Iraq is facing a significant decline in its oil exports, largely due to the near-total obstruction of the Strait of Hormuz. To mitigate this drop in production, analysts stress the urgency for Iraq to negotiate a new deal with Turkey about a crucial oil pipeline within the next two months.
Status of the Kirkuk-Ceyhan Pipeline
The Kirkuk-Ceyhan pipeline, which has been operational for decades, plays a pivotal role in exporting crude oil from Iraq to Europe. However, its governing agreement, which links the Kirkuk region in northern Iraq to Ceyhan in Turkey, is set to expire on July 27. This agreement was initially interrupted by Turkey in July 2025, with the cessation planned to take effect one year later. This evolution poses a critical challenge for Iraq, particularly as it grapples with a significant reduction in oil exports.
In the context of these challenges, Turkey had previously proposed a comprehensive draft agreement that addressed not just the pipeline but broader energy cooperation. Officials in Baghdad expressed intentions to evaluate this proposal, yet time is of the essence as the deadline approaches.
As per Nabil Al-Marsoumi, an Iraqi economics expert, Turkey is not legally obligated to permit the passage of Iraqi oil through the pipeline after July 27. Both nations must finalize a new pact swiftly to avoid further complications. Turkey’s ambassador in Baghdad confirmed ongoing discussions regarding a new energy deal aimed at expeditiously resolving the situation.
The reason behind Turkey’s decision to end the previous agreement appears multifaceted. It includes frustrations stemming from drone attacks on oilfields in the Kurdistan region and a want for a more favorable deal. Additionally, a March 2023 ruling by the International Court of Arbitration requiring Turkey to pay Iraq $1.5 billion for unauthorized oil exports has likely added pressure. This situation complicates relations as Ankara faces its own financial burdens, including operating costs for the pipeline that have not been counterbalanced by oil transport fees while the pipeline was suspended.
In March, Iraq resumed limited exports of about 200,000 barrels per day (bpd) through the Kirkuk-Ceyhan pipeline, which is only a fraction of its pre-war capacity exceeding 4 million bpd. The State Oil Marketing Organization reported that total oil exports in the early months of 2026 hovered around 1.9 million bpd, generating approximately $16 billion, a stark contrast to previous years.
The urgent need for a new agreement is reinforced by Iraq’s intent to explore additional pipeline construction to streamline further oil exports. Recently, Iraqi authorities approved a substantial budget for a $5 billion project aimed at developing a new pipeline that will extend from Basra to Haditha, ultimately linking to Turkey, Syria, and Jordan.
As Iraq stands at a crossroads, securing a new oil agreement with Turkey appears paramount to reversing the decline in its oil exports and stabilizing its economy. Time will tell if the negotiations yield a favorable outcome before the July 27 deadline.