According to Kurdpress, Iraq is only a few weeks away from a decisive crisis; A crisis that can bring the country's oil-dependent economy into an unprecedented stage of collapse. According to an analytical report by Simon Watkins on the website OilPrice.com, the agreement to transport Iraqi oil through Turkish pipelines will expire on July 27, 2026. After the practical closure of the Strait of Hormuz, this route has become the only vital artery for Iraq's oil exports.

According to this report, the closure of the Strait of Hormuz since the end of last February caused Baghdad to lose most of its oil export route to Asian markets, especially China. Before this crisis, about 95% of Iraq's oil was exported through Hormuz. But now Iraq's storage tanks are full and the government is forced to shut down oil wells.

This situation has reduced Iraq's oil production from more than 4 million barrels per day before the crisis to around 1.4 million barrels per day; A figure that is the lowest level of Iraqi production since the American invasion in 2003. Experts warn that the continued suspension of production can cause permanent damage to Iraq's oil reservoirs; including pressure drop in reservoirs, water infiltration and erosion of mining equipment.

The report adds that the current crisis is rooted in the long-standing differences between Baghdad, Ankara and the Kurdistan Region. In March 2023, an international arbitration court ordered Turkey to pay $1.5 billion in compensation to Baghdad because Ankara had allowed the Kurdistan Regional Government to export its oil without coordinating with the Iraqi central government.

After this ruling, Türkiye activated the termination clause of the 1973 agreement on the Iraq-Turkey oil pipeline in 2025 and announced that this agreement will be completely terminated on July 27, 2026.

Now, Baghdad is trying to save a part of its oil exports by reviving the Kirkuk-Ceyhan pipeline. This pipeline, which starts from Kirkuk and reaches the Turkish port of Ceyhan in the Mediterranean Sea via Mosul and Fishkhabur, has a nominal capacity of 1.6 million barrels per day. However, frequent attacks by armed groups and years of infrastructural deterioration have limited its performance.

The Iraqi government is also completing the Kirkuk-Ninewa pipeline project to transport oil to the Turkish border without passing through the areas under the control of the Kurdistan Region. Baghdad hopes to export between 150,000 and 250,000 barrels of oil per day through this route.

On the other hand, the Kurdistan Region has still maintained its independent pipeline from Taqtaq field to Fishkhabour. Its capacity has reached about 900,000 barrels per day. But the main problem is that both pipelines are covered by the same 1973 agreement with Turkey, and if there is no new agreement, the activity of both will be stopped at the end of July.

According to this report, Türkiye is now using its superior position in the negotiations and has demanded extensive economic and energy concessions from Iraq. Sources close to the Iraqi Ministry of Oil have said that Ankara has demanded a significant increase in the oil transfer tariff per barrel, guaranteeing a constant volume of daily exports and extensive participation in Iraq's oil, gas, petrochemical and electricity projects.

Turkey is also trying to persuade Baghdad to participate in the huge $17 billion "Development Road" project, which is supposed to connect the large port of Faw in southern Iraq to Turkey and then to Europe through a rail and road network. At the same time, this project is considered a part of China's "Belt and Road" grand plan.

The report emphasizes that the future of Iraq's oil exports is now tied not only to the negotiations between Baghdad and Ankara, but also to the geopolitical competition between the West, Russia and China; A competition that can determine the future path of Iraq's economy and the balance of power in the region