Iraq and Pakistan have entered into agreements with Iran for the supply of oil and liquefied natural gas (LNG) from the Persian Gulf, signaling Tehran’s capacity to influence energy flows through the Strait of Hormuz. This development comes as the ongoing conflict involving the U.S. and Israel has significantly reduced energy exports from a region that typically accounts for 20% of the world’s oil and LNG supply.
In recent weeks, the U.S. has imposed restrictions on Iranian ports, prompting Iran to shift its strategy regarding the Strait. Initially, Tehran aimed to halt maritime traffic, but it has since redefined the area as a “controlled corridor.” This change is particularly impactful for Iraq, whose oil exports predominantly traverse the Strait, making it one of the countries most affected by its disruptions. Pakistan, which has sought to mediate in the conflict, relies heavily on energy imports from the Persian Gulf and has faced soaring fuel prices.
Under the newly established agreement between Baghdad and Tehran, two large Iraqi oil tankers, each carrying approximately 2 million barrels of oil, successfully navigated the Strait on Sunday. An Iraqi oil ministry representative indicated that the country is currently negotiating with Iran to increase transit volumes, as oil revenues constitute 95% of Iraq’s budget.
These discussions have been corroborated by two additional sources within the Iraqi oil ministry and the maritime sector. A spokesperson for the Iraqi government did not respond to Reuters’ request for comments.
Additionally, two tankers loaded with Qatari LNG are en route to Pakistan as part of a separate bilateral agreement with Tehran. Prior to the conflict, Pakistan received around ten LNG shipments each month but is now struggling to meet high summer electricity demand for air conditioning.
Sources indicate that neither Iraq nor Pakistan has made direct payments to Iran or its Islamic Revolutionary Guard Corps (IRGC) in relation to these transit arrangements. Although Qatar did not directly participate in these agreements, it informed the U.S. before dispatching shipments to Pakistan.
Other nations are reportedly considering similar agreements as rising energy prices and supply disruptions exert significant pressure on Asian economies. Before the conflict, approximately 3,000 vessels passed through the Strait of Hormuz each month; current traffic has plummeted to about 5% of that volume.
These disruptions have resulted in a more than 50% increase in Brent crude prices since the conflict began in late February, with LNG prices in Europe and Asia surging by approximately 35-50%. Iran has expressed its intention to maintain control over the Strait post-conflict, demanding reparations, the lifting of sanctions, and access to frozen assets as part of any peace negotiations.
Iraq and Pakistan have signed energy agreements with Iran, highlighting Tehran's influence over the Strait of Hormuz amid ongoing regional conflicts. These developments come as energy exports from the region face significant disruptions, leading to rising global prices.
Source: Reuters