Iraq has announced a state of force majeure on all oil fields operated by foreign companies. This decision was made after military actions in the region led to significant disruptions in shipping through the Strait of Hormuz, effectively paralyzing the country’s main oil exports.
This is reported by Finway
Impact of Military Actions on Iraq’s Oil Sector
As stated in a letter from the Iraqi Ministry of Oil, shipping through the Strait of Hormuz has been severely complicated due to unprecedented military activity. As a result, most of Iraq’s oil exports are under threat, and storage facilities have reached maximum capacity due to the inability to offload crude. International partners have been unable to provide the necessary tankers, despite the state company SOMO’s readiness to export.
“In light of the situation, the ministry has ordered a complete halt to production in the relevant concession areas, and according to the terms of the contract, this decision does not provide for any compensation,” the letter states.
The ministry also reported that the issue of partially resuming production will be periodically reviewed depending on the development of regional security. Foreign companies have been invited to urgent negotiations to address key operational issues, cost management, and personnel under the new force majeure conditions.
Production Cuts and Financial Consequences
Iraq’s Minister of Oil, Hayyan Abdel-Ghani, stated that after the halt of exports from southern ports, production by Basra Oil Company has been reduced to 900,000 barrels per day from 3.3 million barrels. The extracted oil is primarily directed to meet the needs of local refineries.
Significant reductions in production and exports may further complicate Iraq’s financial situation, as more than 90% of the country’s revenue comes from oil sales. Thus, the state faces serious budgetary challenges amid an already unstable economic situation.
At the same time, Iraq continues to work on restoring the pipeline that will allow oil to be transported from Kirkuk directly to the Turkish port of Ceyhan, bypassing Kurdistan. This is expected to enhance export flexibility in the future and reduce dependence on traditional routes.