A Decades-First Shipping Shift
Iraq has moved its own crude beyond the Strait of Hormuz for the first time in decades, according to reports by The National. The Iraqi Oil Tankers Company (IOTC) chartered a very large crude carrier (VLCC) and shipped two million barrels of domestic crude oil into open international waters outside the waterway, as detailed by Iraqi News. State officials stated that the strategic maneuver aims to shift part of the nation’s exports away from the traditional free-on-board Basra port model, capturing better pricing opportunities and avoiding high war risk premiums.
Director General Ali Qais noted that the company is currently in discussions to procure specialised crude tankers as soon as possible to rebuild sovereign blue-water capabilities and compete with regional maritime peers. The state-owned enterprise was once a major fleet operator in the 1980s but has struggled to rebuild its maritime assets following successive conflicts and sanctions.
Strait Closures and Economic Strains
The US-Iran conflict, which broke out in February, has heavily disrupted the Persian Gulf’s primary energy artery. According to data from Kpler cited by The National, total Hormuz flows in September stood at 6.02 million barrels per day, down sharply from 20.64 million bpd in February. The waterway has experienced persistent disruptions, including missile and drone attacks, naval confrontations, and surging marine insurance rates.
As Opec’s second-largest producer, Iraq relies on oil for at least 90 percent of its state revenue. Prior to the war, roughly 3.3 million barrels per day crossed the Strait of Hormuz from southern Basra terminals. Caught in the middle of regional hostilities, Baghdad has faced diplomatic pressure from neighbors after pro-Tehran armed groups launched drones from Iraqi territory, while ships navigating near the strait have confronted acute security risks.
Diplomatic Standoff Over Waterway Access
While energy producers seek alternative logistical pathways, diplomatic efforts to reopen the waterway remain deadlocked. Iran’s top negotiator and parliament speaker Mohammad Bagher Ghalibaf stated that the Strait of Hormuz will stay closed until the United States accepts Tehran’s seven-day plan, according to Al Jazeera. Ghalibaf maintained that Washington recently communicated proposals through a mediator, asserting that Iran is neither intimidated nor inclined to accept unilateral demands.
Iranian Foreign Minister Abbas Araghchi reiterated in Tehran that while his country is serious about finding diplomatic solutions, it remains fully prepared to defend itself if military actions resume. Meanwhile, Iranian officials emphasized that reopening the strait is Tehran’s primary operational focus, contrasting with Washington’s parallel concentration on nuclear negotiations.
Infrastructure Plans and Sovereign Logistics
In response to the export bottleneck, Iraqi authorities are working to diversify transport corridors. Oil Minister Bassim Khudair announced that the government aims to increase total export capacity to five million barrels a day once strategic pipelines extending to Fishkhabour and Baniyas are completed, alongside upgraded terminal options outside the immediate bottleneck zone. Although previous proposals to reopen the northern pipeline through Ceyhan or move crude overland to Syria offer partial relief, direct maritime shipping adjustments remain critical for maintaining national income stability.