Baghdad Moves to Curb Oil Smuggling by Iran-Backed Militias: Report

ERBIL (Kurdistan24) - The Iraqi government has recently taken action against a large-scale scheme to divert government oil to militias through non-operational factories.

The move involves a hasty shutdown of asphalt plants linked to Iran-backed terrorist groups operating in Iraq, as Michael Knights, a senior fellow at The Washington Institute for Near East Policy, detailed in a recent report.

The Ministerial Energy Committee (MEC) of Iraq's cabinet, led by Prime Minister Mohammed Shia al-Sudani, held two key sessions on July 15 and 22, Knights explained.

During these meetings, the committee approved decisions marked "very urgent" that aimed at curbing the widespread diversion of government fuel oil to fake end-users associated with U.S.-designated terrorist groups such as Kata’ib Hezbollah (KH) and Asaib Ahl al-Haq (AAH.) 

Knights’ report, however, failed to explain when that scheme began, although it did note that under the previous Iraqi Prime Minister, Mustafa al-Kadhimi, the practice had been significantly scaled back.

Understanding the U.S. Failure to Counter Iran in Iraq

Most likely, the oil diversion began during the tenure of U.S. President Barack Obama (2009-17) and has continued since.

There were very good reasons for overthrowing Saddam Hussein and his regime, rooted in traditional national security grounds. But President George W. Bush, who launched Operation Iraqi Freedom (OIF), failed to articulate them very well.

To do so would have meant that the president’s own father had made a huge mistake in ending the 1991 war with Saddam in power and compounded it by not supporting the popular uprisings that erupted soon afterwards.

Read More: The US Watches, as Saddam Crushes the Uprisings: 25th Anniversary

Bill Clinton succeeded Bush’s father, known as Bush 41, in 1993. Although Clinton had complained during the 1992 election campaign that Bush 41 should have gotten rid of Saddam during the war, once he was elected president, Clinton did nothing. He did not want to deal with Saddam.

Indeed, as information emerged suggesting Saddam might be a serious problem, that information was swept under the rug. Martin Indyk, who recently passed away at the age of 73, was Clinton’s first National Security Advisor on the Middle East. Indyk enforced the Clinton administration’s position on Saddam with great energy, as some  individuals directly experienced. 

They include no less a figure than Paul Wolfowitz, who had been number three at the Defense Department under Bush 41 and would rise to number two under his son, often referred to as Bush 43.

Having committed himself so strongly to the position that Saddam was no threat, Indyk would later oppose OIF. There were also senior Republican officials, who served in Bush 41, with the same background and then took the same position in opposition to  OIF.

Thus, for Bush 43 to explain why it was necessary to overthrow Saddam would have been to alienate both Republicans and Democrats, because both had made serious mistakes In regards to Iraq. 

Besides, the Bush 43 administration came to believe that overthrowing Saddam would be easy—a “cakewalk,” in the language of those days.

Read More: Operation Iraqi Freedom: 15 Years On

Elected to the U.S. Senate in 2004, Barack Obama opposed OIF, and the course of the war appeared to vindicate his judgment. It was certainly no cakewalk.

After Obama became president in 2009, he thought it was important to develop good relations with Iran, so no future, hot-headed Republican president—his view of Bush—would launch a costly and unnecessary war against that country.

While the Bush 43 administration actively sought to counter Iran’s efforts to extend its influence in Iraq, the Obama administration did not. It was during Obama’s presidency, with its conciliatory posture, that Iran was able to establish its rather considerable position within Iraq.

The Scheme to Fund Pro-Iranian Militias Using Iraqi Oil

The scheme involved key governmental bodies, including the Ministry of Oil, Ministry of Industry and Minerals, and the Prime Minister’s National Operations Center (PM-NOC.) These entities allocated large quantities of subsidized government fuel oil to Iraqi asphalt factories, often on the basis of exaggerated claims of their operational capacities. This allowed much of the fuel to be diverted to illegal exports, earning the militias over $900 million a year, according to Knights’ calculations.

Last month, however, the Sudani government abruptly changed course. The MEC ordered an immediate investigation into the real capacities of the asphalt plants; reduced fuel allocations to 60% of their capacity until the review was completed; and increased the subsidized fuel price to $369 per ton.

Knights claims that the Iraqi government was prompted to act, because the scheme was about to become public and that would be highly embarrassing.

But he provides no details to support that conclusion, and other explanations are possible, including something quite straight-forward, like the U.S. government asked Sudani to address the problem.

Sudani is in a difficult position, as Washington allowed Iran’s position to become so strong in Iraq long before he took office. While Kadhimi, his predecessor, did take action against this scheme, Kadhimi merely reduced it and did not eliminate it—testimony to the power of pro-Iranian elements within Iraq.

Moreover, Kadhimi was not elected. Rather, Adil Abdul Mahdi, who was elected Iraqi prime minister in 2018, faced popular protests against government corruption and inefficiency and he resigned in 2020. The Iraqi president then chose Kadhimi to replace him.

Sudani paid his first visit to a Western capital when he came to Washington in April, and the visit seems to have gone relatively well. Thus, Sudani does not appear to be a pro-Iranian, anti-American figure.

Read More: U.S. Seeks to Broaden Ties with Iraq, as PM Sudani Makes First Visit to Washington

Moreover, Sudani became prime minister with the support of Masoud Barzani, head of the Kurdistan Democratic Party (KDP), the largest political party in the Kurdistan Region.

In an interview with Kurdistan 24, Sudani hailed Barzani as “one of the pillars of politics in Iraq,” who “plays a very important role in the understandings and the alliances that pave the way for the political process in Iraq.”

Read More: Iraqi PM-designate lauds Masoud Barzani—underscoring importance of KDP in Iraqi politics

Anyone familiar with Iraqi politics would also understand that such high praise for Barzani would not come from a rabidly anti-American, pro-Iranian figure.

Editing by Laurie Mylroie