Baghdad and Damascus sign crucial deal to restore oil pipeline, reducing reliance on the Strait of Hormuz

Jul 19, Kathmandu - Iraq and Syria have signed an agreement to reconstruct the oil pipeline as an alternative to the strategic Hormuz Strait, aiming to bolster energy independence and regional stability. The deal was inked on Friday during the Chamber of Commerce summit in Washington, D.C., attended by officials from Baghdad and Damascus.

The signing ceremony featured Iraq’s Basem Abdul Karim Nasser, CEO of Basra Oil Company, and Syrian Petroleum Company CEO Yusuf Kabliwi, with U.S. Energy Secretary Chris Wray present. Wray emphasized the importance of reforms in Iraq, stating, “There is plenty of room to improve Iraq, increase oil production, reduce dependence on hostile neighbors, and bring independence, prosperity, and ample energy to Iraq.”

Iraqi Prime Minister Mohammed Shia al-Sudani recently met with U.S. President Donald Trump at the White House to discuss energy and regional security.

According to the U.S. Energy Information Administration, the pipeline stretches from Kirkuk in northern Iraq to the Mediterranean coast of Syria, with a capacity to supply 700,000 barrels of oil daily. The pipeline has been inactive since it was damaged during the 2003 invasion of Iraq.

Iraq, the second-largest oil producer in OPEC, suffered substantial losses during the Iran-U.S. conflict, especially when tanker transport through the Hormuz Strait was obstructed. Currently, Iraq relies heavily on its southern port city of Basra near the Persian Gulf, due to limited alternative routes for exporting its oil.

OPEC data indicates that before the escalation of tensions involving Iran, Iraq produced around 4.2 million barrels daily in February. However, during the conflict, Iraqi oil production plummeted by over 50%, dropping to approximately 1.9 million barrels per day.

Several Gulf nations are seeking to expand pipeline capacity to reduce their dependence on the Hormuz Strait. The UAE is constructing a second pipeline to the Fujeirah port on the Oman Gulf, which will double export capacity beyond the Strait.

Reuters reported on July 7 that Saudi Arabia is contemplating expanding its pipeline capacity to 2 million barrels per day to the Red Sea, aiming to mitigate geopolitical risks associated with Hormuz. Experts caution, however, that while pipelines can offer strategic security, they do not address fundamental threats posed by Iran to regional energy infrastructure.

Bab McNally, founder of Rapidan Energy, told CNBC’s Power Lunch this Monday, “The problem isn’t just the waterways. The main concern is that Iran could attack loading facilities, pumping stations, terminals, and storage units using weapons, posing a significant threat to energy security in the region.”