Kurdish Policy Analysis

Baghdad says Iraqi crude is sold at market prices despite Hormuz disruptions, while Kurdistan's exports remain severely constrained by security concerns.

Iraq exported 42.5 million barrels of crude oil in July as SOMO denied selling oil at discounted prices, while Kurdistan's exports remained sharply reduced amid security concerns.

Iraq's oil exports remain resilient despite regional turmoil

Iraq exported 42.5 million barrels of crude oil in July, demonstrating the country's continued ability to maintain exports despite months of regional instability and heightened security risks in the Persian Gulf. According to Iraq's State Organization for Marketing of Oil (SOMO), the overwhelming majority of exports continued to flow through the country's southern terminals and the Strait of Hormuz, while exports from the Kurdistan Region remained sharply below normal levels because of security concerns.

The figures highlight both the resilience and vulnerability of Iraq's energy sector. While Baghdad has successfully maintained substantial export volumes, the country's heavy dependence on the Strait of Hormuz continues to expose its economy to geopolitical shocks.

Southern terminals dominate Iraq's exports

Speaking to Dijlah TV, SOMO Director General Ali Nazar al-Shatri said approximately 35.5 million barrels were exported through Iraq's southern export terminals via the Strait of Hormuz during July.

An additional 7 million barrels were shipped through Turkey's Ceyhan port, reflecting Baghdad's increasing efforts to diversify export routes amid continuing uncertainty in Gulf shipping lanes.

Beyond crude oil, Iraq also expanded exports of refined petroleum products. Shatri said the country exported 30,000 to 35,000 tons of petroleum products per day—primarily heavy fuel oil—to Syria, totaling more than one million tons during the month.

SOMO rejects claims of discounted Iraqi crude

Shatri firmly dismissed reports suggesting Iraq has been selling its Basra crude at steep discounts because of elevated risks associated with shipping through the Strait of Hormuz.

According to him, SOMO does not provide direct price discounts to buyers.

Instead, Iraqi crude is sold under the country's Official Declared Price (ODP) mechanism, which is linked to internationally recognized benchmark prices.

He acknowledged that Iraqi crude has occasionally traded around $20 below peak global prices during periods of elevated insurance costs, operational risks, and market volatility. However, he stressed that these price movements reflect normal market conditions rather than an official Iraqi pricing strategy.

Shatri also emphasized that SOMO does not control maritime transit through the Strait of Hormuz.

Instead, international energy traders with established logistics and security arrangements are responsible for transporting Iraqi crude after purchasing it at Iraq's export terminals.

Kurdistan Region's oil exports remain heavily constrained

One of the most significant developments in July was the continued collapse in exports from the Kurdistan Region.

According to Shatri, production and exports from Kurdish oil fields dropped dramatically—from roughly 230,000–240,000 barrels per day to only around 20,000 barrels per day.

The sharp decline reflects ongoing security concerns among international oil companies following renewed fighting between the United States and Iran earlier this year.

Despite the reduction, Baghdad says discussions with international operators have produced encouraging signs.

Following meetings with Iraqi Prime Minister Mohammed Shia al-Sudani, companies reportedly expressed their willingness to restore production once security guarantees are fully implemented.

If these assurances prove credible, Kurdish oil production could gradually recover over the coming months.

Iraq and Turkey extend pipeline cooperation

Shatri also confirmed that although the long-standing Iraq-Turkey Pipeline (ITP) agreement officially expired on July 27, exports through Turkey have continued without interruption.

Baghdad and Ankara reached a temporary one-year arrangement involving SOMO, Iraq's North Oil Company, and Turkey's BOTAS to ensure uninterrupted operations.

The agreement supports Iraq's broader strategy of increasing northern export capacity to at least 750,000 barrels per day, while the pipeline itself retains a maximum capacity of approximately 1.5 million barrels per day.

To achieve this objective, Iraq plans to redirect portions of Basra crude toward Kirkuk while simultaneously expanding production through partnerships with BP and Turkey's TPAO.

Officials acknowledge that transporting crude by tanker trucks remains only a temporary solution until permanent pipeline infrastructure is completed.

Baghdad pursues new export routes beyond Hormuz

Beyond the Turkey route, Iraq continues pursuing longer-term plans to diversify its export network.

One proposal involves constructing a new pipeline linking Basra, Haditha, Zakho, and Syria's Mediterranean port of Baniyas.

Such infrastructure would significantly reduce Iraq's dependence on the Strait of Hormuz—a strategic chokepoint through which roughly 20 percent of global oil supplies pass.

The initiative has gained additional urgency following months of regional instability that exposed the economic risks associated with relying almost exclusively on Gulf export routes.

Strategic analysis: Iraq is racing to reduce Hormuz dependence

July's export figures demonstrate that Iraq's oil sector remains operational despite extraordinary geopolitical pressures.

However, the numbers also reveal a deeper strategic reality.

Although Baghdad succeeded in exporting 42.5 million barrels, nearly 84 percent of those shipments still moved through southern terminals connected to the Strait of Hormuz.

The recent US-Iran confrontation showed how vulnerable Iraq remains to disruptions in this narrow waterway. During the crisis, Iraqi crude production reportedly fell from approximately 4.14 million barrels per day before the conflict to 1.49 million barrels per day at the height of the blockade, underscoring the country's dependence on secure maritime access.

For that reason, expanding exports through Turkey, reviving northern pipelines, restoring production in the Kurdistan Region, and developing alternative routes to the Mediterranean have become strategic priorities rather than simply infrastructure projects.

The extension of the Iraq-Turkey pipeline arrangement and plans for new export corridors suggest Baghdad is seeking a more resilient energy strategy capable of insulating the country's economy from future regional crises.

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