Iraq faces US sanctions threat over Kurdish oil exports

Shafaq News/ The administration of US President Donald Trump is pressuring the Iraqi government to expedite the resumption of oil exports from the Kurdistan region via Turkiye’s Ceyhan pipeline or face economic sanctions similar to those imposed on Iran, Reuters reported on Friday.

Citing eight sources in Baghdad, Washington, and Erbil with direct knowledge of the matter, Reuters revealed that increased pressure from the US administration played a significant role in the Iraqi Oil Minister’s recent announcement that Kurdish oil exports would resume next week.

The swift resumption of oil exports from the semi-autonomous Kurdistan region is expected to help offset the potential decline in Iranian oil exports, which Washington aims to reduce to zero under Trump’s "maximum pressure" campaign against Tehran. The restoration of exports would mark the end of nearly two years of halted shipments, during which over 300,000 barrels per day of Kurdish oil were blocked from reaching global markets via Turkiye.

Iran, heavily reliant on economic ties with Iraq to navigate US sanctions, views its neighbor as a crucial ally. However, Baghdad, which maintains partnerships with both Washington and Tehran, fears being caught in the middle of Trump's aggressive policies against Iran, sources noted.

The US has urged Iraqi Prime Minister Mohammed Shia Al-Sudani to sever economic and military ties with Iran. Last week, Reuters reported that Iraq’s central bank had banned five private banks from accessing US dollars at the request of the US Treasury, further tightening financial controls linked to Tehran.

Despite the announcement of export resumption, concerns remain over unresolved technical challenges that could delay implementation, according to four of the eight sources. Meanwhile, Iran continues to exert significant military, political, and economic influence in Iraq through powerful Shiite armed groups and allied political factions. However, escalating US pressure coincides with Iran’s growing vulnerability following intensified Israeli strikes on its regional proxies.

With the Ceyhan pipeline shut since 2023, smuggling of Kurdish oil to Iran via trucks has surged. Six of the eight sources indicated that Washington is pressuring Baghdad to curb this practice. An Iraqi oil official familiar with the crude shipments stated, "Washington is pushing Baghdad to ensure that crude oil from the region is exported through Turkiye rather than being sold at discounted rates to Iran."

While the pipeline shutdown has fueled Kurdish oil smuggling to Iran, a broader illicit trade network—estimated by experts to generate at least $1 billion annually for Iran and its proxies—has flourished under Al-Sudani’s tenure since 2022, according to Reuters.

In response, two US administration officials confirmed that Washington had formally requested Iraq to resume Kurdish oil exports, emphasizing that this move would help alleviate upward pressure on global oil prices. A White House official, when asked about the administration’s stance, stated, "Allowing our Kurdish partners to export their oil is not only crucial for regional security but also helps stabilize gas prices."

Despite the potential benefits, resuming Kurdish oil exports would only partially offset losses from declining Iranian exports. Iran, however, has a history of circumventing US sanctions to sustain its oil sales.

Turkiye halted the Ceyhan pipeline in March 2023 following an International Chamber of Commerce ruling ordering Ankara to pay $1.5 billion in damages related to Kurdish oil exports.