A major controversy has erupted between Iraq and Iran over illegal oil smuggling. On March 24, Iraq’s Oil Minister Hayan Abdel-Ghani revealed that some tankers recently detained by the U.S. Navy in the Persian Gulf were carrying fraudulent Iraqi shipping documents. However, investigations found that these tankers were not Iraqi at all—they belonged to Iran.
Iran is under strict international sanctions, which means it cannot freely sell its oil on the global market. To get around this, smugglers have reportedly been using fake Iraqi documents to disguise Iranian oil as Iraqi oil. This deception allows them to sell oil to countries that would otherwise avoid doing business with Iran due to sanctions.
Despite the clear accusations from Iraq, Iran’s oil ministry immediately denied that any of its tankers had been seized by the U.S. However, the revelation has put a spotlight on a vast and sophisticated smuggling operation that has been running for years.
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How the Smuggling Network Works
According to reports, a well-organized smuggling network operates within Iraq to help Iran bypass sanctions. This network is believed to generate over $1 billion annually for Iran. The scheme works in multiple ways:
- Blending Oil: Smugglers mix Iranian and Iraqi oil to make it appear as though it comes from Iraq. Since Iraqi oil is not under sanctions, it can be sold on international markets without raising suspicion.
- Forging Documents: Iranian tankers use fake Iraqi shipping papers to make their cargo seem legitimate. This allows them to pass inspections and sell oil to buyers who might not want to risk violating sanctions.
- Using Subsidized Fuel: Some smugglers take advantage of the Iraqi government’s low-cost fuel, which is meant for domestic industries, and resell it abroad for huge profits.
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Iraq’s leaders are aware of these illegal operations, but stopping them is not easy. Many of the groups involved are powerful and well-connected, making enforcement a challenge. Iraqi Prime Minister Mohammed Shia al-Sudani is in a difficult position, as he relies heavily on support from Iran-backed Shia paramilitary groups that are central to these smuggling operations.
U.S. Response and Sanctions
The U.S. has been closely monitoring Iran’s illegal trade and has taken action in recent months. On February 4, the U.S. government announced it was bringing back its “maximum pressure” strategy against Iran. This includes tougher sanctions aimed at stopping the country from selling its oil.
On March 20, the U.S. Treasury Department imposed sanctions on eight vessels that were caught transporting Iranian oil. These ships were reportedly delivering oil to small refineries in China, known as “teapot” refineries, which often buy from sanctioned countries at a discount.
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Despite these measures, the U.S. has not officially confirmed whether it seized any Iranian tankers in the Persian Gulf. This silence has added to the mystery surrounding the situation.
Experts believe that Iraq plays a crucial role in Tehran’s illicit activities, including oil smuggling and money laundering. Saeed Ghasseminejad, a financial expert, noted that applying economic pressure on Iraq to curb these operations is important but has limits due to the influence of Iran-backed militias in Iraq’s political system. Similarly, Max Meizlish, a senior research analyst, highlighted that Iraq is trying to balance its relations with both Iran and the U.S., but failing to assist in enforcing sanctions should have consequences.
The accusations of fake shipping documents and illegal trade have exposed the hidden struggles between international sanctions, regional politics, and underground smuggling networks. While Iran continues to deny wrongdoing, Iraq’s latest revelation has raised serious concerns about the extent of these operations and the challenges in stopping them.
