Minister claims Iranian soldiers occupied oilfield

REUTERS - Iranian soldiers crossed into Iraqi territory on Friday and took up position at a southern oilfield whose ownership is disputed by Iran, a senior Iraqi official said.

Deputy Interior Minister Ahmed Ali al-Khafaji, reversing earlier denials, said the incursion was the latest in a series this week at the Fakka oilfield, 300 km (185 miles) southeast of Baghdad, in Maysan province.

"At 3:30 this afternoon, 11 Iranian (soldiers) infiltrated the Iran-Iraq border and took control of the oil well. They raised the Iranian flag, and they are still there until this
moment," he told Reuters.

There was no official word from Tehran on the incident. Oil prices rose after al-Arabiya television first reported an incursion.

Khafaji said Baghdad had taken no military action and stressed it would seek a measured, diplomatic response to the situation. "We are awaiting orders from our leader."

"This well is located on Iraqi land, 300 metres (yards) inside Iraq. It is disputed between Iran and Iraq. There was an agreement between the two countries' oil ministers to fix this problem diplomatically," he said.

An Iraqi security source in Maysan province, speaking on condition of anonymity, said Iranian troops had made their way on Thursday onto the Fakka oilfield area, located just on the Iraqi side of the two countries' long desert border, then withdrawn after several hours.

Oil futures rise

The benchmark U.S. light crude oil future moved to a high of $74.69 per barrel at 1414 GMT, up from $73.31 at 1108 GMT before the first reports.

The incident came a few days after the Iraqi Oil Ministry awarded leading global energy firms contracts to operate seven oil fields, in the second tender since the 2003 U.S. invasion.

Ties between Iran and Iraq, which fought a bloody eight-year war in the 1980s, have improved since a Shi'ite-led government took over in Baghdad following the ousting of Sunni Arab leader Saddam Hussein in 2003.

Yet tensions have flared in the past in the inhospitable desert region, just one of many flashpoints where continuing disagreement over shared borders between the majority Shi'ite Muslim neighbours has fuelled a low-level public feud.

With Washington and Tehran at odds over Iran's nuclear programme, the Iran-Iraq relationship is more delicate given the presence of 115,000 U.S. soldiers on Iraqi soil.

A source in the Iranian embassy in Baghdad said he had no information about any incursion.

"If such a thing had happened, they would have told us," he said, referring to the Iranian government in Tehran.

Iraqi Interior Minister Jawad al-Bolani told al-Arabiya television: "Iraq will not give up its oil wealth, no matter the reason."

Iraqi government spokesman Ali al-Dabbagh said ministers would meet this evening on the issue and would make a statement following their discussion.

Together with Bazargan and Abu Gharab, Fakka makes up the so-called Maysan Fields, which have an estimated 2.463 billion barrels of reserves.

According the Oil Ministry, oil production in the Fakka area began in the 1970s but was suspended during the Iran-Iraq war. The closest city is Amara, some 300 km (185 miles) southeast of Baghdad.

Iraq offered the Maysan oilfield complex to global energy firms in its first postwar development contract auction in June.

But a Chinese consortium, the sole group to bid on the fields, declined the Oil Ministry's proposed fees.