Iraq and Pakistan strike energy deals with Iran as Tehran flexes Hormuz control

Iraq and Pakistan ​have ​agreed to deals with Iran to ship ​oil and liquefied natural gas from the Gulf, a Reuters investigation has shown, in a demonstration of Tehran's ability to control energy flows through the Strait of ⁠Hormuz. The US-Israeli war with Iran has slashed energy exports from a region that normally ​supplies 20 per cent of the world's crude oil and LNG. The US has blockaded Iranian ports in recent weeks. And although Iran initially sought to halt traffic through the strait, that ⁠is now changing, said Claudio Steuer of the Oxford Institute for Energy Studies. "Iran has shifted from blocking Hormuz to controlling access to it ... Hormuz is no longer a neutral transit route, it is a controlled corridor," Mr Steuer said. With most of its crude exports typically shipped through the strait, Iraq was among the producers worst-affected by its closure, while Pakistan, which has sought ⁠to mediate in the conflict, depends heavily on Gulf energy imports and has faced surging fuel costs. In a deal between Baghdad and Tehran that has not ​been previously reported, Iraq ⁠secured safe passage for two very large crude carriers, each ‌carrying about 2 million barrels of crude, that passed through the strait on Sunday. Iraq is now working to secure Iran's approval for more crossings, an Iraqi Oil Ministry ​official told Reuters, as the government seeks to protect the oil revenues that make up 95 per cent of its budget. "Iraq is a close ally of Iran, and any deterioration in Iraq's economy would also damage Iran's economic interests in the country," the official said. Another Oil Ministry official and a shipping industry source also confirmed the talks with Tehran. An Iraqi government representative did not immediately respond to a Reuters request for comment. Qatari gas for Pakistan Similarly, two tankers loaded with Qatari LNG are headed to Pakistan after an agreement between Islamabad and Tehran, industry sources told Reuters. Pakistan received about 10 LNG cargoes a month before the war and now must meet high summer electricity demand for cooling. Neither Iraq nor Pakistan has made direct payments to Iran or its Islamic Revolutionary Guard Corps in relation to the crossings, the sources said. Qatar was not directly involved in the deals, the industry sources said, but it informed the US before the shipments to Pakistan. Pakistan's petroleum and information ministries did not immediately respond to requests for comment. Neither did Qatar's Foreign Ministry. Iran tightens grip Other countries are ​exploring similar deals, according to sources, as rising energy costs and supply disruptions weigh heavily, particularly on ‌Asian economies. "As more governments become willing to cut deals with Iran for ⁠passage, it risks normalising the idea that Iran will control the Strait of ​Hormuz on a more permanent basis," said Saul Kavonic, head of research at consultancy MST Marquee. Before the war, about 3,000 vessels passed through ​Hormuz each month. Traffic is now ‌about 5 per cent of that level, according to shipping data. The disruption has sent Brent crude prices surging by more than 50 per cent since the outbreak of the conflict at the end of February. LNG ⁠prices in Europe and Asia have jumped by between 35 per cent and 50 per cent. Iran says it wants to retain control over the strait after the war. It has ⁠demanded reparations, sanctions relief and access to frozen assets as part of any settlement, conditions US President Donald Trump described as "garbage", dashing hopes of a deal to end the conflict. In the meantime, Iran is formalising its control over the strait, industry sources said. And it has asked Iraq to submit documents for each tanker to enable transit through routes under the supervision of its naval forces, one of the Iraqi Oil Ministry officials said. Specialised teams at the Iraqi ministry are providing Iranian ​authorities with detailed information on each vessel, including destinations, shipping details, ownership and cargo specifications, to help avoid incidents. A Pakistani source said there had been some hiccoughs with the process. "The IRGC sometimes changes the goalposts, so it is hard to keep things on track, but we are working through it," he said.