Dec. 18 (Bloomberg) -- Iranian forces yesterday entered Iraqi territory at dawn and occupied well number 4 in the East Maysan oil field, Border Guard General Zafer Nazmi said. The Iranian forces positioned tanks around the well, which is in the al-Fakah region, 450 kilometers (280 miles) south of Baghdad. The two neighbors have disputed the border of southeast Iraq for decades.
“They positioned tanks around it and dug trenches,” General Nazmi said by phone from Basra. “They are still there, they raised the flag.”
East Maysan in southern Iraq is an old oil field that is no longer in production, according to Nazmi. Iraq is the third largest oil producer in the Middle East after Saudi Arabia and Iran.
Energy analysts and traders were surprised at the news, 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.
Crude oil for January delivery rose as much as $2.04, or 2.8 percent, to $74.69 a barrel on the New York Mercantile Exchange. It traded at $74.58 a barrel at 2:19 p.m. London time.
Iran and Iraq waged an eight-year war that ended in 1988, with much of the fighting along the border between southern Iraq and Iran. Iraq has this year signed contracts with several foreign companies to develop its oil fields to revive production.
OPEC Meeting
“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.
Iraq’s National Security Council will hold a meeting to discuss the situation, state-run television al-Iraqiya said. Iraq’s al-Hurra television station also reported that Iranian forces crossed the border into Iraq, citing the U.S. army saying the incident was not violent.
Baghdad-based government spokesman Ali al-Dabbagh didn’t immediately respond to e-mails and mobile telephone calls seeking comment. Calls to Iran’s presidential office, Foreign Ministry and Ministry of Defense were not answered. Friday is the weekend in Iran. A spokesman for the Iranian embassy in London declined to comment.
To contact the reporters on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.netKadhim Ajrash in Baghdad through the Dubai newsroom or mchmaytelli@bloomberg.net
