Iran seeks to sabotage Iraq's oil drive

BEIRUT, Lebanon, May 30 (UPI) -- As Iran's oil production shrinks because of Western economic sanctions, Iraq says its output has hit its highest level since 1989. If the current confrontation in the Persian Gulf continues, Iraq's production will soon outstrip that of its longtime rival.

But the Tehran regime doesn't want to see its precious oil exports overtaken by Iraq's, oil prices pushed down and post-Saddam Hussein Iraq become an economic powerhouse that will dash Iran's drive to dominate its western neighbor.

To ensure that none of this happens, the global security consultancy Stratfor reports, Shiite Iran is systematically stealing Iraqi oil, either through siphoning it off from pipelines to bolster its own exports or by extending its control over Iraq's southern oilfields in Shiite-controlled Basra province that borders the Islamic Republic's main oil fields.

"Iran's deep political, economic and militant links in Iraq -- particularly in the … south -- will help Tehran manage the near-term politics of Iraq's oil-driven ascent," Stratfor observed in an analysis Monday.

"And illicit trade links pervasive in Iraq's southern border regions could even allow Iran to reap financial rewards from increased Iraqi production …

"Iran has many avenues of influence in Iraq, but it cannot provide Baghdad the technology or investment needed to extract Iraq's energy wealth.

"Instead," Stratfor noted, "Iran has embarked on a series of oil-smuggling schemes that allow it to siphon off Iraqi crude for its own exports and secure access to installations in Iraq's southern oil fields."

These contain two-thirds of Iraq's stated reserves of 143.1 billion barrels and it is the megafields there, operated by major foreign oil companies with advanced technology, that are responsible for the country's growing production levels.

But, possibly more important in the short term, Iran's alleged plundering strategy is providing its "ruling elite with an income stream impervious to Western-backed sanctions," Stratfor says.

"Smuggled crude can be added to the significant shipments of oil Iran still exports.

"The oil can also be blended with Iranian crude to help disguise the origins of shipments sold on the spot market."

Iraq, which is seeking to more than double its oil output by 2015, posted a production level of 3.03 million barrels per day in April, a 7.7 percent increase over March.

Iran's production slipped to 3.2 million bpd, the Organization of Petroleum Exporting Countries said.

So, at current rates, Iraq should overtake Iran sometime in the next couple of months and become OPEC's second largest producer. The last time that happened was in 1988 after the two Persian Gulf states ended an eight-year war started by Saddam.

Iraq's rising production and export levels are helping assuage concerns that an EU embargo on Iranian crude scheduled to start July 1 will curtail global output.

Iranian output could then fall an additional 600,000-700,000 bpd, the International Energy Agency said.

Iraq's export level has increased sharply with the inauguration of two offshore mooring facilities for supertankers in the northern gulf. Another two are to begin operations in the next few months.

All together, these will expand export capacity from Basra, holding 80 percent of Iraq's reserves, to 4.8 million bpd by 2014.

The Iranians are likely to grab a large chunk of that.

Stratfor estimates that 10 percent of Basra's oil production is being stolen via a network of Tehran-backed politicians, oil unions and militias. That has a market value of more than $20 million a day at current prices.

"Ideally, Iran would like to see southern Iraq evolve into a single, Shiite-dominated state within an Iraqi federation that would serve as an Iranian satellite," Stratfor observed.

That concept is given considerable weight by the fact that the Iranian official reportedly running this large-scale smuggling network is Maj. Gen. Qassem Suleimani, commander of the al-Quds Force, the elite covert action arm of the Revolutionary Guards Corps.

Suleimani, who operated Iranian-armed Iraqi Shiite militias against the Americans during their occupation, is a powerful figure in the Iranian leadership.

With the departure of U.S. forces in December, Suleimani's operations, which the Baghdad government seems powerless to halt, are likely to intensify as the sanctions bite deeper into Iran's economy.