Iraq's oil ministry declared Force majeure on all oilfields operated by foreign companies, in a letter dated 17 March1. Onshore storage has reached capacity. Production cuts have been ordered. Iraq produces roughly 4.5 million barrels per day — second only to Saudi Arabia within OPEC — and exports the vast majority from its southern Basra terminals through tanker routes that transit the strait of Hormuz. Gulf oil exports had already fallen at least 60% compared with February.
Force majeure suspends Iraq's contractual obligations to the international companies — BP, TotalEnergies, ExxonMobil, Lukoil, CNOOC — that operate its largest fields under technical service contracts. Those companies cannot lift the crude they are owed. Iraq cannot store crude it continues to extract. The result is mandatory well shut-ins — a process that risks long-term reservoir damage, particularly in Iraq's pressurised southern fields, and carries restart costs running into hundreds of millions of dollars per field.
Iraq is more exposed than its Gulf neighbours to a prolonged shutdown. Oil accounts for more than 90% of government revenue and virtually all export earnings. The Central Bank of Iraq held roughly $100 billion in foreign reserves before the war — a fraction of Saudi Arabia's $430 billion or the UAE's estimated $1.4 trillion in sovereign wealth. Iraq cannot sustain months of near-zero oil income without defaulting on salaries for its 4.5 million public-sector employees or cutting funding for security forces still deployed against Islamic State remnants in the west.
Iraq is not a party to this conflict. Its oilfields have not been struck. But its geography — entirely dependent on the strait for southern exports — has made it one of the war's largest economic casualties. The Force majeure formalises what Brent at $112.19 and a record $14.20-per-barrel backwardation2 had already priced in: for Iraq, the physical link between oil in the ground and the global refining system has been broken.
