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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Why Iraq Just Awarded A Strategically Vital Gas Field To A Ukrainian Firm

  • Russia-aligned Iraq has awarded the development of a crucial gas field to a Ukrainian firm.
  • The importance of the Akkas gas field for Russia, Iran, and China can barely be overstated.
  • The Akkas field is one of three big gas sites that form a skewed triangle across southern Iraq.
Iraq oil and gas

So strategically vital to Russia, Iran, and China is the Akkas gas field in Iraq that enormous pressure was brought to bear on politicians in Baghdad to ensure that all contracts related to the field went to Russian firms in the first instance, with back up from Chinese companies when required. Iranian gas companies are not thought up to the task of running a major gas field development, which is why their own gas fields are mostly being effectively run by firms from those two countries, particularly Russia. However, in one of the most extraordinary surprises in recent gas or oil field contracts’ history, Iraq has awarded the Akkas development to a virtually unknown company from Russia’s current archenemy - Ukraine. So, what is going on?

The importance of the Akkas gas field for Russia, Iran, and China can barely be overstated. Situated in the heart of the Middle East, sharing its eastern border with Iran, its northern border with Turkey, its western border with Syria and Jordan, and its southern border with Saudi Arabia, Iraq is perhaps the single most geopolitically important country in the entire Middle East to these three countries - and to the U.S. In turn, its lawless western desert province of Anbar – a place so violent and unpredictable that it was even avoided where possible by Islamic State - is perhaps the most geopolitically vital area in all of Iraq. And the most strategically important position in Anbar is the huge Akkas gas field. The field itself has around 5.6 trillion cubic feet of proven reserves, and Iraq’s Oil Ministry plans for it to produce around 400 million cubic feet per day of gas. But Akkas could have nothing in it, and Russia, China, and Iran would still do anything to get it. One key reason for this is that oil and gas companies are legally entitled to secure their oil and/or gas field operations around the world through whatever means they feel necessary. In practical terms, this can include stationing a massive heavily-armed security force around an oil and/or gas field.

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This aligns perfectly with China’s multi-generational power-grab project, the ‘Belt and Road Initiative’, which leverages big investments into major on-the-ground oil, gas, industrial, and transport developments to secure effective control over large swathes of a country’s economy and, therefore, its future political allegiance. A bonus for China is that its huge investments into Iraq in recent years were also supposedly to have given it first refusal on most of the oil, gas, and petrochemicals projects that come up in Iraq for the duration of the ‘Iraq-China Framework Agreement’, as fully analysed in my new book on the new global oil market order. As part of this, China was also supposed to receive at least a 30 percent discount on all oil, gas, and petrochemicals it buys from Iraq. The other deals – mostly in the further west of Iraq – are supposed to have first refusal given to Russia, with similar discounts on oil and gas purchases factored into those relevant agreements.

However, there are even bigger stakes at play for Russia in the Akkas development due to its geographical location. The Akkas field is one of three big gas sites that form a skewed triangle across southern Iraq, stretching from the Mansuriya field near the eastern border with Iran, down to the Siba field in the south (extremely close to the key Iraqi Basra export hub), and then all the way west across to Akkas itself (extremely close to the border with Syria). Along the spine of this entire area running from east to west are the historical ultra-nationalist and ultra-anti-West cities of Falluja, Ramadi, Hit and Haditha. At the point geographically, Iraq turns into Syria, and it is just a short hop to the key strategic ports of Banias and Tartus, and to Latakia – all three of which are crucial globally strategic sites for Moscow, as also detailed in my new book on the new global oil market order. The Syrian port of Tartus remains a huge naval base for Russia and the only Mediterranean port to which it has access. The port is just a short ride from Khmeimim airport, which – under a deal struck in 2015 - became a dual-use civilian-military airport-airbase for use by Russia. And just a short flight away from those two key assets is Russia’s Latakia intelligence-gathering listening station. Russia thought it had finally gained control over these three sites in September 2019 when Stroytransgaz signed a preliminary contract with Iraq’s Oil Ministry to develop the hitherto virtually unknown Block 17 in the Anbar province. The Block 17 site in Anbar province was perfect for Russia’s purposes, as it was right in the middle of what the U.S. military used to call ‘the spine’ of Islamic State where the Euphrates flows westwards into Syria and eastwards into the Persian Gulf, extremely close to the border with Iran. However, U.S. pressure on Iraq caused ongoing delays to this deal.

For both Russia and Iran, the securing of the spine of Iraq running through Akkas is crucial to the development of the Banias port in Syria. This has long been earmarked as the end point for the long-planned Iran-Iraq-Syria pipelines that would move Iranian, and later Iraqi, oil and gas from Iran through Iraq to Syria, and then into the less rigorously policed ports of southern Europe. This route would not only allow for the movement of sanctioned Iranian oil and gas into Europe, but also of anything else that Russia and Iran want to get into the continent without too many checks. It has also long been the final part of Russian and Iranian plans to build a ‘land bridge’ from Tehran to the Mediterranean Sea by which they could exponentially increase the scale and scope of weapons delivery into southern Lebanon and the Golan Heights area of Syria to be used in attacks on Israel, as also analysed in depth in my new book on the new global oil market order. This core aim of this policy was to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan. 

With all this at stake, then, why did Iraq award the Akkas gas development to hitherto unknown Ukrainian firm Ukrezemresurs? The answer is in the question, which is that there is so much at stake for the U.S.’s three key geopolitical rivals in the area – not least in Russia’s war against Ukraine - that Washington could not allow it to happen right now. According to sources who work very closely with Iraq’s Oil Ministry spoken to exclusively by OilPrice.com within the last two weeks, it was made very clear to Iraq that financial disbursements and waivers to keep importing energy from Iran would be heavily scrutinised if Akkas was awarded to Russia, or to any companies from China or Iran right now. “This message was stressed to the recent delegation to Washington led by [Prime Minister, Mohammed] Al Sudani, and appears to have been clearly received,” said the source. “It was also promoted with further promises of investment by U.S. firms on the one hand, or further sanctions against Iraq for aiding Iran on the other,” he added. Indeed, the Akkas award announcement came at around the same time as

Iraq-headquartered energy and utility company Raban Al-Safina for Energy Projects (RASEP) signed memorandums of understanding (MoUs) with U.S. firms KBR, Honeywell, Baker Hughes, Emerson, and GE to develop the Nahr Bin Omar gas field in Basra in southern Iraq. Given Iraq’s history of promising one thing to the U.S. and then doing the exact opposite, it remains to be seen how these MoUs and the Akkas gas field award to Ukrezemresurs pans out, of course. But, given the weight of resources in this new U.S. initiative in Iraq, if it does not work then Washington is unlikely ever to find a way back into the country.

By Simon Watkins for Oilprice.com


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