Iraq summoned the Iranian ambassador in Baghdad and has begun “diplomatic steps” to resolve the situation, Iraqi government spokesman Ali Al-Dabbagh said in a statement after a meeting of the security council.
Iranian forces entered Iraq at dawn yesterday and occupied an oil well in the East Maysan oil field, Zafer Nazmi, a border guard general, said earlier today. The Iranian forces positioned tanks around the well in the al-Fakah region, 450 kilometers (280 miles) south of Baghdad. The two neighbors have disputed the border of southeast Iraq for decades.
“The council stressed that the incursion is a violation of Iraq’s border and territorial integrity and called on Iran to withdraw from well 4 and lower the Iranian flag from the well tower immediately,” according to the statement.
Crude oil for January delivery rose 71 cents, or 1 percent, to settle at $73.36 a barrel today on the New York Mercantile Exchange. It rose as much as 2.8 percent in intraday trading on news of the incursion.
Iranian Policy
Iraq is the third-largest oil producer in the Middle East after Saudi Arabia and Iran. Iranian politics have influenced crude markets at other times this year as the country’s insistence on developing atomic power stokes concern in the U.S. and other nations that it may be trying to make nuclear weapons.
East Maysan in southern Iraq is an old oil field that is no longer in production, Nazmi said.
“They positioned tanks around it and dug trenches,” Nazmi said by phone from Basra. “They are still there, they raised the flag.”
U.S. State Department spokesman Robert Wood said U.S. forces are aware of the incident, which he said happened near an oil field between Iranian and Iraqi border forts. Wood referred other questions to Iraqi authorities.
Clashes between the two countries over disputed oil fields near the border have occurred previously and “the lack of a formally demarcated border between the two countries has been the cause,” Stratfor, an Austin, Texas-based intelligence- consulting group, said in an e-mailed statement.
Border Dispute
The border “is not clearly delineated, is in desert and is in dispute anyway,” said Edward Morse, head of economic research at LCM Commodities LLC in New York. “The possession of an unproductive well seems a strange thing on which to hang a national crisis.”
Morse is a former deputy assistant secretary of state for international energy policy.
Energy analysts and traders were surprised at the incursion, which comes days before Iran and Iraq meet fellow members of the Organization of Petroleum Exporting Countries at a Dec. 22 meeting in Luanda, Angola.
“We don’t need any more conflict in that part of the world,” OPEC Secretary-General Abdalla el-Badri said when told of the incident today at the climate summit in Copenhagen. “I hope that is not true.”
Iraq this year signed contracts with several foreign companies to develop its oil fields to revive production.
Better Relations
Ties between Iran and Iraq have improved since the establishment of a Shiite Muslim-led government in Baghdad after the ouster of Saddam Hussein in 2003. The Iranians are Shiites. The two countries waged an eight-year war that ended in 1988, with much of the fighting along the border between southern Iraq and Iran.
“From a geopolitical perspective it is a surprising development in terms of timing, considering the upcoming OPEC meeting,” said Harry Tchilinguirian, senior oil analyst with BNP Paribas SA in London.
“If verified, the incursion only goes to highlight the still very uncertain conditions on the ground in Iraq that have been impeding the recovery of the country’s oil sector,” Tchilinguirian said.
The Maysan oil fields, also known as Missan, were among the development contracts offered to foreign oil companies in June, though no bids were received. Of the three fields in that region, Buzurgan, Abu Ghirab and Fauqi, production began in 1976 at the first two and was suspended in 1980 because of the Iran- Iraq war and didn’t restart until 1998, according to Iraq.
Earlier this week, Iran successfully tested a medium-range missile, drawing condemnation from the U.S. and U.K. and a threat of sanctions from U.K. Prime Minister Gordon Brown.
