Ahmed Kawah

When Iran turned the Strait of Hormuz from an international shipping lane into an instrument of pressure in its confrontation with the United States, the closure did not apply equally to everyone. A new hierarchy quickly emerged: ships allowed through, ships barred from passage, and a smaller category granted political exceptions. Iraq became the most prominent beneficiary of that exception — yet it remains one of the biggest losers from the closure.

Tehran allowed a number of Iraqi oil tankers to pass through the strait. According to Reuters, Iraq is the only Gulf producer to have publicly received such permission from Iran. That helped Baghdad raise exports from roughly 1.35 million barrels per day in July to about 2.34 million in August. But the figures are deceptive. Exports remained well below pre-war levels of more than 3.3 million barrels per day, according to vessel-tracking data.

The price of that “exception” has been severe. Iraq’s state oil marketer, SOMO, was forced, according to Reuters, to offer some August cargoes at discounts of between $25 and $30 a barrel, while shipping and insurance costs were estimated at around $17 a barrel. Iraq could still sell its oil, but only by surrendering part of the value of every barrel to the geopolitical risk surrounding Hormuz.

At the same time, Iran expanded the list of vessels it considered non-compliant with its rules in the strait to 56 ships, threatening fines, detention or seizure. Passage through Hormuz therefore ceased to depend solely on the norms of international navigation. It increasingly became subject to an Iranian decision over who could move and who could not.

For Iraq, the problem runs deeper than whether an individual tanker receives clearance. The country’s economy depends overwhelmingly on oil exports through its southern terminals, and Baghdad has no alternative maritime route capable of handling comparable volumes if Hormuz becomes a permanently high-risk or semi-closed corridor.

That vulnerability was underlined again when a Panama-flagged tanker carrying about 2 million barrels of Iraqi fuel oil was struck by a drone in Iraqi territorial waters, according to Reuters. Even cargoes that secure permission to leave are no longer insulated from the conflict.

Iran can use Hormuz as leverage. Other Gulf producers, to varying degrees, possess pipelines and export routes that bypass the strait. Iraq sits in a far more exposed position: it needs its neighbour’s acquiescence to move its oil, pays deeper discounts and higher insurance premiums to keep buyers interested, and remains vulnerable to attack before its cargoes even leave Iraqi waters.

Iran’s exception, then, is less a privilege for Iraq than a reminder of its strategic dependence. Hormuz may be a bargaining chip for Tehran. For Baghdad, it is an economic lifeline it cannot afford to lose.