Top Energy Stories

Iraqi Oil Minister Ihsan Ismaael sat down with Iraq Oil Report for an interview covering a host of pressing topics for the country's energy sector. One consequential yet unfinished deal is a multi-faceted project with France’s TotalEnergies worth $28 billion over 50 years, which would involve gas capture, upstream development, treatment and transport of water for use at southern oil fields, and Iraq’s first solar power plant. Another priority has been the formation of the Iraqi National Oil Company (INOC), which was initiated in 2018 but stalled in the face of legal challenges. The new company could fundamentally restructure the oil sector: INOC aims to take over direct management of state oil companies, while the Oil Ministry is supposed to step back into more of a regulatory role. The ministry is also contending with frustrated international oil companies (IOCs) that have been squeezed by the tough financial terms of Iraq’s technical service contracts (TSCs) as well as low oil prices and production curtailments associated with OPEC-plus cuts. ExxonMobil recently filed for arbitration over its efforts to leave the West Qurna 1 field, after the Oil Ministry rejected its efforts to sell its share to Chinese companies. Ismaael gave insight on these topics and more; read the full transcript on Iraq Oil Report.

The Iraqi federal government's recent transfer of 200 billion Iraqi dinars ($138 million) to the semi-autonomous Kurdistan Regional Government (KRG) was a one-time payment rather than the start of monthly budget disbursements, according to multiple officials from both sides. The financial transfer on July 10 initially raised hopes that the Iraqi government might be implementing a Cabinet order from mid June that authorized both monthly payments of Kurdistan's share of the federal budget going forward and backdated payments for the first half of 2021. Such a breakthrough deal had the potential to ease financial pressure on the KRG, helping it to pay salaries to public-sector employees, maintain social stability, and provide reassurance to oil companies invested in Kurdistan that have suffered from payment delays. The latest financial transfer from Baghdad — the first in nearly a year — was actually the result of a second Cabinet decision in early July that makes no guarantee of regular budget disbursements, because the two sides have not yet agreed on how to calculate exactly how much the KRG is owed, if anything. For more insight into the political and technical hurdles standing in the way of regular budget transfers, read the full story on Iraq Oil Report.

The KRG Ministry of Natural Resources (MNR) has issued a directive to field operators that they have 18 months to halt the flaring of associated gas that is produced along with crude oil. The July 13 order, a copy of which was seen by Iraq Oil Report, is a move to end the wasteful and environmentally disastrous practice of burning gas and other byproducts of crude production. But it is also likely to raise concerns among the international oil companies (IOCs) developing Kurdistan's oil fields, since the two-page letter does not address the key question of how the anti-flaring measures will affect the financial structure of projects where the MNR already owes hundreds of millions of dollars in backlogged invoices. Read the full story on Iraq Oil Report.

The federal Iraqi government and KRG combined for 3.340 million barrels per day (bpd) of crude oil exports in July, according to data from the Oil Ministry and industry officials. Higher global oil prices also led to an increase in federal revenues from oil sales, which rose to $6.514 billion in July from $6.141 billion the previous month. Nationwide exports in July were 22,000 bpd higher than the June average of 3.318 million bpd, in line with Iraq’s higher OPEC-plus quota, under which the country was supposed to cap overall production — exports plus crude that is consumed domestically — at 4.016 million bpd. Read the full story on Iraq Oil Report.

Kadhimi's Trip to Washington

The biggest news from Mustafa al-Kadhimi's second trip to Washington as prime minister wasn't really news at all. During Kadhimi's visit to the Oval Office, U.S. President Joe Biden said the U.S. combat mission in Iraq will conclude by the end of the year. Before the trip, Kadhimi had told AP that Iraq would still ask the U.S. for training and military intelligence gathering. "There is no need for any foreign combat forces on Iraqi soil," he said, adding that Iraq wanted a U.S. presence “to support our forces in training and developing their efficiency and capabilities and in security cooperation." But the new agreement appears to be a semantic reclassification of the existing U.S. military footprint rather than a plan for significant numbers of troops to withdraw. It was “a set piece of diplomatic theatre,” according to Jane Arraf and Eric Schmitt of the New York Times. The narrative is convenient for both leaders: Kadhimi is eager to be seen as protecting Iraqi sovereignty ahead of national elections this October, while Biden is highlighting his initiatives to wind down U.S. involvement in both Afghanistan and Iraq.

The most tangible achievement of Kadhimi's trip was probably the trove of 17,000 archaeological artifacts that he and his delegation brought with them back to Baghdad. The haul is said to be the “largest-ever repatriation of looted Iraqi antiquities,” writes Jane Arraf for the New York Times. On arrival, the Iraqi Culture Ministry took delivery of the clay tablets and seals dating back to the world’s earliest civilizations. The repatriation is also a victory in a global effort by countries to press Western institutions to return culturally vital artifacts. Many of the Iraqi pieces had been held by the Washington Museum of the Bible, funded by the Christian evangelical family that owns the Hobby Lobby craft store. The U.S. Department of Justice fined Hobby Lobby $3 million for failing to exercise due diligence in its acquisitions processes.

The U.S. Senate Foreign Relations Committee and the Biden administration are pushing to repeal an authorization for military action in Iraq written when Saddam Hussein was still alive. The debate is part of a larger discussion over the use of old congressional authorizations for military force, according to the AP. Deputy Secretary of State Wendy Sherman spoke up for ending Congress’s authorization for U.S. troops to strike in Iraq. She stated that Iraq is a partner not an enemy of the U.S., and that repealing the 2002 resolution would underline that changed relationship, and deprive Iran of an anti-U.S. talking point. Several Republican committee members argued against repealing the authorizations because it would send the wrong message to Iran.

The U.S. granted Iraq the latest in a series of four-month-long extensions to sanctions waivers allowing the country to import gas and electricity from Iran. Iraq has depended on Iran for up to one-third of its power in recent years, although Iran has been an unreliable supplier. The waivers enable Iraq to continue those imports without triggering U.S. sanctions. Under former President Donald Trump, waiver approval was hardly a sure thing, since his administration took a somewhat coercive diplomatic approach toward Iraq, wielding the threat of sanctions as leverage to push Baghdad to develop alternatives to Iranian energy supply and to sign contracts with U.S. companies. The Biden administration appears to be taking a somewhat less transactional stance, granting longer waivers than the Trump administration did, without the same levels of suspense. The new waiver runs until the start of December, according to AFP.

Iran and Iraq

The U.S. assassinations of Iranian Gen. Qassim Soleimani and Iraqi paramilitary leader Abu Mahdi al-Mohandis have failed to deter attacks against U.S. troops in Iraq, writes Simona Foltyn for Politico magazine. The Trump administration said the January 2020 strike would create “real deterrence” against the militias. However, Foltyn writes that the strike plunged Iraq into a “fresh cycle of instability as the militias intensified and broadened their operations, while also consolidating their grip on power within the loose grouping of the PMF.” Iraqi officials indicate that the failure of the U.S. to anticipate the consequences of the assassinations indicate that the U.S. government has limited understanding of the country’s complex internal dynamic. Already this year, the Biden administration has twice ordered strikes on Iran-backed militias in retaliation for attacks on U.S. forces in Iraq.

Attacks on U.S. positions in Iraq are partly a symptom of the leadership vacuum left by the killing of Soleimani and Mohandis. Writing for the Guardian, Martin Chulov reports that the successor to Soleimani in Iraq – Esmail Qaani – has failed to convince paramilitary groups that it is not in their interests to continue firing rockets at U.S. forces. During a meeting last month, one of the attendees reportedly told Chulov that “all eyes were on him at the start, and they started to look away. By the end of the meeting, they thought they had his measure. And that isn’t good for Iraq. He is not the new Hajji Qassim, that’s for sure.” Chulov writes that Qaani doesn’t speak Arabic and had no experience in Iraq or Syria. More importantly, he does not have a rapport with Ayatollah Khamanei or his office.

Former Iraqi Prime Minister Nouri al-Maliki was days away from being sanctioned by the U.S. government earlier this year, according to Robert Tollast, reporting for the National. The move was being discussed during the closing weeks of the Trump administration in January. “He was so close to designation, but state mechanisms ran out the clock on him,” said an official familiar with the internal discussions, according to Tollast. The basis for sanctions is not clear, but may stem from a number of corruption allegations and alliances with Iran-backed groups that have attacked U.S. forces and killed hundreds of protesters, writes Tollast. Maliki is also seeking a political return in the coming elections, according to analysis by the Washington Institute for Near East Policy, despite keeping a relatively low profile recently.

Commentary and Analysis

Iraq needs to implement laws key to ending torture and building justice. A UN report highlights the need for Iraq to put in place effective measures to tackle torture in detention centres and other violations. The authors of the report — "Human Rights in the Administration of Justice in Iraq: legal conditions and procedural safeguards to prevent torture" — write that torture continues throughout the country despite the existence of a legal framework that criminalizes torture and sets of procedural safeguards to prevent it. The report covers the period between July 2019 and April 2021 and is based on hundreds of interviews with detainees, prison staff, judges, and lawyers. The detainees describe numerous instances of torture in detention. UN High Commissioner for Human Rights Michelle Bachelet said, "Eradicating torture will be one of the most effective tools to start to build public trust in the state's ability to deliver justice and uphold the principle of fairness."

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