Iraq

Pope Francis has called for an end to the spread of weapons and violence on the first day of his visit to Iraq. The head of the Roman Catholic Church also made a plea for religious tolerance in a country where Christians make up a small minority.

The pope’s visit comes amid simmering tensions between the U.S. and Iranian-backed groups operating in Iraq. The nation has seen recent violence, including a rocket attack on an American airbase on Wednesday.

Francis is the first reigning pontiff ever to visit Iraq and gave a speech at the presidential palace in Baghdad where he appeared with President Barham Salih and Prime Minister Mustafa al-Kadhimi.

“I come as a penitent, asking forgiveness of heaven and my brothers and sisters for so much destruction and cruelty. I come as a pilgrim of peace in the name of Christ, the prince of peace,” the pope said, according to Catholic News Service.

“May the clash of arms be silenced! May their spread be curbed, here and everywhere,” he said.

“May the voice of builders and peacemakers find a hearing! The voice of the humble, the poor, the ordinary men and women who want to live, work and pray in peace.”

“May there be an end to acts of violence and extremism , factions and intolerance,” the pope added. “May room be made for all those citizens who seek to cooperate in building up this country through dialogue and through frank, sincere and constructive discussion — citizens committed to reconciliation and prepared, for the common good, to set aside their own interests.”

There had been concerns about Francis’ trip due to the ongoing COVID-19 pandemic and the military situation in Iraq. However, the pope said on Friday he felt it was his “duty” to visit the country, while Iraqi authorities have insisted they can protect him, according to National Catholic Reporter. The pope and his entourage have also been vaccinated against the virus.

Francis made reference to Iraq’s religious minorities in his address, saying “it is essential to ensure the participation of all political, social and religious groups and to guarantee the fundamental rights of all citizens.”

“Only if we learn to look beyond our differences and see each other as members of the same human family will we be able to begin an effective process of rebuilding and leave to future generations a better, more just and more humane world,” he said later in response to comments from Salih.

The majority Muslim country has a population of almost 40 million but only between 200,000 and 300,000 Iraqis are Christians, according to The New Arab. The Christian population stood at around 1.5 million before the U.S. invasion in 2003.

The pope’s comments on Friday echoed his remarks on February 8, criticizing the “proliferation of weapons” around the world and particularly in Syria, with which Iraq shares a land border.

The U.S. and Iran remain heavily involved in Iraq and tensions have escalated after Wednesday’s air base attack. The Pentagon has been accused of providing cover to the Islamic republic by not publicly blaming Iran for the attack. No group has yet claimed responsibility but the rocket strike reportedly bares the hallmarks of Iran-aligned Shia militias.

Pentagon spokesperson John Kirby has come under fire for his apparent hesitation to link Iran to Shia militias operating in Iraq and launching attacks against U.S. and allied troops, following the latest rocket barrage against Iraq’s Ain Al Asad air base this week.

Kirby spoke with reporters on Wednesday shortly after the attack, during which one American civilian contractor died of a heart attack. The U.S. has not yet apportioned blame for the rocket attack, and no group has claimed responsibility.

But the operation bears the hallmarks of attacks by Iran-aligned Shia Iraqi militias, which regularly target American, Iraqi and allied forces with artillery, IEDs, rockets, and other weapons.

This week’s attack on Ain Al Asad follows a similar strike on the Erbil International Airport in Iraqi Kurdistan last month that killed one civilian contractor and wounded several Americans. That attack prompted American retaliatory airstrikes in Syria, targeting fighters belonging to Iran-backed Iraqi militia groups.

But Kirby’s apparent hesitance to link Iran to this week’s attack has prompted criticism online. The Pentagon spokesperson broke with common parlance to describe the suspected perpetrators as “Shia-backed militias,” rather than Iran-backed groups, even after reporters in Wednesday’s briefing challenged the phrase.

“Obviously it’s a rocket attack and we have seen rocket attacks come from Shia-backed militia groups in the past,” Kirby said of this week’s operation.

He added: “We’ve long been open and honest about the threats that arise from these rocket attacks that are being perpetrated by some Shia-backed militia. And we’ve not been bashful about calling it out when we’ve seen it.”

But reporters took issue with Kirby’s phrasing. “When you say Shia-backed militias, do you mean Shia militias or Iran backed…” one journalist asked, before Kirby cut him off and replied: “I mean Shia-backed militias.”

Asked to explain what that meant, Kirby responded: “No seriously. I mean Shia-backed militia.” Pressed again on the phrase, the spokesperson said: “I’ve been using that phrase pretty much since I’ve been up here and we know that—and I’ve said this—that some of the Shia-backed militias have… Iranian backing.”

Past statements, including the Pentagon confirmation of last month’s airstrikes in Syria, have referred to such Iraqi Shia groups as “Iranian-backed militia.”

Iran-watchers on Twitter took issue with Kirby’s remarks and suggested they may be signaling a policy pivot from the administration.

Giorgio Cafiero, the CEO of the Gulf State Analytics geopolitical risk company, said Kirby’s phrasing was “rather weird.” Jason Brodsky, the policy director of the United Against Nuclear Iran group, said the exchange with Kirby was “bizarre.”

Mark Dubowitz, the CEO of the hawkish Foundation for Defense of Democracies, wrote on Twitter that Kirby’s comments hinted at a return to the “absurdities” of former President Barack Obama ‘s Iran strategy.

Dubowitz said Kirby is “a great American,” but “the fact that he has to offer these verbal contortions to whitewash the role of the regime in Iran in attacking Americans is the fault of senior leadership.”

There is significant overlap between Shia militias and Iran-affiliated groups in Iraq, but not all of the former are aligned with Tehran.

Though the Iranian regime wields huge influence in the country, local Shia leaders—chief among them Ali al-Sistani and Muqtada al-Sadr—command enormous popular followings and pursue their own interests, often with a nationalist tinge.

A deft politician who has repeatedly rebranded himself, Sadr has demanded the withdrawal of all foreign forces from Iraq, whether American or Iranian, and has called for Iran-backed militias to be absorbed into the Iraqi armed forces.

Sadr has also worked to build bridges with Iran’s arch-rival Saudi Arabia and its Sunni royal family.

Forces loyal to Sistani have previously worked with the Americans against Sunni insurgents in Iraq, and the ayatollah has been held up by hawks like former Secretary of State Mike Pompeo as a powerful bulwark against Tehran’s influence.

Kirby’s words may be an administration attempt to soften the American response and avoid further escalation, but could also be a reflection of the fact that the investigation is yet to identify exactly which group was responsible for the Ain Al Asad attack.

President Joe Biden has said he will “make judgements” about a response to this week’s attack once the Iraqi-U.S. investigation finds those responsible. “We are following that through right now,” Biden told reporters Wednesday.

White House Press Secretary Jen Psaki said: “If we assess further response is warranted, we will take action again in a manner and time of our choosing.”

Last month’s airstrikes in Syria were designed to deter further attacks against American and allied targets, but Iran-backed militias have continued to agitate in Iraq. Biden is juggling these tit-for-tat actions with his hope of reviving the Joint Comprehensive Plan of Action nuclear deal with Iran and avoiding military escalation in the region.

This article has been updated to provide further background on the Shia militia movement in Iraq.

Oil prices fell for the fourth consecutive session Friday to bring their drop for the week to 3%, illustrating how fears of excess supply continue to keep crude prices down even as hopes for upcoming trade talks boost the outlook for the global economy.

U.S. crude futures inched down 0.4% to $54.85 a barrel Friday, paring an earlier advance even as other risky assets got a boost from trade hopes. Brent crude, the global price benchmark, slipped 0.3% to $60.22 a barrel Friday and also posted a weekly decline.

Although oil prices have rebounded this year, they are down about 20% in the past year, compared with a roughly 3.5% climb in U.S. stocks.

Fears that softening demand and steady supply will result in a glut have tamped down crude in recent months. Earlier this week, the Organization of the Petroleum Exporting Countries revised downward its expectations for 2019 global oil-demand growth. The cartel and its allies then put off talk of further output cuts at a technical meeting, a setback to some analysts who think the group needs to lower supply further to mop up excess production.

Oil’s separation from other risky assets this week was also notable because crude had moved alongside stocks on sentiment about U.S.-China trade relations recently.

Although tensions between the world’s two largest economies have thawed ahead of coming discussions, some analysts remain skeptical that they can reach a far-reaching agreement that removes tariffs and relieves significant pressure on the global economy. That uncertainty is a worry for oil investors trying to gauge whether demand growth will continue slowing down.

Meanwhile, the U.S. continues to churn out oil, and a number of other projects are set to add crude to the global market next year.

“Though Saudi Arabia has reduced its output more sharply than the production cut agreement stipulates, other member countries such as Nigeria and Iraq as well as Russia, which is a member of OPEC+, have been producing significantly more of late.” Commerzbank analysts said in a note to clients.

Elsewhere in commodities Friday, front-month copper futures surged 2.2% to $2.6810 a pound, advancing to their highest level since late July on optimism that a trade compromise and lower interest rates will support economic activity. The industrial metal is particularly sensitive to expectations for growth in China, which accounts for roughly half of global consumption.

Write to Amrith Ramkumar at [email protected]

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Crude prices surged following an attack on Saudi Arabia’s oil infrastructure. In light of the disruption, President Trump said he has authorized the release of oil from the Strategic Petroleum Reserve if needed.

Brent crude, the global gauge of oil prices, was up 8.7% at $65.49 a barrel in early European trading on Monday, after initially soaring as much as 19.5%. U.S. oil futures were 8% higher at $59.26 a barrel. The moves put both benchmarks on track for their biggest one-day percentage gains since 2016, and for one of their largest advances of the past 30 years.

Analysts cautioned that prices likely will be volatile as trading volumes increase throughout the session and more details emerge about the disruption in Saudi Arabia, where attacks over the weekend knocked out 5.7 million barrels a day of production, or roughly 5% of the globe’s output.

A sustained spike in fuel prices could mark the latest threat to a world economy already under significant pressure from the U.S.-China trade war. It could also impact stocks in the U.S., where resilient consumer spending has helped lift major indexes. Higher energy prices can raise gas and heating bills, cutting into available income.

The jolt to the market followed weeks of listless trading in oil.

“The market has been relatively complacent toward recent events in the Middle East, in the Strait of Hormuz for example,” said Harry Tchilinguirian, head of commodity strategy at BNP Paribas. “The market is now re-evaluating these risks, because the attacks hit the heart of the oil industry in Saudi Arabia.”

On Sunday Mr. Trump went on Twitter to say he was authorizing the release of crude from the SPR to keep markets well supplied if needed. Such releases have been rare historically and only used as a last resort. The president said the size of the release was yet to be determined. There are more than 600 million barrels in the SPR.

In a follow up tweet Mr. Trump said the U.S. is “locked and loaded” and would proceed once Saudi Arabia has identified the culprits behind the attacks.

The attacks targeted Abqaiq, a massive processing plant that is at the heart of Saudi Arabia’s energy system. Analysts say the damage could potentially create a supply shortfall as the kingdom assesses the damage and tries to avoid a sharp drop in exports.

The world’s largest crude exporter could tap oil inventories and use other facilities to process crude, but analysts say the uncertainty created by the attack could lead to significantly higher fuel costs. While the U.S. has grown its shale production, limited export capacity could limit the industry’s ability to respond to a large shortfall.

“This is basically equivalent to taking the entire Permian Basin and having it produce nothing for days,” said Rob Thummel, a senior portfolio manager who oversees energy assets at Tortoise Capital Advisors, referring to the prolific U.S. region that spans more than 75,000 square miles of West Texas and New Mexico. “The response here is key and how long it takes to come back.”

Mr. Thummel said he wouldn’t necessarily immediately add to investments in energy stocks first thing Monday given the number of unknowns about the disruption to Saudi output.

“I’d like to see this play out a little more,” he said.

The outsize moves also illustrated the fragility of the oil market, which has increasingly been controlled by passive funds and trend followers as commodity funds focused on supply and demand have closed in recent years. Analysts said funds closing bets that oil prices would fall to limit losses could exacerbate market swings if the surge continues.

Houthi rebels in Yemen backed by Iran claimed responsibility for the attacks, the latest in a series in recent months on Saudi Arabia’s oil infrastructure. A Saudi-led coalition has fought for years to seize control in Yemen from the Houthis, who took control of the country’s capital, San’a, in 2014 during a civil war.

This weekend’s incident stoked ongoing tensions between Iran and the U.S. and its ally Saudi Arabia. The U.S. blamed Iran for the attacks, a claim Tehran denied. U.S. and Saudi officials are also investigating whether they involved cruise missiles fired from Iraq or Iran, The Journal reported.

The uncertainty in the Middle East could force investors to brace for more possible disruptions to output, analysts said. U.S. crude ended last week up 21% for the year at about $55 barrel, though it was well below its April peaks and levels from a year ago on fears that softening demand would result in a supply glut.

Recent declines in fuel prices have been a boon for large users of fuel and consumers who have paid less at the pump. U.S. consumers have continued to spend steadily in recent months, powering the economy despite a trade war between the world’s two largest economies. Consumer spending accounts for more than two-thirds of U.S. growth.

Analysts said more responses from developed nations that could tap their plentiful stockpiles of crude could soften some of the market’s reaction. An inventory response could be necessary because the Organization of the Petroleum Exporting Countries has limited spare capacity that can be quickly turned on in an emergency to handle what could be the industry’s largest disruption in years.

Large buyers of Saudi Arabian oil in Asia such as China, Japan and India could also be impacted depending on how much fuel prices rise on the supply disruption.

“These attacks make it even more difficult to protect these facilities, so there’s a reason why a risk premium is likely to stay over the coming weeks,” said Giovanni Staunovo, a commodity analyst at UBS Wealth Management.

Write to Amrith Ramkumar at [email protected] and Joseph Wallace at [email protected]

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This week’s drama in oil markets serves as a reminder that business is all about taking calculated risks—particularly the energy business.

What is true for Saudi Arabian Oil Co., or Aramco, also holds true for a supermajor such as Exxon Mobil. The relative assessment of those companies’ riskiness shifted after the former was the target of the weekend’s attacks knocking more than half of its production offline.

Saudi officials may delay Aramco’s planned initial public offering as a result, but the risk of another incident shouldn’t derail it.

Investors’ skittishness will be reflected in the company’s valuation once Aramco’s shares trade. There already was peril in having a powerful controlling state shareholder selling part of a company that it effectively nationalized decades ago. Security risks, which already should have been part of any investor’s assessment, will loom even larger now.

That doesn’t mean Aramco’s vast oil reserves aren’t valuable enough for a listing or even that the company would fall short of becoming the world’s most valuable publicly traded energy company. It probably would be the most valuable public company, period, though likely short of the lofty $2 trillion aspirations of Saudi Arabia’s de facto ruler Crown Prince Mohammed bin Salman.

Many large oil companies operate in far riskier regions. Exxon has a big liquefied natural gas operation in Papua New Guinea and oil production in Iraq, for example. But many of the 41 countries where it has upstream operations are safe and politically stable, and even the less stable ones don’t become problematic simultaneously.

Investors also have appetites for companies with more concentrated exposure. Tullow Oil operates primarily in fields in East and West Africa. Kosmos Energy has built a business around going to some of the more difficult regions to explore for oil and develop assets, including Equatorial Guinea and Mauritania. Medco Energi has operations in Tanzania, Yemen, Oman and Indonesia.

Such stocks aren’t for the faint of heart, but Aramco will sell at the right valuation. It is unique because it is both concentrated and simply too big for an energy investor to ignore. Saudi authorities might not be pleased with the price they receive even if they wait until Saturday’s attack fades into memory. Like prospective investors, they also may have to grin and bear it.

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