Iraq Plans to Triple Pipeline Exports as Hormuz Stays Shut

Iraq has approved a plan to triple crude oil exports through the pipeline running from its northern Kirkuk fields through Kurdistan to the Turkish Mediterranean port of Ceyhan, aiming to reach up to 770,000 barrels per day within three months as the Strait of Hormuz closure continues to choke off the country’s primary export route, according to Bloomberg via OilPrice. The move underscores how deeply the conflict has damaged Iraq’s economy and how few alternatives OPEC’s second-largest producer has to get its crude to market.

Iraq’s southern fields, which accounted for the vast majority of pre-war exports through Gulf terminals, have seen production plunge by roughly 70 percent since the US-Iran conflict shut down Hormuz transit. Current output averages around 1.3 million barrels per day, down from 4.3 million bpd before the crisis. Petroleum revenues fund approximately 90 percent of Iraq’s state budget, making the export collapse an existential fiscal problem rather than merely a commercial inconvenience.

Why Iraq is uniquely exposed

Among the major Middle East oil exporters, Iraq is arguably the worst positioned to weather a prolonged Hormuz closure. Saudi Arabia has the East-West pipeline to the Red Sea port of Yanbu. The UAE developed the Habshan-Fujairah pipeline specifically to bypass the strait. Iraq has neither — its entire southern export infrastructure feeds into the Persian Gulf through the Basra Oil Terminal and nearby facilities, all of which depend on Hormuz being open.

The Kirkuk-Ceyhan pipeline, Iraq’s only non-Gulf export route, has been underutilized for years. It was shut down entirely for extended periods due to disputes between Baghdad and the Kurdistan Regional Government over revenue sharing and export authority. Those disputes have not been fully resolved, but the Hormuz crisis has given both sides an incentive to cooperate that no previous negotiation could match.

The initial target is to push pipeline throughput to 500,000 bpd, with a stretch goal of 770,000 bpd as infrastructure is brought back to full capacity and additional pumping stations are activated along the route. Even at the upper end, 770,000 bpd would replace less than a quarter of Iraq’s pre-war export volume — a measure of how much economic damage the Hormuz closure has already inflicted.

Oil markets and the broader supply picture

The Iraq pipeline plan arrives as oil prices rally for a third consecutive session, with Brent crude approaching $100 a barrel and WTI up nearly 10 percent over three days. The market welcomed any incremental supply, but the volumes Iraq can realistically deliver through Ceyhan are modest relative to the scale of the Hormuz disruption.

The Organisation for Economic Co-operation and Development warned this week that global GDP growth could fall to 2.1 percent from a projected 3.4 percent if the Iran conflict extends into 2027, MarketWatch reported. The warning reflects the cumulative toll of sustained high energy prices on manufacturing, transportation and consumer spending across both developed and emerging economies.

India, the world’s third-largest oil importer, has been particularly hard hit. Analysts have slashed India’s oil demand growth forecasts by 30 to 90 percent due to the Hormuz supply crunch, according to OilPrice. New Delhi secured a trade deal with Oman for crude that can be loaded outside the strait, but India’s overall import dependency — roughly 85 percent of its crude is imported — means no single bilateral arrangement can offset the disruption at scale.

The geopolitical squeeze on Baghdad

Iraq’s pipeline gambit carries political risks alongside its economic logic. Tehran has already pressured Baghdad to deny its airspace and territory for operations against Iran, and a dramatic ramp-up of Iraq’s non-Hormuz exports could be read in Tehran as Baghdad profiting from, or even enabling, the pressure campaign against the Iranian regime. Iran accused the United States this week of launching attacks from bases in Kuwait and Bahrain, a reminder that Tehran is tracking how its neighbors accommodate Washington during the conflict.

At the same time, Iraq needs revenue desperately. With 90 percent of its budget dependent on oil sales and production down 70 percent, the fiscal arithmetic is stark. Civil servant salaries, fuel subsidies and reconstruction spending all depend on restoring export volumes by any route available. The Kirkuk-Ceyhan pipeline is the only option that does not require the war to end first.

Turkey, for its part, benefits from increased Ceyhan throughput. Transit fees and the strategic leverage that comes from hosting a critical energy corridor give Ankara reasons to facilitate the ramp-up. The Ceyhan terminal is already a major hub for Mediterranean crude trading, and additional Iraqi barrels would reinforce Turkey’s position as an energy transit state at a moment when that role carries considerable geopolitical value.

What 770,000 barrels per day means — and does not mean

Even if Iraq achieves the 770,000 bpd target on schedule, the number must be measured against what has been lost. Pre-war, Iraq exported roughly 3.3 million bpd from its southern terminals. The pipeline can replace at most a quarter of that volume, and the three-month timeline means relief is weeks away, not days.

For global markets, the additional barrels are marginal. The Hormuz closure has removed far more supply than any combination of pipeline bypasses, Venezuelan exports and strategic reserve drawdowns can replace. HSBC warned last week that the global oil market is approaching a “super-squeeze” tipping point where inventories can no longer absorb additional disruption. Iraq’s pipeline plan treats one symptom without addressing the underlying condition.

For Iraq itself, the pipeline is a lifeline — partial, slow to deliver and politically complicated, but the only one available. The country that once exported more crude than any OPEC member except Saudi Arabia is now scrambling to push a fraction of that volume through a single pipeline that runs through a semi-autonomous region with which Baghdad has spent years in fiscal dispute.

Secretary of State Marco Rubio told senators this week that Washington wants to end Russian oil sanction waivers as soon as possible, OilPrice reported, a move that would tighten global supply further and make every incremental barrel from Iraq’s pipeline more valuable — and the absence of Hormuz transit more painful.

What to watch

The operational timeline for the pipeline ramp-up will be the key indicator. Infrastructure that has been underutilized or idle requires maintenance, staffing and coordination between Baghdad and Erbil that has historically been difficult to sustain. If the 500,000 bpd initial target is reached within weeks, the market will treat it as a credible partial offset. If technical or political delays push the timeline past the three-month window, Iraq’s fiscal position will deteriorate further.

The broader question is whether the Hormuz closure has permanently altered Iraq’s export strategy. Even if the strait reopens, Baghdad may conclude that dependence on a single maritime chokepoint is an unacceptable vulnerability — and invest in pipeline capacity that should have been built years ago. The crisis is teaching a lesson that the 1980s Tanker War taught and Baghdad subsequently forgot: geography is not destiny, but infrastructure is.

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For the latest oil price moves, see Brent nears $100 as Hormuz crisis drives US gas prices up 42%. For the overnight escalation, see US strikes Qeshm Island; Iran retaliates against Kuwait, Bahrain. For the diplomatic track, see Trump claims Khamenei in direct negotiations.