Iraq petchem import costs rise on levy of ‘safe passage fee’

Focus story by Muhamad Fadhil and Fahima Khail

AMMAN, Jordan (ICIS)–Iraq’s cost of importing petrochemicals has increased as an Islamic militant group controlling parts of the country has started demanding “safe passage fees” for trucked cargoes, industry sources said on Thursday.

The extremist group called Islamic State or ISIS blocks the entry of trucks carrying petrochemicals from Jordan into Iraq unless the fee is paid, they said.

“ISIS is demanding a safe passage fee. If not, trucks carrying petrochemical [goods] cannot pass through from Jordan to Iraq,” an Amman-based distributor said.

In recent weeks, land transport costs from Amman to the Iraqi capital of Baghdad have more than doubled to $180/tonne from $70/tonne previously, the distributor said.

Iraq is a major market for plastic converters based in Jordan.

ISIS militants are collecting at least $500 for every truck carrying petrochemical goods, a Jordan-based trader said.

As cargoes are only delivered up to the Jordanian side of the border, the added land transport costs are often borne by end-users, squeezing their profit margins.

“Buyers are the ones who often need to pay such safe passage fees,” the trader said.

Jordanian distributors and traders typically sell their goods on a delivered (DEL) or cost and freight (CFR) basis up till the Al-Karama Free Zone, which is located at the Mafraq Governorate – near the Iraq-Jordan border.

These additional transports fees in Iraq are dampening the overall petrochemical demand in the East Mediterranean (East Med) region, with some buyers delaying their purchases, industry sources said.

The East Med region includes Jordan, Syria, Lebanon, the Palestinian territories and Israel.

“With all these added costs, we are in no hurry to buy material,” according to a polymer buyer based in Amman selling finished goods to Iraq.

Should the militant group escalate its campaign, petrochemical deliveries to Iraq will turn “more and more expensive”, with the flow of imported cargoes from Jordan likely to be be reduced further, a separate polymer buyer said.

ISIS is pursuing an extreme form of Sunni Islam with an aim of establishing a Muslim caliphate in Syria and Iraq.

The militant group also actively conducts checks on invoices and discriminates against trucks delivered to areas of Shias, a sect of Islam it opposes, according to the Amman-based distributor.

The US and its Arab allies have launched multiple air strikes this week on ISIS in Iraq and Syria, in response to growing atrocities being perpetrated by the militant group in the Middle East, including mass killings of those who refuse to convert to its brand of extremist Islam.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections