadh in May.

Iraqis are extremely unhappy about the state of their country's economy. According to the Arab Center Washington DC’s annual Arab Opinion Index, 84 per cent of Iraqis surveyed said that economic conditions in their country were "bad" or "very bad" — results that were collected before the federal government began to delay salary payments to public-sector employees. Of all Arab countries, only Tunisia and Lebanon scored worse. But to whatever extent Iraqis dislike their economy, they judge their political leaders even more harshly. The percentage of Iraqis who said the country's political conditions were "bad" or "very bad"? 91 percent.

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