Iraq dismisses US Congress accusations of oil smuggling to Iran
Shafaq News/ On Sunday, the Iraqi Ministry of Oil firmly rejected accusations made by members of the US Congress that Iraq is aiding Iran in circumventing international sanctions, labeling them as "mere allegations" with no basis.
Earlier, several US Congress members sent a letter to President Joe Biden, accusing Iraqi entities, including the Ministries of Oil and Transport, the State Oil Marketing Organization (SOMO), and certain factions, of exploiting Iraq's oil industry to benefit Iran's Revolutionary Guard Corps (IRGC) and its treasury. The letter alleged that Iraqi oil was being smuggled to Iran and urged the Biden administration to impose sanctions on those involved.
In its official statement, the Iraqi Oil Ministry declared, "The letter's contents have no foundation. The only accurate statement in the letter is that these are allegations and do not rise to the level of verified information."
The ministry reiterated Iraq's commitment to maintaining the highest standards of transparency in oil production and exportation, noting that all relevant data is regularly published through official channels. The statement further clarified that “Iraq only engages with a select group of reputable global companies, including American firms, under contracts that follow international transparency and legal guidelines.”
On September 4, 2024, five Congress members—French Hill, Joe Wilson, Michael Waltz, Michael V. Lawler, and Kevin Hern—sent a letter to President Biden, expressing concerns over an upcoming visit by Iraqi Oil Minister Hayan Abdul Ghani to the United States. "We are writing concerning the impending visit of Hayyan Abdul-Ghani, the Minister of Oil from the Government of Iraq. There are multiple public reports alleging that Abdul-Ghani and other officials in the Iraqi government are involved in industrial-scale sanctions evasion on behalf of the regime in Iran. Given these reports, we respectfully request that your administration prevent Minister Abdul-Ghani from attending events in the United States until these allegations are investigated and the findings are presented to Congress. Further, if verified, we urge you to designate individuals and entities, as appropriate." The letter said.
The lawmakers also expressed concerns by both public and private reports that Iraq's oil sector is being converted into "a powerful and endemic means by which Iran-Aligned Militia Groups (IAMGs) and Iran's Islamic Revolutionary Guard Corps (IRGC) generate terrorist financing." quoting a recent report by the Washington Institute of Near East Policy stating that "the scale of the operation is significant, estimated to net nearly $1 billion per year. This is enabling U.S.-designated terrorist entities to facilitate mass sanctions evasion by allowing U.S.-sanctioned Iranian oil exports to reach the world market labeled as Iraqi oil. Further, we are concerned that the scheme may include the abuse of Iraq's access to the U.S. dollar through oil sales to give Iran illicit access to the dollar."
In addition, the letter expressed concerns that "given the scale of the trade, senior Iraq officials and their families, including those in the Iraqi Ministry of Oil and the Iraqi Ministry of Industry and Minerals, may be directly involved. This includes overseeing and profiting from corruption surrounding the allocation of Iraqi government fuel oil to companies owned or controlled by Asa'ib al-Haq (AAH), an Iranian-sponsored Iraqi organization that has been designated by the United States as a Foreign Terrorist Organization and a Specially Designated Global Terrorist. Other public reporting claims that Iraqi fuel has been diverted from its intended industrial uses and instead smuggled onto the international market, benefiting the IRGC and Iran's proxies in Iraq."
"Another concern is that the Government of Iraq may be facilitating Iran's sanctions evasion by allowing Iranian crude to enter Iraq's offshore oil-loading areas, where it is mixed with Iraqi terrorist-smuggled oil and labeled as Iraqi products. This is another scheme that has been investigated by the Biden Administration and has raised public concerns in the past. This scheme increases the realized price of sanctioned Iranian crude to benefit Iran and the IRGC. Likely, officials in the Iraqi Prime Minister's Office, Iraqi Ministry of Oil, State Oil Marketing Organization (SOMO), and Ministry of Transport are aware of and complicit in, this sanctions evasion mechanism. Finally, we are also deeply concerned that as part of these illicit operations, Iran is using Iraq's general access to the dollar-denominated oil trade to gain access for itself to U.S. dollars."
Based on these reports, the five lawmakers requested that President Biden investigate and assess whether the Ministry of Oil, the State Organization for Marketing Oil, the Oil Products Distribution Company, the General Company for the Ports of Iraq, the State Company for Mineral Industries, and any senior officials of those agencies, including Minister Abdul-Ghani, "have engaged in sanctionable conduct or caused a U.S. person to violate sanctions, thereby engaging in prohibited conduct. Given the likely scale and timeframe of these evasion schemes, it is likely that they have been developed or expanded during the tenure of Minister Abdul-Ghani, drawing on his knowledge and resources as the former director of Basra Oil Company."
Further, they said they believe the United States must ensure that Iraq is "not allowing IAMGs to smuggle Iraqi oil or facilitating sanctions evasion as sophisticated methods to service energy debts to Iran that avoid U.S. Treasury restrictions - something Iraqi Prime Minister Sudani has publicly stated he will seek to do. This is occurring while the Iraq-Turkey pipeline remains closed, which the Iraq Oil Ministry refuses to reopen, directly impacting oil exports from the Kurdistan Region and over $5 billion in U.S. investment, including from the U.S. Development Finance Corporation."
The US Congress members pointed out that a comprehensive review of these allegations should include three critical assessments:
"First, an assessment of whether any of these individuals or entities have engaged in conduct that violates statutory Iran sanctions, such as the Iran Sanctions Act, and any of the regulations issued to enforce statutory sanctions and relevant executive orders."
"Second, an assessment of whether individuals or entities have engaged in sanctionable or criminal conduct related to terrorism sanctions, including violations of Executive Order 13224 (Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism) or statutes applying criminal and civil penalties for providing material support to FTOs."
"Finally, it should include an assessment of whether violations of the recently passed Stop Harboring Iranian Petroleum Act (SHIP Act) have taken place. The SHIP Act, which was included in the national security supplemental appropriations legislation from April, mandates the imposition of sanctions against ports and port operators, refineries, and vessels that facilitate the trade in condensate, refined, or unrefined petroleum products, or other petrochemical products originating from Iran. We request that you review the above-mentioned individuals and entities in addition to the port and berth operators at Khor Al Zubair Port and Umm Qasr Port as well as vessel management in Iraqi offshore ship-to-ship transfer areas and at offshore Single-Point Moorings, in addition to other relevant persons."
"We respectfully request that you expedite consideration of this request and provide us the determinations requested no later than September 30, 2024. Further, as this inquiry into Minister Abdul-Ghani's conduct is ongoing and until such determinations are made, we respectfully request that he no longer be granted visas to the United States."
In its response, the Iraqi Oil Ministry denied any involvement in helping Iran evade sanctions, emphasizing that its energy transactions with Iran, particularly in gas and electricity imports, are carried out transparently and in full coordination with US authorities.
"Iraq conducts its energy-related activities in full compliance with international agreements and respects its obligations under international law," the ministry stated. "Our relationships with neighboring countries, including Iran, are built on mutual respect and in line with legal frameworks."
"The notion that Iraq's oil resources are being used to fund armed groups or smuggle oil to Iran is false and without merit," the ministry stated. It also clarified that oil exports are conducted through official channels under close monitoring, with exports handled via international ports like Basra in Iraq and Ceyhan in Turkiye. All movements are closely tracked by international auditing firms like KPLER, which ensure accurate reporting of quantities, cargo, and transport methods.
The ministry expressed surprise at the claim that Iraqi officials and their families may be involved in smuggling oil or manipulating allocations, emphasizing its commitment to transparency under the leadership of Oil Minister Hayan Abdul-Ghani. The ministry challenged the Congress members to present concrete evidence to support these allegations.
Meanwhile, the ministry highlighted that Abdul-Ghani's upcoming visit aims to promote investment in Iraq's gas exploration, with plans to offer 10 gas exploration blocks in a new licensing round.
The ministry concluded by stressing that all Iraqi oil-related activities, particularly those involving the export of crude oil and fuel oil, are conducted under stringent regulations and international oversight. "Iraq's territorial waters are tightly controlled and monitored by the Iraqi Navy, and any activities outside Iraqi waters are not the responsibility of the Iraqi authorities once the oil is loaded onto international vessels," the statement said.
US sanctions on Iran date back to the 1979 Islamic Revolution, which overthrew the US-backed Shah and led to the Iran hostage crisis. In response, the US imposed initial sanctions targeting Iran's economy. Over the years, sanctions expanded due to concerns over Iran's nuclear program, support for terrorism, and human rights abuses.
The most significant sanctions came after Iran's nuclear ambitions became more evident. In 2006, the US worked with international partners to impose strict sanctions, particularly targeting Iran's oil exports and financial sectors. This isolated Iran from global financial markets, severely impacting its economy.
The 2015 Joint Comprehensive Plan of Action (JCPOA), or Iran nuclear deal, provided temporary sanctions relief in exchange for curbing its nuclear activities. However, in 2018, the Trump administration withdrew from the deal and reimposed sanctions, further tightening economic pressure on Iran.
US sanctions currently target Iran's oil, banking, shipping, and other key industries, aiming to curb Tehran's nuclear activities, missile development, and regional influence. The Biden administration has explored diplomatic avenues to revive the JCPOA but with little success as of mid-2023.
