Border Oil Risks Iran-Iraq Flare-Up

Brief clash highlights risk of further conflict as Iran sets out to guard oil reserves.

Border Oil Risks Iran-Iraq Flare-Up

Brief clash highlights risk of further conflict as Iran sets out to guard oil reserves.

Monday, 22 February, 2010

A recent clash in an oil field on the border between Iran and Iraq highlights Iran’s determination to guard against any attempt to rob it of its reserves.

In December, Iraqi officials reported that Iranian soldiers with alleged ties to the Revolutionary Guard had had crossed the border to seize the Fakkeh oil field. Iran denied that they crossed the border and said the facility was within its territory.

A few days later, it was reported that the Iranian soldiers had pulled back but it was the first serious confrontation between the two neighbouring countries since the fall of Saddam Hussein’s regime in 2003.

Iran’s resolve may be strengthened by the fact that Fakkeh is a name that resonates in the country as the site of at least four military operations during the eight-year war with Iraq that ended in 1988.

It recalls the heroic resistance and eventual slaughter of Iranian forces - with no access to food, water and weapons – by the besieging, better-equipped army of Saddam.

Every year, the Revolutionary Guards and the Basij militia organise tours of the location. Visitors are enchanted by the Fakkeh scenery and singers perform mournful songs that eulogise the ill-fated forces. Inspired, they typically weep and pledge to defend the Islamic Republic by any means, be it against Saddam’s army or against protesters on Tehran streets.

Iranian foreign minister Manouchehr Mottaki visited Iraq on January 7 to defuse the row over the Fakkeh oil field. A joint committee was formed to resolve the dispute and Mottaki was quoted as saying the oil field offered an opportunity for joint investment.

Iraq’s foreign minister, Hoshyar Zebari, was quoted as saying Baghdad was determined to expand its ties with Tehran.

He added that Tehran and Baghdad had agreed to “normalise border conditions and put back things as they were”.

When Iraq invited oil multinationals to tender for exploitation of the Fakkeh oil field in June 2009, none showed any interest as they had no desire to get involved in a possible dispute between the two countries.

Unofficial reports say Iran exploits 24,000 barrels of oil per day from the Fakkeh field, called West Paydar in Iran.

Disputes over shared oil fields are nothing new. Last July, reports said that the Iraqi army had taken over an Iranian oil field in the Dehloran region. At the time, Iranian and Iraqi officials rejected the report and said that there had been a misunderstanding between Iranian and Iraqi border guards.

Last July, the chief executive of the National Iranian Oil Company, Seifollah Jashnsaz, announced an agreement with the Iraqi side to study and develop shared oil fields. Less than a month later, an official of the contracting directorate at the Iraqi oil ministry, Sabah al-Saedi, said his country had not reached a definite agreement with Iran.

According to former deputy oil minister Hadi Nejad Hosseinian, Iran has so far identified nearly 20 oil and gas fields near the border with Iraq that are shared by the two countries.

Nejad Hosseinian said that while no exact estimate of the reserves of these oil and gas fields is available, “the majority of them are among Iran’s biggest oil fields”.

Iran’s strategy is to keep quiet about this issue while it lacks the capacity itself to exploit the resources.

“Basically before extraction starts, information about the shared oil and gas fields is considered semi-confidential,” said one oil expert from Tehran speaking on condition of anonymity.

“Iran does not tend to talk in clear terms about the disputes it has with its neighbouring countries over shared oil and gas fields.”

This reluctance to talk stems from Iran’s inability to compete with the country which it shares common resources. Iran does not want to give information, or send out signals, that can be used against it by the Iraqis.

Besides Iraq, Iran shares oil and gas fields with Kuwait, Saudi Arabia, Qatar, the United Arab Emirates and Oman. In the north of the country, Iran has the same problem with Caspian Sea littoral states.

Tehran decided immediately after the end of the Iran-Iraq war in 1988 to develop its shared oil fields with its neighbours, but it has had no major success in this regard thus far.

The semi official Fars News Agency recently reported that Iran’s partners extract nine times more oil and gas from shared fields than Iran. Iranian experts have estimated that about 60 billion US dollars is needed to invest in the oil and gas fields that Iran shares with its Gulf neighbours.

Economic sanctions, the lack of access to advanced industrial equipment, insufficient capital, and the hesitance of western oil companies have caused Iran to be concerned about lagging behind its rivals in using the shared resources.

The Japanese company INPEX was to develop the Azadegan oil field, one of the biggest that Iran shares with Iraq, but the deal collapsed in 2006.

The future of the Yadavaran oil field, another one that is shared by Iran and Iraq, is also uncertain. China’s Sinopec Corp signed a deal to develop the field in 2007 but production has yet to start.

Envious Iranian officials note the interest shown by multinational corporations in taking part in Iraqi oil projects, despite the country’s unstable political and security situation.

Unlike other minerals, oil, as a liquid, can migrate from one side of a border to the other in response to drilling nearby so often the only equitable solution is joint exploitation. Slant drilling – where one country deliberately drills under a border to access another country’s oil – is not unknown. Iraq accused Kuwait of slant drilling and cited this as a justification for its 1990 invasion of the Gulf emirate.

Oil migration in shared oil fields toward Iraq has further raised concerns in Tehran. The spokesman for the parliamentary energy commission, Emad Hosseini, said in January, “oil migration toward Iraq at a time when Iran is showing negligence in exploiting shared resources” can be damaging to the country.

It appears that Iran will continue negotiating with Iraqi officials to resolve border disputes and subsequently share the oil reserves. The issue for Iranian officials is to delay the Iraqi side from exploiting the shared oil field until they themselves are fully prepared to use their share.

“Land borders are recognised and an agreement can be reached on them … but no demarcation can be made in the depths of the earth,” Hosseini said.

Iran has shown it is not prepared to rely on lines on a map to safeguard its interests when Iraq is exploiting its share of the oil from below ground.

Ali Kheradpir is an Iranian journalist and oil expert based in Tehran.

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