Kurdish Policy Analysis

SULAIMANI, Kurdistan Region of Iraq —By Dr. Pshtiwan Faraj | Kurdish Policy Analysis

With Iraqi oil exports plunging after the closure of the Strait of Hormuz, analysts are debating whether Tehran is using the crisis to reinforce its regional leverage while Baghdad races to find alternative export routes.

Iraq's oil exports have fallen sharply amid regional conflict, fueling concerns over a deepening financial crisis and renewed debate over Iran's influence on Baghdad's economy.

Iraq is facing one of its most severe economic challenges in years after oil exports reportedly fell dramatically in May and June, intensifying concerns over the country's financial stability and dependence on regional energy routes.

According to reported export figures, Iraq shipped roughly 32 million barrels of crude oil during the two-month period, generating less than $2.3 billion in revenue—a sharp decline from pre-conflict export levels of around 3.5 million barrels per day before the U.S.-Iran confrontation and the closure of the Strait of Hormuz.

The reported collapse has fueled warnings from economists that Iraq could face mounting fiscal pressure if disruptions continue.

A Budget Built on Oil

Oil accounts for the overwhelming majority of Iraq's government revenue.

With exports significantly reduced, analysts warn that Baghdad could struggle to finance salaries, public services, infrastructure projects, and other state obligations if regional instability persists.

The crisis has also revived debate over Iraq's vulnerability to geopolitical events beyond its control.

Is Tehran Using Oil as Leverage?

Several Iraqi political analysts argue that Iran may be seeking to use the disruption to reinforce its influence over Baghdad.

Political analyst Ihsan al-Shammari argues that Tehran views recent diplomatic outreach by Iraqi Prime Minister Ali al-Zaidi, particularly his engagement with Washington, as a challenge to Iran's traditional influence inside Iraq.

According to al-Shammari, restricting Iraqi oil exports would send a strategic message that regional stability remains closely tied to Iranian decisions rather than American guarantees.

These assessments represent the analysts' views and have not been confirmed by Iranian officials.

Criticism From Iraqi Commentators

Writer and journalist Falah al-Mashal offered a broader criticism of Iran's regional policy.

He argued that Iraq played a vital economic role for Tehran during years of international sanctions by helping sustain trade and energy ties.

Yet, according to al-Mashal, Iraq now finds itself facing major obstacles to exporting its own oil while vessels from other countries reportedly continue moving through regional waters.

He also argued that energy relations between the two countries have increasingly become instruments of political leverage rather than purely commercial partnerships.

Baghdad Searches for Alternatives

Iraqi Oil Minister Bassem Mohammed Khadr said the government is pursuing direct discussions with Tehran aimed at facilitating the movement of Iraqi oil shipments.

He also confirmed that Baghdad is expanding alternative export options by increasing flows through northern infrastructure under the Iraq–Turkey pipeline framework.

Officials hope the route could eventually transport more than 700,000 barrels per day, reducing Iraq's dependence on Gulf shipping lanes and improving its resilience during regional crises.

Long-Term Strategic Risks

Political analyst Mujashi al-Tamimi warned that Iraq faces a broader strategic challenge beyond the current crisis.

He noted that despite the sharp decline in Iraqi exports, global oil markets have remained relatively stable, suggesting that international consumers have found alternative supplies.

Al-Tamimi also argued that if Iran eventually reaches a diplomatic agreement with Washington and restores its own oil exports to international markets, Iraq could face increased competition and reduced geopolitical leverage.

For that reason, he said, accelerating Iraq's Development Road Project—designed to connect Asia and Europe through Iraqi transport and logistics infrastructure—has become an economic necessity rather than simply a long-term development initiative.

Iraq at an Economic Crossroads

The current crisis underscores Iraq's continuing dependence on oil exports and the vulnerability of its economy to regional conflict.

Whether Baghdad can diversify export routes, strengthen non-oil sectors, and reduce exposure to geopolitical disruptions may determine not only its economic recovery but also its long-term strategic independence in an increasingly volatile Middle East.

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