Iran says Iraqi ships are allowed to use Strait of Hormuz

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TEHRAN – The Iranian military said Iraq is exempt from shipping restrictions in the Strait of Hormuz that have strangled global energy flows for weeks.

“Brotherly Iraq is exempt from any restrictions we have imposed on the Strait of Hormuz,” Iran’s military spokesman said in an Arabic-language video statement published by the official Islamic Republic News Agency.

The declaration has the potential to unleash as much as three million barrels a day of Iraqi oil cargoes.

It also comes just days after a French container ship and Japanese-owned tanker crossed in what appeared to be the first transits by vessels linked to Western-aligned nations since the conflict spurred the Islamic republic to effectively shut the waterway.

Vessel traffic through the vital strait has been picking up in the past week, though it remains unclear if Tehran granted permission as a result of diplomatic outreach or negotiations with individual shipping companies. 

Even so, the number of transits is a small fraction of the pre-war rate, when one-fifth of the world’s oil and liquefied natural gas sailed the narrows connecting the Persian Gulf to the Indian Ocean.

Early in the war that has raged for five weeks, Iraq and other key Persian Gulf oil producers were forced to slash crude output as the primary export route closed and storage tanks filled to capacity.

Iraqi oil exports plunged by roughly 97 per cent to a daily average of 99,000 barrels in March from the prior month as production shrank and overseas shipments were restricted to a pipeline system that traverses Turkey to the Mediterranean port of Ceyhan.

Iran’s loosening of Hormuz restrictions opens at least an opportunity for Iraq to resume seaborne shipments, though other hurdles remain, including a lack of clarity on when and by how much the nation’s oil fields can ramp up output. 

It is also unclear, given weeks of shipping turmoil, how much tanker capacity will be immediately available to load and haul Iraqi crude from Persian Gulf ports.

The Iranian statement distinguished “brotherly” Iraq from “hostile” states that Tehran has repeatedly said the strait is closed to.

Speaking in Arabic rather than Iran’s native Persian, the military spokesman thanked the Iraqi people for their support since the war began.

The two neighbours have close ties – despite a brutal eight-year war in the 1980s – thanks in part to their majority Shia Muslim populations.

Iraqi militias form a key node in Iran’s network of regional proxies opposed to the US and Israel, and Baghdad also relies on Tehran for supplies of natural gas.

Tracking vessel movements can be an inexact science because of the potential for electronic interference with ships’ signals and the intentional disablement of transponders by pilots sailing through risky zones. 

Iraq is the second-largest oil producer in OPEC, second only to Saudi Arabia, according to February data compiled by Bloomberg. BLOOMBERG