Shift in trade relations between Iraq and Jordan

Iraqi oil exports to Jordan could be increased as soon as conditions permit.
Saturday 23/02/2019
Iraqi Prime Minister Adel Abdul Mahdi (R) meets his Jordanian counterpart Omar Razzaz meet at the Trebil border point with Jordan, February 2. (AFP)
Shared interests. Iraqi Prime Minister Adel Abdul Mahdi (R) meets his Jordanian counterpart Omar Razzaz meet at the Trebil border point with Jordan, February 2. (AFP)

AMMAN - The Jordanian government revealed preferential tariffs offered by Iraq for supplying oil to Jordan as part of economic partnerships signed by the two countries.

Jordanian Energy and Mineral Resources Minister Hala Zawati said Jordan would purchase about 10,000 barrels of Iraqi crude oil per day at a “discounted rate of $16 off per barrel."

Zawati said Jordan would provide tankers to transport crude oil from the Baiji area in Iraq to the Jordanian oil refinery in Zarqa.

Zawati said that quantity would cover approximately 7% of Jordan’s energy needs. Payments are to be adjusted to transportation costs and various crude classifications, with the average monthly price of Brent crude acting as a benchmark.

Energy is one of the major concerns of the Jordanian government because of high import costs and their influence on trade deficits and rising commodity prices.

Jordanian officials said they are convinced that Amman is one of Iraq’s most important economic partners and that every effort would be made to increase bilateral trade and direct investment.

However, analysts said it is necessary for Jordanians to change the way they look at agreements with other countries and that the era of maximally exploiting the needs of the other party is long gone. Bilateral relations now are based on shared interests rather than preferential relations, they said.

The announcement came two days after Iraq resumed oil exports to Jordan by land through the Turaibil Border Crossing, the only land-based border crossing between the two countries.

Iraqi Prime Minister Adel Abdul-Mahdi met with Jordanian Prime Minister Omar Razzaz and high-level delegations in a makeshift conference room in a tent pitched at the border crossing.

Under the memorandum of understanding signed February 2 by the two parties at the Karameh-Turaibil crossing, Iraqi oil exports to Jordan could be increased as soon as conditions permit.

This Iraqi-Jordanian rapprochement comes after Jordanian King Abdullah II’s official visit to Baghdad in January, the first of its kind in more than ten years.

The issue of the sale of Iraqi oil to Jordan at prices lower than global market rates sparked debate on social media in Iraq due to the reluctance of the government in Baghdad to disclose the terms of the agreement.

To boost their cooperation in the oil sector, the two sides agreed to begin preliminary studies for an Iraqi-Jordanian oil pipeline from Basra in southern Iraq to the port of Aqaba in Jordan.

Experts pointed out that Amman’s priority was to meet its fuel needs through this planned pipeline.

Building the pipeline would achieve two goals for Jordan: securing part of its oil needs, estimated at 165,000 barrels per day, at lower prices thanks to lower transportation costs; and it would turn Jordanian territories into a transit point for Iraqi oil and gas shipments to African and European markets through the Gulf of Aqaba, enabling Jordan to receive transit fees for oil passing through its territory.

The two sides also agreed that Jordan would supply Iraq with electricity via a joint grid, the building of which would begin in the next three months, with deliveries to begin within two years.

Iraq relies on Iran for electricity imports but is seeking to diversify its sources. To continue importing electricity from Iran, Iraq secured temporary exemption from US sanctions on Iran. Baghdad is also seeking to purchase electricity from Kuwait and Turkey.

Bilateral agreements between Jordan and Iraq include the activation of a 2017 Iraqi Council of Ministers resolution that exempts 393 Jordanian goods from customs duties.

Comprehensive economic integration between the two countries is atop the agenda, which looks to integration to ease economic crises they have been suffering for years. Trade volume between Iraq and Jordan is estimated at $1.4 billion a year in the framework of an oil-for-food programme.