Iraq has long been the key instrument through which Iran has been able to generate economy-supporting revenue from oil exports around the world, despite intense sanctions against it doing so. Last week, the general manager of Iraq’s State Organization for Marketing of Oil (SOMO), Ali Nazar al-Satari, said that the monopoly state oil marketer is in talks with Oman’s OQ Trading to build an oil pipeline between the two countries. This potentially opens another extremely valuable mechanism by which Iran can circumvent sanctions, so additionally keeping it away from the negotiating table that might circumvent its nuclear weapons ambitions.

Iran has long taken enormous pride in its ability to side-step the sanctions against oil exports imposed by the West. As its then-Foreign Minister, Mohammad Zarif, stated in December 2018 at the Doha Forum: “If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions.” It is Iraq that has been the pivotal enabler of this, from the beginning of the process to the end, as analysed in depth in my new book on the new global oil market order. At the start of the process, sanctioned Iranian oil is labelled as non-sanctioned Iraqi oil by dint of the fact that several of both neighbouring countries’ oil production comes from oil fields that sit atop the same oil reservoirs. These shared fields include Iran’s Azadegan (the same reservoir as Iraq’s huge Majnoon site), Yadavaran (Iraq’s Sinbad), Azar (Iraq’s Badra), Naft Shahr (Iraq’s Naft Khana), Dehloran (Iraq’s Abu Ghurab), West Paydar (Iraq’s Fakka), and Arvand (Iraq’s South Abu Ghurab). From the point when it is re-branded to Iraqi oil, Iranian oil then needs to be shipped where it is required, which is still mainly China. Iran’s own former Petroleum Minister, Bijan Zanganeh, publicly highlighted how this is done in 2020. He said: “What we export is not under Iran’s name — the documents are changed over and over, as well as [the] specifications.” A further layer of obfuscation is undertaken when the oil cargoes are at sea, such as tankers disabling of the ‘automatic identification system’ on ships that carry Iranian oil rebranded as Iraqi — this makes tracking such vessels extremely difficult. Compounding this – particularly useful for oil being moved to China — is the common practice of at-sea or just-outside-port transfers of Iranian oil onto tankers flying the flags of a local Asian country, with Malaysia and Indonesia having long been favoured by Iran and Iraq in this regard.

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Iraq’s plan with Oman has further benefits for Iran. One of these is that it offers unfettered sea routes directly out from the Gulf of Oman and into the Arabian Sea from which it can head East to China, or West to Africa, and then North into Europe. This bypasses any potential trouble – or scrutiny from the West – associated with the Persian Gulf and the tangential Strait of Hormuz. Additionally, part of the Iraq-Oman deal being mooted is oil storage capacity in a country that remains unsanctioned by the U.S. or its allies, at a time when they are looking to ramp up sanctions on countries seen as complicit in enabling Iran to continue with its energy exports. Iraq’s choice of Oman (in consultation, no doubt, with Iran, and probably China) also appears to signal the intention of making the Sultanate a major operating hub for Iran and China in a world in which the U.S,. especially, is looking to dramatically increase sanctions against Iran. This is because Iran and Oman have long had plans – currently delayed due to sanctions pressures – for a potentially game-changing 192-kilometre 36-inch gas pipeline running along the bed of the Oman Sea at depths of up to 1,340 metres from Kuhmobarak port in Iran to Sohar Port in Oman.

In the early part of the planned project, this undersea gas pipeline would be the second part of a 200-kilometre 56-inch land pipeline running from Rudan to Mobarak Mount in Iran’s southern Hormozgan province. The aim of this part of the project – up to Iran’s delivery of its gas to Oman – would be for Tehran to utilise Muscat’s liquefied natural gas (LNG) facility at Qalhat. As the world’s second-largest gas reserves holder (after Russia), Iran has long seen monetising this in LNG form as key to its next phase of energy (and economic) expansion. That said, once the first phase is complete, the second phase was always intended to be the expansion of deliveries of Iranian gas to Oman, which would then move it on to wherever it could be sold. Iran’s LNG plan involving Oman was also part of the broader co-operation deal made between Tehran and Muscat in 2013, extended in scope in 2014, and fully ratified in August 2015, as analysed in depth in my new book on the new global oil market order. It was centred on the Sultanate’s importing at least 10 billion cubic metres of natural gas per year (bcm/y) from Iran for 25 years. The deal was to have begun in 2017, valued at roughly US$60 billion at that time. The target was then changed to 43 bcm/y to be imported for 15 years, and then finally altered to at least 28 bcm/y for a minimum period of 15 years.

The timing of this Iraq deal with Oman also appears well judged by Tehran, as Washington has in recent weeks increased sanctions on Baghdad. A notable recent example came in April, with the ‘No Iranian Energy Act’ introduced to U.S. lawmakers. As highlighted by the Chairman of the Republican Study Committee, Congressman August Pfluger, this legislation is part of President Donald Trump’s maximum pressure campaign against Iran’s leaders. “[These] are the world’s most dangerous state sponsors of terrorism, [and] the Iranian regime is not just a threat, its leaders are a genocidal death cult,” he said. The proposed Act will sanction the importation of Iranian natural gas to Iraq, which has for many years formed the foundation of the country’s domestic power sector. Indeed, gas and electricity imports from Iran has historically comprised around 40% of all Iraq’s energy needs. An adjunct piece of legislation – the ‘Iran Waiver Rescissions Act’ — would permanently freeze Iranian-sanctioned assets everywhere, including Iraq, and prohibit any standing or future U.S. President from using any waiver authority to lift the sanctions.

This step-up in action also includes the key backer of Iran and Iraq – China – some of whose trading firms were included in the U.S. State Department’s latest announcement on Iran-related sanctions. Specifically, it said that it would impose sanctions on 20 entities it believes are engaged in trading Iranian oil and petrochemical products, including China’s Zhoushan Jinrun Petroleum Transfer Co., an oil terminal in the greater Zhoushan port area. In an extremely similar tone and wording to Brian E. Nelson’s comments on sanctions imposed on Hong Kong entities in 2023, the Department said: “The Iranian regime continues to fuel conflict in the Middle East to fund its destabilizing activities, [and] Today, the United States is taking action to stem the flow of revenue that the regime uses to support terrorism abroad, as well as to oppress its own people.” Zhoushan Jinrun was highlighted by the State Department is for: “…knowingly engaging in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran”. The port is the fourth of China’s to be sanctioned by Washington in recent weeks, following similar actions against Huaying Huizhou Daya Bay Petrochemical Terminal Storage in March, Guangsha Zhoushan in April, and Dongying Port in May.