With the exacerbation of the global energy crisis, will Iraqi oil be an alternative to the Russian?

BAGHDAD

- The Russian war on Ukraine ignited global energy markets, so oil and gas prices rose to record levels, which made oil supplies vulnerable to fluctuations, amid countries scrambling for alternatives to secure their needs.

In the midst of the exacerbation of the crisis, the demand for crude oil is rising, so have buyers' attention turned to the Middle East - especially Iraq - to provide an alternative to Russian oil?

Several days ago, the price of "Brent" North Sea crude touched $140 a barrel, and was on its way to recording its highest price in 14 years.

This came after US Secretary of State Anthony Blinken said that Washington and its allies were discussing a ban on Russian oil imports, in response to Russia's war on Ukraine.

Russia is one of the world's largest oil producers, and these tensions threaten crude supplies.

Russia produces more than 10 million barrels per day, and it produces 16% of the world's natural gas.

Europe imports from Russia about 25% of its need of oil and 40% of its need of natural gas.

Jihad stressed Iraq's commitment to the decisions of "OPEC Plus" (Al-Jazeera)

Regarding the possibility of Iraq compensating Russian oil in the event of an import ban from Russia, the spokesman for the Iraqi Oil Ministry, Assem Jihad, explained that Iraq is committed to the “OPEC +” agreements, and does not deviate from them.

Speaking to Al-Jazeera Net, Jihad indicated that Iraq respects its obligations with the sober companies that have been buying Iraqi oil for a long time.

He added that the ministry holds a meeting every month under the chairmanship of the minister, agents, relevant and supervisory departments and concerned parties in the Oil Marketing Company (SOMO), and during these meetings pricing decisions for Iraqi oil are taken for the next month, and the required shares and divisions on the companies applying for purchase, after reviewing market developments.

Regarding the most important countries that buy Iraqi oil, Jihad indicated that Iraq deals with Asian markets, which are considered promising, and then European and American markets.

Al-Marsoumi ruled out that Iraq would be able to compensate the Asian market in the event that the export of Russian oil stopped (Al-Jazeera Net)

Iraq and competition

For his part, Professor of Economics at the University of Basra, Dr. Nabil Al-Marsoumi, ruled out that Iraq would be able to take Russia’s place in supplying Asian markets with its need of oil, especially since Russia is the second largest oil exporter to China at a rate of one million and 590 thousand barrels per day, while Iraq is the third largest exporter to China at a rate of one million and 87 thousand barrels per day, and Saudi Arabia comes as the largest exporter of oil to China with about one million and 700 thousand barrels per day.

Al-Marsoumi says - to Al-Jazeera Net - that in light of the current sanctions on Russia, which have reduced European demand for oil, Russia was forced to set oil export discounts, and the last discount granted to Shell was $25 on the price of a barrel, referring to The expected Russian trend towards Asian markets, especially India and China, by tempting these countries with discounts, may negatively affect Iraqi oil, and may lose it part of the market share.

Al-Marsoumi believes that Iraq is unable to gain a new share in European markets due to limited exports, because 97% of Iraq’s exports are heading south towards the seas, and that about 100,000 barrels are heading north from the Turkish port of Ceyhan, which transports Kirkuk oil, and therefore the absence of export outlets will make it difficult Iraq should increase its exports to Europe to compensate for the shortage of Russian crude, and this is a major challenge facing Iraqi oil in the future if the war in Ukraine continues.

SOMO announced a few days ago that it achieved the highest export rate in two years, last February, at a rate of 3.314 million barrels per day, an increase of 112,000 barrels per day over the previous month, and the highest financial revenue since 2014 at an amount of 8.54 billion dollars per month.

Somo announced a few days ago that it had achieved the highest export rate in two years at a rate of 3.314 million barrels per day (Al Jazeera Net)

OPEC and the market

The expert in oil economics, Dr. Falah Al-Amiri, believes that the OPEC countries and its partners have few reserves of oil, and they are unable to meet the current market need in the event that the export of Russian oil stops due to the US-European sanctions.

Al-Amiri says - to Al-Jazeera Net - that Iraq has limited flexibility in increasing its production, so Iraqi oil cannot replace the amount expected to be lost by the global market of Russian oil, but Iraq can increase its production between 200 and 300 thousand barrels per day only.

He pointed out that the global oil market would need to compensate for the production of between 3 and 4 million barrels of Russian oil destined for export per day if America and Europe imposed sanctions on Russian oil.

Al-Amiri explains that the largest customers of Iraq are China and India, which import about 70% of Iraqi oil, and the rest is exported to Europe and America, and there may be a change in the proportion of oil going to Europe.

Musa warned that Iraq may suffer a threat to its food security due to the rise in food prices globally (Al-Jazeera Net)

Crisis and food security

Member of the National Initiative for Transparency in Extractive Industries Saeed Yassin Musa sees - in an interview with Al Jazeera Net - that the war in Ukraine threatens food security in many countries, including Iraq, due to the rise in wheat prices internationally, and that Iraq adheres to the ceilings of production and marketing as decided by OPEC + in Meeting the needs of the markets, but Iraq is able to raise production by about one million barrels per day.

As for the economic analyst, Dergham Muhammad Ali, he believes that Iraq - due to its reliance on oil sales - will benefit from the increase in its prices in strengthening its finances, but in return it will be greatly affected by the high prices of oil derivatives and imported gas, meaning that the growth in prices will be absorbed by the prices of derivatives and gas and inflation in the prices of materials food globally.

And Muhammad Ali says - to Al-Jazeera Net - that oil prices are likely to rise more with less supplies, and at the same time, China will rely more on Russian oil, which will fill part of the need of one of the largest importers of oil and gas, and this will limit - in the next stage - this rise .