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Iran flexes its control over the Hormuz Strait as Iraq and Pakistan strike deals to buy energy

According to five sources with knowledge of the situation, both Iraq and Pakistan have signed deals with Iran for the shipping of oil and liquefied gas from the Gulf. This is a demonstration of Tehran’s ability to control the energy flows through Strait of Hormuz.

The U.S. and Israeli war against Iran?has slashed the energy exports of a region which normally?supplies 20 percent of crude oil and LNG to the world. In recent weeks, the U.S. blockedaded 'Iranian' ports. Claudio Steuer, of the Oxford Institute for Energy Studies, says that although Iran originally sought to stop traffic through the Strait, its stance has now changed.

He said that Iran has changed its approach to Hormuz, from blocking it to controlling the access to it. "Hormuz is not longer a neutral route of transit; it is now a controlled corridor."

The closure of the Strait has had a major impact on Iraq, whose crude oil exports are typically sent through it. Pakistan, who has been trying to mediate the conflict and is heavily dependent on Gulf energy imports, has seen fuel prices rise.

Baghdad and Tehran struck a deal that was not previously reported that ensured the safe passage of two large crude carriers that carried about 2,000,000 barrels each. They passed through this strait Sunday.

Iraqi officials familiar with the original deal and the current talks said that the government is working to get Iran to approve more transits. The goal is to protect the 95% of the budget that comes from oil revenue.

The official stated that "Iraq was a close ally to Iran and any deterioration of Iraq's economy could also harm Iran's interests in the country."

Another official from the Iraqi Oil Ministry and a source in the shipping industry confirmed that talks had taken place with Tehran. The sources requested anonymity because they were not authorized to comment on the subject.

A request for a comment from the Iraqi government was not immediately responded to by a spokesperson.

QATARI LNG FOR PAKISTAN

Two industry sources who are familiar with the situation said that two tankers containing Qatari LNG were also headed for Pakistan, following a bilateral agreement between Islamabad and Tehran. They asked not to be identified as they weren't allowed to speak to media.

Pakistan received approximately 10 LNG cargoes about a month prior to the war, and must now meet summer cooling electricity demands.

The sources confirmed that neither Iraq nor Pakistan had made any direct payments to Iran, or to its Islamic Revolutionary Guard Corps. (IRGC), in relation to transits.

Qatar did not directly participate in the bilateral agreements, according to two sources from the industry, but informed the United States of the shipments before they went to Pakistan.

The Pakistani petroleum and information ministers did not respond immediately to comments. Qatar's Foreign Ministry also did not respond to requests for comment.

IRAN TIGHTENS IT GRIP

Sources familiar with the talks say that other countries are also exploring similar deals as rising energy prices and disruptions in supply have a heavy impact on Asian economies.

Saul Kavonic is the head of research at the consultancy MST Marquee.

Before the war, around 3,000 ships passed through Hormuz every month. Shipping data shows that traffic is only 5% of what it was before the war.

Brent crude has risen by over 50% since the beginning of the conflict in February. Prices of LNG in Europe and Asia are up by about 35% to 50%.

Iran wants to keep control of the Strait after the war. As part of any settlement it has demanded reparations, sanctions reduction and access to frozen assets, conditions that U.S. president Donald Trump called "garbage", sapping hopes for a deal ending the conflict.

Industry sources say that Iran has formalised its control of the Strait. One of the officials in Iraq's oil ministry said that Iran has requested Iraq to provide documentation for every tanker, to allow transit along designated maritime routes with its naval forces. To avoid any incidents, specialised teams from the Iraqi oil ministry provide detailed information to Iranian authorities on each vessel, including its destination, shipping details, owner and cargo specifications. Pakistani sources familiar with negotiations between Iran and Pakistan over the passage vessels have said that there were some glitches in the process. He said that the IRGC often changes their goals, making it difficult to keep on track.

(source: Reuters)