Iraq and Pakistan have each signed separate agreements with Iran to transport oil and liquefied natural gas from the Gulf region, according to information obtained on May 12 local time. Under the agreement, Iraq secured safe passage for two very large crude carriers (VLCCs) that transited the Strait of Hormuz on May 10, each carrying approximately 2 million barrels of crude oil. Meanwhile, under another bilateral agreement between Pakistan and Iran, two tankers loaded with Qatari liquefied natural gas are heading toward Pakistan. Sources indicated that neither Iraq nor Pakistan made any direct payments to Iran or the Islamic Revolutionary Guard Corps for transit rights.

Deep Analysis

Event Essence

Iraq secured safe passage for two VLCCs (2 million barrels each) through the Strait of Hormuz on May 10, leveraging an agreement with Iran. Concurrently, Pakistan arranged for two Qatari LNG tankers under a separate bilateral agreement with Iran. Neither country made direct payments to Iran or the Islamic Revolutionary Guard Corps for transit rights. These events illustrate a novel regional energy logistics arrangement that bypasses conventional payment and financing channels, potentially relying on barter or third-party guarantees. This matters because it demonstrates Iran's strategic leverage in securing Gulf energy flows and offers a workaround to sanctions constraints, affecting global crude and LNG supply reliability.

Economic Impact Points

Shift in Regional Crude and LNG Supply Chain Dynamics

The VLCC shipments for Iraqi oil (likely Basra crude) and Qatari LNG for Pakistan under Iranian transit agreements signal a reconfiguration of supply routes. For chemical industry stakeholders, this ensures uninterrupted feedstock flow—crude for refineries and LNG for petrochemical crackers—reducing short-term supply disruption risks. However, the lack of direct payments suggests alternative settlement mechanisms (e.g., barter for goods or services), which could introduce cost opacity and compliance challenges for downstream buyers.

Implications for Strait of Hormuz Transit Security

These agreements underscore Iran's de facto role as a regional transit guarantor, potentially lowering the risk premium associated with Hormuz chokepoint passage. Given that the Strait handles about 20% of global oil and LNG trade, any perceived stability could compress insurance and freight rates. For chemical firms, this may temporarily ease naphtha and LPG price volatility, but reliance on bilateral transit pacts introduces geopolitical dependency that could shift rapidly.

Financial and Sanctions Compliance Risks

With no direct payments to Iran or the IRGC reported, the transactions likely involve third-party clearing, escrow accounts, or sovereign-level guarantees. Chemical companies sourcing feedstocks indirectly via these routes must tighten due diligence to avoid inadvertent sanctions breaches. This model, if replicated, could set a precedent for energy barter arrangements that sideline dollar-denominated trade, altering trade finance norms in the downstream chemicals sector.