Iraq's only sea coastline is just 36 miles long -- a sliver of access at the northern tip of the Persian Gulf critical to the world's fourth-largest crude producer, which exports some three-quarters of its oil through the port of Basrah.
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Losing that vital link to its customers in Asia, Europe and the US would be disastrous for its economy, and the recent attacks in the region, including a rocket strike Wednesday on a compound near Basrah that houses several international oil companies, have Iraqi officials on edge.
The federal government in Baghdad lacks adequate alternatives to replace the volumes of its lifeblood oil currently being exported through the Gulf, and the heavy influence that neighboring Iran wields on its institutions risks embroiling Iraq in the escalating hostility between Tehran and Washington.
On Thursday, Iran said it shot down a US drone, sending oil prices sharply higher on fears a military confrontation could be imminent.
"While the oil market risk of a serious security incident in Basrah goes without saying, Iraq also presents a theater for possible miscalculation between Iran and the US," said Paul Sheldon, chief geopolitics adviser for S&P Global Platts Analytics.
Iraq pumped a record 4.82 million b/d in May, including the semi-autonomous Kurdistan region, according to the latest S&P Global Platts survey of OPEC production.
About 3.5 million b/d of that crude is exported via Basrah through the Persian Gulf and then the narrow Strait of Hormuz chokepoint that Iran has threatened to shut down over US sanctions.
Federal officials have conceded that their crude export options are limited beyond Basrah, and sources at Iraq's State Oil Marketing Organization told Platts on condition of anonymity that no contingency plans exist to protect shipments or compensate for losses if cargoes cannot get through the Gulf.
Iraq's only other major oil outlet is through the Turkish port of Ceyhan, but its capacity pales in comparison to Basrah.
SOMO could seek to use around 200,000 b/d of spare capacity in a pipeline from Kirkuk to Ceyhan operated by the Kurdistan Regional Government. SOMO exported about 100,000 b/d of crude through that pipeline in May, according to the oil ministry, but to send more through, the federal government would need to broker a deal with the KRG and find sufficient trucks to drive the barrels to the pipeline export hub north of Kirkuk -- not an easy task.
The KRG, which uses the pipeline to export almost all of the crude produced in its territory, shipped 464,000 b/d in May, according to a Ceyhan terminal report seen by Platts.
"Basrah is where all the action is and where the potential [production] swing is," said Sajad Jiyad, managing director at the Baghdad-based Bayan Center think tank.
SOMO could also try to truck its oil to and through Turkey and Jordan, but those volumes likely would not exceed 100,000 b/d, again assuming the company can even find the requisite number of tanker trucks and keep convoys secure from attacks.
The stakes are enormous for Iraq. Oil sales make up almost 90% of Iraq's revenues, and maintaining security is crucial to its ambitious plans to boost production capacity to 6.5 million b/d by 2022 as it rebuilds after years of war.
Wednesday's rocket strike hit a state-owned Iraqi Drilling Company site near the Zubair oil field and adjacent to an ExxonMobil camp, prompting the US oil major to evacuate 21 staff. Shell and Eni, who operate in the area, said they were monitoring conditions but continuing operations as normal.
While no group has yet claimed responsibility and rocket strikes in Iraq are relatively common, it marked the fourth attack in one week that has affected US personnel in the country. Iran-backed militias operating in Iraq are suspected.
"Should there be a second incident in the vicinity and in quick succession, this may prompt IOCs to reconsider deployments of foreign personnel in Basrah, as risks in the overall environment to non-US operators and personnel will be perceived to increase," said Niamh McBurney, an analyst with Verisk Maplecroft.
Even before the recent attacks, the US has been trying to limit Iran's sphere of influence in Iraq, using the threat of sanctions to halt a crude swap arrangement between the two neighbors. The US has also sought to make Iraq less reliant on gas and electricity supplies from Iran, though it did grant another 90-day sanctions waiver this month to Baghdad allowing those imports to continue for now.
Iraqi officials did not respond to requests for comment, but several of them, including oil minister Thamir al-Ghadhban, will be in London for an Iraq-focused investment conference that begins next Thursday.
The war-weary country's oil sector has rebounded remarkably in the last few years after the Islamic State was driven out. But to attain its lofty production target, Iraq will need to significantly expand its Basrah export capacity and storage tanks, as its facilities have deteriorated from years of war and underinvestment, as well as diversify its export outlets.
Rebuilding the federal leg of the Iraq-Turkey export pipeline inside Iraq that was severely damaged during the fight against the IS could double the export rate from Ceyhan.
A long-mooted pipeline connecting Basrah to Aqaba in Jordan on the Red Sea could also serve as a major export valve.
However, those are major projects that would require significant investment and take some years to be completed.
Amid the rising geopolitical tensions and escalating attacks, the more immediate worry for Iraqi authorities is ensuring that its exports through the Persian Gulf can happen at all.
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