An Iraqi government adviser revealed on Wednesday that Baghdad is only days away from deciding to completely halt oil production for export from southern fields, due to escalating tensions in the Strait of Hormuz.
Shipping traffic through the Strait of Hormuz has been suspended for the fifth consecutive day after Iran attacked several vessels amid its war with the United States and Israel, choking a key artery through which roughly 20 percent of the world’s oil and gas supplies pass.
The Iraqi government adviser, who asked not to be named because he is not authorized to speak publicly, said that storage facilities have reached full capacity, as there are no tankers ready to load cargo. Some vessels have also refused to cross the strait because of security risks.
“Insurance costs for oil shipments have also increased by about 200 percent compared with before the outbreak of the war,” the adviser said, adding:
“We have no choice but to halt production intended for external exports and limit output to meeting domestic consumption.”
Iraq currently produces around 4.4 million barrels per day, nearly one million barrels of which are used for domestic consumption.
The adviser noted that suspending exports would cause losses estimated at between $6 billion and $7 billion per month, threatening the government’s ability to cover basic expenditures, foremost among them public-sector salaries, operational wages, and state institutional expenses.
On Tuesday, Iraq’s Ministry of Oil announced a reduction in crude oil production in the southern fields in Basra province, which account for about 80 percent of the country’s crude output.
Iraqi officials also told Reuters that Iraq — the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) — may be forced to reduce production by more than three million barrels per day within days if oil tankers cannot freely reach loading terminals.
Ship-tracking data from the analytics firm Vortexa show that the number of crude oil tankers passing through the strait fell to just four vessels on March 1, the day after the war began, compared with an average of 24 tankers per day since January.
Hundreds of tankers carrying oil and liquefied natural gas remain stranded near major hubs such as Fujairah Port in the United Arab Emirates, preventing them from reaching customers in Asia, Europe, and other regions.
The threats facing Iraq are not limited to oil exports. They also include imports of food commodities, most of which arrive through the country’s southern ports.
According to the Iraqi government adviser, the country’s stockpile of basic goods — such as flour, rice, cooking oil, and legumes — is sufficient for about six months. However, prices of vegetables and everyday goods are expected to rise as trade routes through Hormuz remain disrupted, while imports from neighboring countries such as Turkey and Jordan cannot fully meet domestic demand.
He added that continued imports from Iran have also become uncertain due to the war and the closure of some border crossings. Iraq had been importing agricultural products from Iran worth between $300,000 and $400,000 per day, including tomatoes, cucumbers, eggplants, and peppers.
In sum, the adviser said Iraqi government estimates suggest the war will likely be short-lived, lasting between one week and ten days. But if it continues longer, it could lead to a “financial catastrophe,” potentially leaving Iraq unable to pay salaries.
He revealed that the option currently under discussion to overcome the crisis is borrowing from the Central Bank of Iraq. He noted that contacts are underway between the government and parliament to issue a decision allowing this step, since the current government is a caretaker administration and does not have the authority to make strategic decisions without legislative authorization.
He concluded that this option could allow the government to weather the crisis temporarily for one or two months, but if the war drags on, the country’s financial and economic conditions will become far more complex and difficult.
Earlier, U.S. President Donald Trump pledged to provide insurance and naval escorts for energy-exporting vessels leaving the region.
The White House said Wednesday that the U.S. Department of Defense (Pentagon) and Department of Energy are working on plans to ensure the safety of oil tankers passing through the Strait of Hormuz amid the war in Iran, though no timeline was provided.
The United States and Israel began launching airstrikes Saturday on targets across Iran, prompting Iran to carry out retaliatory strikes against energy infrastructure in Gulf countries, including Saudi Arabia, the United Arab Emirates, Kuwait, Oman, and Bahrain.
The article is a translation of the original Arabic.
Ghassan Taqi
A journalist specializing in Iraqi affairs, he has worked with the Middle East Broadcasting Networks (MBN) since 2015. He previously spent several years with Radio Free Europe/Radio Liberty, as well as various Iraqi and Arab media outlets.
