Reuters: Iran's Oil Smuggling Network and Its Proxy Groups in Iraq Generate Annual Revenue of One Billion Dollars

Five different intelligence sources spoke to Reuters about the activities of a complex oil smuggling network in Iraq since the premiership of Muhammad Shia' al-Sudani. According to these sources, this network generates at least one billion dollars annually for Iran and its proxy groups. The operations of this complex network utilize an Iraqi government policy of providing low-cost fuel oil to asphalt companies, involving a wide range of companies, groups, and individuals in Iraq, Iran, and Gulf countries. Reuters states that between 500,000 to 750,000 tons of heavy fuel oil, including high-sulfur fuel oil (HSFO), equivalent to 3.4 to 5 million barrels of oil, are exported from asphalt companies to Asian countries each month. One of the routes for exporting fuel oil from Iraq involves mixing it with Iranian fuel oil and exporting it as a completely Iraqi product. According to the five sources who spoke to Reuters, Tehran circumvents some of the stringent U.S. sanctions against its energy exports through this method. Given the very similar characteristics of fuel oil produced in Iran and Iraq, it is scientifically impossible to distinguish between pure and blended final export products. The second route involves exporting fuel oil that is originally allocated at a very low price to asphalt companies according to Iraqi government law. According to this report, Tehran directly profits from the first method. Iran has long been forced to sell its oil at heavy discounts to limited customers like China due to sanctions. However, by passing it off as Iraqi oil, it can achieve higher revenues. The second method primarily serves as a source of income for the Iran-backed militia groups that control the entire smuggling network in Iraq. Three sources estimated the annual revenue of this network to be between one to three billion dollars based on rough calculations of the oil volume passing through this network and its average price. Iran views Iraq as a vital economic choke point and therefore maintains significant political, military, and economic influence in this neighboring country through powerful Shiite militia groups and political parties it supports. Baghdad has been trying to be a reliable ally to Washington while maintaining close ties with Tehran in recent years. However, with Donald Trump's return to the White House and potential tightening of his policies regarding Iran's efforts to circumvent sanctions, Iraq's cooperation with the Iranian government will come under increased scrutiny. Cooperation with Iran in this illegal trade could expose Iraqi officials and government institutions to U.S. sanctions, and some officials in Baghdad are concerned about facing problems with Trump's return to the White House. On the other hand, the excessive reliance of Iraqi leaders on Iran-backed Shiite militia groups to remain in power has made it 'very difficult' for them to combat illegal activities, including oil smuggling. Washington has long been monitoring the oil smuggling network and its connections with Iran and sanctioned individuals. According to one of Reuters' sources, this issue was even raised during the Iraqi Prime Minister's visit to Washington three months ago. Despite the White House's pressure on Iraqi officials to prevent Iranian oil smuggling, Tehran's extensive influence in the neighboring country cannot be overlooked. This includes groups like 'Asa'ib Ahl al-Haq,' which, supported by the Islamic Revolutionary Guard Corps, has become part of Iraq's official security apparatus for the past six years and currently has sixteen representatives in parliament. Qais al-Khazali, the leader of this group, has been on the U.S. sanctions list since 2019 for serious human rights violations, including the killing of Iraqi protesters.