Iran’s Pipeline Politics reaches Iraqi Kurdistan

Evidently, Erbil expects that direct crude sales to Iran would be settled directly, generating needed revenues for Erbil. Interestingly, Baghdad seems to have agreed to the deal between the KRG and Iran under one condition: According to the KRG representative in Tehran, Nazim Dabbagh, Baghdad had showed willingness to support the project if the oil export to Iran also included Kirkuk’s oil production, which is currently being exported to Ceyhan.

Kirkuk is an oil producing region that is claimed by the KRG, but outside the boundaries of the Kurdish Region in Iraq. Evidently, the inclusion of the Kirkuk oil would create a complex dynamic for payments from Iran and it is conceivable that Baghdad would insist for payments to go to Baghdad as opposed to Erbil.

From Tehran’s perspective, the deal is not only in line with its regional policy of increasing energy interconnectivity and trade with immediate neighbors, but it also helps it increase the efficiency of its oil production and distribution. In fact, the majority of Iran’s oil production is in the southwestern province of Khuzestan, while key population centers are in the northern and northwestern regions.

Any import from the KRG that could become a feed for Iran’s northern refineries in Kermanshah, Tehran or Tabriz would thus reduce the need to pump crude from the south through Iran’s existing pipeline system. This logic is also the reason why Iran and Turkmenistan have restarted talks about a new round of swap deals in which Iran would receive crude oil in its Caspian Sea port of Neka and would in turn allocate oil from its southern field to customers of Turkmen oil.