In December 2017, a major deal was signed that will strengthen cooperation between Iran and Iraq over oil production. The agreement between Tehran and Baghdad provides for refining Iraqi crude in Iran and increasing final exports of refined oil from the ports of Basra at the rate of almost 60,000 barrels per day. Following the instability resulting from Iraqi Kurdistan's independence referendum held in the fall of 2017, oil extraction in the Northern Iraqi province of Kirkuk has now resumed at the rate of 90,000 barrels per day from the Avana oil wells and of 275,000 barrels per day from the Bye Hassan fields.
Iraq's Deputy Petroleum Minister Karim Hattab said the main goal was to increase production from the Kirkuk oil fields. Iraqi Oil Minister Jabar al-Luaibi promised a return of oil export revenues to pre-crisis levels. Referring to the crisis between Baghdad and Erbil triggered by the independence referendum, Luaibi also confirmed that revenues from the Kirkuk oilfields will once again become part of the federal budget.
The Baghdad government had previously requested Iraqi Kurdistan to resume exports through the state-owned oil marketing company SOMO. With the recently signed agreement, Iraq will resume exports via tanker trucks traveling along the highway connecting Iraqi Kurdistan with Iran's Kurdish province of Kermanshah. The Iranian authorities have also pledged to deliver refined oil ready for export to the ports of Basra, in southern Iraq. The Director General of SOMO, Alaa Yasiri, said the agreement will contribute to boosting Iraq's oil exports and to strengthening economic relations with neighboring countries, and confirmed his aims for the construction of a pipeline that will foster exchanges between the two countries. Both Tehran and Baghdad reacted negatively to Iraqi Kurdistan's demands for independence, to which the former leader of the Kurdistan Democratic Party Massud Barzani had aspired throughout his political career.
The nuclear issue and the effects of sanctions against Tehran
But the initial testing ground for the region's economic recovery will be compliance by all the countries (P5+1) that signed the Iranian nuclear deal in Vienna in July 2015. U.S. President Donald Trump pledged his intention to decertify Tehran's compliance with the agreement, despite assurances by the IAEA (International Atomic Energy Agency) that the country remains in compliance with the accord. The U.S. Congress will be expressing its view on the subject in the coming weeks.
International sanctions have led to increases in the prices of basic goods which, alongside the approval of the next budget that provides for a 70 percent increase in fuel prices, triggered the recent protests in several Iranian cities. Last Wednesday, however, the head of the Pasdaran, Major General Mohammad Ali Jafari announced the 'end of sedition' in the country. The announcement came in the wake of last Wednesday's large-scale pro-government demonstrations. The protest movement is fragmented, with large-scale youth participation and mainly based in provincial cities. The first to mobilize were local workers demanding payment of salaries in arrears and protesting against high unemployment. In line with the declarations by Iran's Supreme Leader Ali Khamenei, Jafari blamed the protests on anti-revolutionary agents, namely the United States, Israel and Saudi Arabia. U.S. President Donald Trump had tweeted his support for the initial protests, which began in the conservative strongholds of Qom and Mashahhad. The United States Ambassador to the United Nations Nikki Haley, however, rejected Iran's accusations against Washington as unfounded. As a result of the stabilization of Northern Iraq, oil production is returning to pre-crisis levels.