Iraq’s export crisis: Hormuz and pipeline uncertainty
Iraq currently faces multiple simultaneous oil export challenges: seaborne exports are constrained by the Strait of Hormuz closure and its northern pipeline corridor is nearing a contractual deadline. The result is a severely strained crude balance, with production at a decade low and recovery dependent on two separate geopolitical negotiations.
Southern Exports: Collateral Damage from Hormuz
Iraq’s crude oil production fell to a 10-year low of 1.5mbd in April (OPEC), down over 60% from the pre-conflict January-February average of 4.1mbd. May production recovered approximately 20% m-o-m to 1.8mbd, signalling some ramping of oilfields following the shut-ins – though volumes remain far below quota levels.
The divergence between production and seaborne exports has widened dramatically. In 2025, exports averaged 380kbd below production, primarily feeding domestic refinery demand. Between March and May 2026, that gap has more than tripled to 1.3mbd – a figure that certainly raises question marks. There are three options to close the gap: 1) higher domestic demand (refining and direct burn), higher exports via other routes (e.g. trucking to Syria) and stockbuilds. We will show in the following that these options – neither individually nor in combination – are unlikely to explain the jump in the gap between production and exports, raising the option that the output loss is even bigger.
Northern exports: Kirkuk volumes at risk
Iraq’s southern export disruption is compounded by uncertainty over its northern pipeline exports. The Kirkuk-Ceyhan pipeline, initially commissioned under a 1973 Iraq-Turkey agreement and today rated at a nameplate capacity of 1.6mbd (Argus), has had a turbulent operational history.
The pipeline agreement formally expires on 27 July following Ankara’s issuance of a termination notice in July 2025. Turkey is now seeking a broader framework covering multiple energy products – oil, gas, petrochemicals, and electricity – and is also pushing for a settlement offset against the arbitration fine it incurred. The expiration of the agreement poses a substantial risk to Baghdad’s export revenues.
Alternate export routes
Iraq’s export crisis has exposed the country’s lack of alternative routes – and accelerated efforts to build them.
Cross-border trucking via Syria
In April, SOMO signed an agreement with Syria for cross-border truck haulage of crude, with a separate arrangement to export 650kt of fuel oil per month. Iraqinews reports 500-700 tanker trucks were conducting daily overland border crossings into Syria as of early June. Seaborne oil exports from Baniyas show these volumes hitting the water in late April and averaging 130kbd for the four weeks to 14 June.
Basra-Haditha pipeline
The longer-term structural response is the Basra-Haditha pipeline, approved in 2024, designed to provide an alternative to both the Kirkuk-Ceyhan corridor and Gulf exports through Hormuz. The planned pipeline is 2.5mbd in capacity and 700km in length (Argus), connecting Basrah fields in the south to three seaborne loading points: Ceyhan (Turkey, Mediterranean), Baniyas (Syria, Mediterranean), and Aqaba (Jordan, Red Sea). The pipeline is also expected to supply domestic refineries along its route.
Signs of Recovery at Hormuz
Forward View
At Hormuz, the directional data is encouraging: crossings are rising, and Iraq is capturing an increasing share. The caveat is that a sustained shut-in of large volumes may well see a slower ramp back up to normal production levels than other exporting counterparts, although the recent increase in exports is a bullish indicator.
At Ceyhan, the window is narrow. The July 27 expiry date is a hard constraint without a renewed deal, and Turkey’s demand for a multi-commodity framework adds significant complexity to any rapid resolution. Failure to agree terms would cease 220kbd of northern exports at a time in which Iraq is facing substantial losses on southern exports.
The cross-border trucking route through Syria may elapse at the end of June. Domestic power generation requirements could weigh on trucked fuel oil exports, though surplus domestic crude may be substituted for the typical fuel oil feedstock.
Looking ahead, near-term export volumes in June and July will be dictated primarily by the status of Hormuz transits. A failure to renew the Kirkuk-Ceyhan agreement by July 27 would compound southern losses with the elimination of one of two remaining export routes – a scenario that would likely accelerate both overland trucking through Syria and political pressure to fast-track construction of the Basra-Haditha pipeline.