Simon Watkins
Jul 07, 2025
The dull dirgeful drone of Russian has been gutturally resonating around various governmental departments in southern Iraq in the past few weeks, particularly since the U.S. and Israel grew tired of the game of nuclear Whac-A-Mole being played by Baghdad’s leading sponsor Iran. So, what could all these heavy-set monobrowed gentlemen be discussing in a country that historically has been used as a front and conduit for all sorts of unpleasant Iranian exports destined to cause trouble of one sort or another around the world?
At the top of the list in terms of scale and scope is energy, as might be expected in a country with the fifth highest oil reserves on the world and sizeable associated and non-associated gas resources to boot, a senior oil industry source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com last week. “There are two elements that most interest them: first, safeguarding the assets they have here in the south [of Iraq] to add to the presence they have in the north [in the semi-autonomous region of Kurdistan] and, second, ensuring that we [the Iraqis] continue the practical relationship we had with Iran for assisting in its oil, gas, and other sectors sector too,” he said. In the case of the former, new deals are on the table from Moscow to further explore and develop key oil and gas regions in the south. This was part of the content of last week’s meetings between Iraq’s Oil Minister, Abdul Ghani, and a delegation from Russia comprising its Ambassador to Iraq, Elbrus Kutrashev, and several very senior representatives from one of its energy giants Lukoil. As a sign of new deals to come in this regard, the Oil Ministry’s Director General of the Petroleum Contracts and Licensing Directorate (PCLD) was also in attendance, as was the Undersecretary for Extraction Affairs, Bassem Mohammed Khudair, presumably to note down all the fields Russia wants. As it stands, Lukoil holds a 75% operating stake in the supergiant West Qurna 2 field and a 60% stake in the supergiant Eridu oil field. “Russia wants to build a big multi-year cooperation agreement here [in Iraq] like the one it had in Iran, and like the one China already has here,” said the Iraq source.
Although all the details for both are laid out in full in my in my latest book on the new global oil market order, the Russia deal in Iran and China’s deals in Iraq and Iran share several key elements. One is that they give preference to Russian and/or Chinese firms (both sides have a dividing line running through Iraq and Iran that favours one side or the other as the major player) for development and exploration rights in Iraqi and Iranian oil and gas fields. The temporal terms of these deals are also skewed in favour of the Russian and/or Chinese developers in that although a contract might be for 25 years, it would not officially start for two years after the signing date, so allowing the developer more time to recoup more profits on average per year and less upfront investment. On the other side of the risk/reward balance, the payments made to the developers are usually the higher of either the mean average of the 18-month spot price for crude oil produced, or the past six months’ mean average price, although other time periods are occasionally. There are further eye-watering concessions involved, including the Russia and/or Chinese developer being given the chance to significantly manipulate the exchange rates at which these payments from Iraq or Iran are made to them.
These recent negotiations going on between Russia and Iraq are designed to complement Moscow’s already tight grip on the Kurdistan region in the north, added the Iraq source. Following the chaos after 2017’s overwhelming vote in favour of full independence in the region, as also analysed in my latest book, Russian energy giant Rosneft effectively took control of the region’s oil sector. This was achieved through a combination of offering massive pre-payment deals for oil exports and huge infrastructure investment. Since then, the Kremlin has been a key factor in sewing discontent between the north and the south through the mechanism of the highly controversial ‘oil exports for budget payments’ deal between the federal government of Iraq in Baghdad and the semi-autonomous government of Kurdistan in Erbil. The aim on Russia’s side was first to use its leverage in Kurdistan to extend its on-the-ground presence in the south and then to help Baghdad with the process of subsuming the Kurdistan region into the rest of Iraq, with a loss of all its independence. By doing this, it was – and is believed – by both Russia and China (as a senior political source in Moscow exclusively told OilPrice.com many months ago) that: “Iraq will be one unified country and by keeping the West out of energy deals there, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” Underlining Russia’s commitment to this is the fact that it recently made clear that it is to restart its key oil and gas operations in Kurdistan region.
The second of Russia’s two key interests at play in the current talks is ensuring that Iraq stays on message about continuing to act as the front for Iran. For Russia, this partly means continuing to allow Iran to rebrand is oil as Iraqi oil, which although is now partly under sanctions’ scrutiny is still far less heavily monitored than Iran’s. This can be done with remarkable ease, as very often oil on the Iraqi side of the border with Iran is being drilled from the same reservoirs as the oil being drilled on the Iranian side, and sometimes through long-distance horizontal directional drilling. Notable examples of shared reservoirs and fields are Iran’s Azadegan oil reservoir (split into North and South fields) that is the same reservoir upon which sits Iraq’s Majnoon oilfield. This identical feature applies to Azar (on the Iran side)/Badra (on the Iraq side), Yadavaran (Iran)/Sinbad (Iraq), Naft Shahr (Iran)/Naft Khana (Iraq), Dehloran (Iran)/Abu Ghurab (Iraq), West Paydar (Iran)/Fakka/Fauqa (Iraq), and Arvand (Iran)/South Abu Ghurab (Iraq). All of this gives Iran money that can be used in the various arms-for-oil swaps being utilised between Tehran and Moscow now. Iraq also plays a vital role in Russia’s broader Middle Eastern plans, by dint of its geographical location between Iran and Turkey to the north and Syria to the west. Just before the removal of al-Assad from power by the U.S. and U.K., Russia, Iran, and China had been putting the final touches to a plan that would see the long-anticipated ‘Land Bridge’ come into being. This would run from Tehran to Syria’s Mediterranean Sea coastline and crucially was aimed at exponentially increasing the scale and scope of weapons delivery into southern Lebanon and the Golan Heights area of Syria for use in attacks on Israel.
Having said all of this, perhaps the most concerning element of parts of these discussions between Russia and Iraq have concerned its nuclear future. According to several sources, talks began on China’s side in the same style as they had when addressing Saudi Arabia’s desire to build out its own nuclear energy programme. This was before the second presidential term of Donald Trump, which prompted a rapid reassessment of its priorities by Riyadh. According to a comment on 1 June from Minister of Higher Education and Scientific Research, Naeem Al-Aboudi, the long-running negotiations between China and Iraq on this nuclear future have led to the imminent signing of an agreement with the China Atomic Energy Corporation for the founding of Iraq’s first subcritical training reactor. This apparently is aimed at “developing the skills of students and researchers in the fields of nuclear physics and peaceful radiation technologies”. Just prior to that, according to the Washington Institute, Al-Aboudi also mentioned on 27 May that Iraq has been working on a deal with Russia since early 2024, the aim of which is the eventual signing of an agreement to co-develop small nuclear reactors at unspecified locations inside Iraq for electricity production. Given the extremely close cooperation between Iraq and Iran on all issues, and their tacit backing by Russia (and China) and several projects that threaten Western security, it is difficult to see Washington or any of its key allies allow such cooperation to go forward unchecked.
oilprice.com
Jul 07, 2025
The dull dirgeful drone of Russian has been gutturally resonating around various governmental departments in southern Iraq in the past few weeks, particularly since the U.S. and Israel grew tired of the game of nuclear Whac-A-Mole being played by Baghdad’s leading sponsor Iran. So, what could all these heavy-set monobrowed gentlemen be discussing in a country that historically has been used as a front and conduit for all sorts of unpleasant Iranian exports destined to cause trouble of one sort or another around the world?
At the top of the list in terms of scale and scope is energy, as might be expected in a country with the fifth highest oil reserves on the world and sizeable associated and non-associated gas resources to boot, a senior oil industry source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com last week. “There are two elements that most interest them: first, safeguarding the assets they have here in the south [of Iraq] to add to the presence they have in the north [in the semi-autonomous region of Kurdistan] and, second, ensuring that we [the Iraqis] continue the practical relationship we had with Iran for assisting in its oil, gas, and other sectors sector too,” he said. In the case of the former, new deals are on the table from Moscow to further explore and develop key oil and gas regions in the south. This was part of the content of last week’s meetings between Iraq’s Oil Minister, Abdul Ghani, and a delegation from Russia comprising its Ambassador to Iraq, Elbrus Kutrashev, and several very senior representatives from one of its energy giants Lukoil. As a sign of new deals to come in this regard, the Oil Ministry’s Director General of the Petroleum Contracts and Licensing Directorate (PCLD) was also in attendance, as was the Undersecretary for Extraction Affairs, Bassem Mohammed Khudair, presumably to note down all the fields Russia wants. As it stands, Lukoil holds a 75% operating stake in the supergiant West Qurna 2 field and a 60% stake in the supergiant Eridu oil field. “Russia wants to build a big multi-year cooperation agreement here [in Iraq] like the one it had in Iran, and like the one China already has here,” said the Iraq source.
Although all the details for both are laid out in full in my in my latest book on the new global oil market order, the Russia deal in Iran and China’s deals in Iraq and Iran share several key elements. One is that they give preference to Russian and/or Chinese firms (both sides have a dividing line running through Iraq and Iran that favours one side or the other as the major player) for development and exploration rights in Iraqi and Iranian oil and gas fields. The temporal terms of these deals are also skewed in favour of the Russian and/or Chinese developers in that although a contract might be for 25 years, it would not officially start for two years after the signing date, so allowing the developer more time to recoup more profits on average per year and less upfront investment. On the other side of the risk/reward balance, the payments made to the developers are usually the higher of either the mean average of the 18-month spot price for crude oil produced, or the past six months’ mean average price, although other time periods are occasionally. There are further eye-watering concessions involved, including the Russia and/or Chinese developer being given the chance to significantly manipulate the exchange rates at which these payments from Iraq or Iran are made to them.
These recent negotiations going on between Russia and Iraq are designed to complement Moscow’s already tight grip on the Kurdistan region in the north, added the Iraq source. Following the chaos after 2017’s overwhelming vote in favour of full independence in the region, as also analysed in my latest book, Russian energy giant Rosneft effectively took control of the region’s oil sector. This was achieved through a combination of offering massive pre-payment deals for oil exports and huge infrastructure investment. Since then, the Kremlin has been a key factor in sewing discontent between the north and the south through the mechanism of the highly controversial ‘oil exports for budget payments’ deal between the federal government of Iraq in Baghdad and the semi-autonomous government of Kurdistan in Erbil. The aim on Russia’s side was first to use its leverage in Kurdistan to extend its on-the-ground presence in the south and then to help Baghdad with the process of subsuming the Kurdistan region into the rest of Iraq, with a loss of all its independence. By doing this, it was – and is believed – by both Russia and China (as a senior political source in Moscow exclusively told OilPrice.com many months ago) that: “Iraq will be one unified country and by keeping the West out of energy deals there, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” Underlining Russia’s commitment to this is the fact that it recently made clear that it is to restart its key oil and gas operations in Kurdistan region.
The second of Russia’s two key interests at play in the current talks is ensuring that Iraq stays on message about continuing to act as the front for Iran. For Russia, this partly means continuing to allow Iran to rebrand is oil as Iraqi oil, which although is now partly under sanctions’ scrutiny is still far less heavily monitored than Iran’s. This can be done with remarkable ease, as very often oil on the Iraqi side of the border with Iran is being drilled from the same reservoirs as the oil being drilled on the Iranian side, and sometimes through long-distance horizontal directional drilling. Notable examples of shared reservoirs and fields are Iran’s Azadegan oil reservoir (split into North and South fields) that is the same reservoir upon which sits Iraq’s Majnoon oilfield. This identical feature applies to Azar (on the Iran side)/Badra (on the Iraq side), Yadavaran (Iran)/Sinbad (Iraq), Naft Shahr (Iran)/Naft Khana (Iraq), Dehloran (Iran)/Abu Ghurab (Iraq), West Paydar (Iran)/Fakka/Fauqa (Iraq), and Arvand (Iran)/South Abu Ghurab (Iraq). All of this gives Iran money that can be used in the various arms-for-oil swaps being utilised between Tehran and Moscow now. Iraq also plays a vital role in Russia’s broader Middle Eastern plans, by dint of its geographical location between Iran and Turkey to the north and Syria to the west. Just before the removal of al-Assad from power by the U.S. and U.K., Russia, Iran, and China had been putting the final touches to a plan that would see the long-anticipated ‘Land Bridge’ come into being. This would run from Tehran to Syria’s Mediterranean Sea coastline and crucially was aimed at exponentially increasing the scale and scope of weapons delivery into southern Lebanon and the Golan Heights area of Syria for use in attacks on Israel.
Having said all of this, perhaps the most concerning element of parts of these discussions between Russia and Iraq have concerned its nuclear future. According to several sources, talks began on China’s side in the same style as they had when addressing Saudi Arabia’s desire to build out its own nuclear energy programme. This was before the second presidential term of Donald Trump, which prompted a rapid reassessment of its priorities by Riyadh. According to a comment on 1 June from Minister of Higher Education and Scientific Research, Naeem Al-Aboudi, the long-running negotiations between China and Iraq on this nuclear future have led to the imminent signing of an agreement with the China Atomic Energy Corporation for the founding of Iraq’s first subcritical training reactor. This apparently is aimed at “developing the skills of students and researchers in the fields of nuclear physics and peaceful radiation technologies”. Just prior to that, according to the Washington Institute, Al-Aboudi also mentioned on 27 May that Iraq has been working on a deal with Russia since early 2024, the aim of which is the eventual signing of an agreement to co-develop small nuclear reactors at unspecified locations inside Iraq for electricity production. Given the extremely close cooperation between Iraq and Iran on all issues, and their tacit backing by Russia (and China) and several projects that threaten Western security, it is difficult to see Washington or any of its key allies allow such cooperation to go forward unchecked.
'Planeloads of Russians' Touch Down in Iraq as Moscow Eyes Oil, Nuclear Deals | OilPrice.com
Russia eyes new oil deals in southern Iraq to expand its influence beyond Kurdistan and replicate Iran-style long-term energy pacts.
oilprice.com
