Iraq’s Internal Divisions Impacting Global Oil Market

While Iran’s nuclear deal is grabbing the international headlines, oil market experts are mainly concerned with the internal divisions in Iraq, particularly the conflict over the secession of Iraqi Kurdistan as the main element which can influence the global oil prices.

While US President Donald Trump’s recent strategy on Iran’s nuclear program was expected to impact the global oil market, many experts say they are more concerned with Iraq’s internal division.

Experts believe that the conflict over Iraqi Kurdistan’s secession from Iraq has more concrete effects on oil prices across the globe, a Farsi report by Tasmin News Agency says.

While many observers expected that the fall of ISIS in Iraq will lead to the renewal of national unity in Iraq, Iraq seems to have entered a new phase of civil war which can cut the country’s exports of over half a million oil barrels per day.

About one third of Iraq’s oil is extracted by some foreign companies like DNO ASA, General Energy and Gulf Keystone Petroleum. Some other larger companies have also invested in Iraq’s oil fields enjoying political support within the government.

Reports say Gazprom Neft and Rosneft from Russia and Sharon from the US are interested in investing in oil fields of Kurdistan region.

Therefore, any ban on oil export from the region will not only hamper foreign investments but also will result in the shortage of oil for European refineries. This comes as the central government’s oil production in the northern areas of the country will run risks. The central government in Iraq is at the threshold of losing the pipeline used to export its oil to Turkey because the pipeline passes through the Kurdistan region.

If the tensions in the northern Iraq keep going on, the export of Iraqi Kurdistan’s oil will stop. This will have consequences affecting regional countries because refineries in the Mediterranean will have problem in making up for the Iraqi oil due to their long distances. This will in turn widen the gap between the demands for and supply of oil in the Mediterranean region and if prolonged, the problem can eat up the oil reserves of the region.

Iraqi Kurdistan Region exports about 565,000 barrels of oil per day which is equal to Qatar’s oil export.

So, as the politicians are involved in talks over the fate of Iran’s nuclear deal, it seems the main focus should be put on the oil markets in Iraq and the internal division in the country which is threatening the future of Iraq’s oil export.

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