The United States and Iraq finalized agreements worth approximately $60 billion. These agreements aim to develop alternative pathways for oil exports within the Persian Gulf region.
Key signings, which occurred at the U.S. Chamber of Commerce, involve diverse sectors such as healthcare, communications, and infrastructure. Importantly, the oil agreements focus on decreasing reliance on the Strait of Hormuz. About 20% of the world’s oil transits this strait. Goldman Sachs projects that constructing necessary pipelines could take over two and a half years, as they would need to operate across multiple countries.
Tensions between the U.S. and Iran have repeatedly led Iran to try closing the Strait since the conflict’s start in late February. This has led to volatility in oil and gas markets. As of Friday, West Texas crude oil prices surged 5% to $88 per barrel, having earlier dropped after reaching over $110 around April. Recent hostilities between the U.S. and Iran contribute to this climb.
Thomas Barrack, the U.S. Ambassador to Turkey, mentioned that oil pipeline deals would diminish the strategic importance of the Strait of Hormuz. Prime Minister Ali Falah al-Zaidi of Iraq met with Chevron executives in Houston on Thursday to discuss expanding the company’s investment in Iraq’s oil industry.
In a Friday address, al-Zaidi highlighted Iraq’s goal to attract long-term investments and partnerships. He underlined Iraq’s commitment to dialogue with the U.S. Chamber of Commerce. That same day, Chevron finalized three agreements with Iraq: two to increase oil production and one to invest in a new pipeline for exporting Iraqi oil globally. Chevron’s president, Jake Spiering, noted these initiatives are vital for energy security.
Additionally, the State Department acknowledged a significant agreement between Iraq and Syria. This initiative will prioritize rehabilitating the Iraq-Syria crude oil pipeline. A U.S.-led international consortium is expected to manage the project’s financial and technical facets.
The pipeline is charted to extend from Basra in southern Iraq to Haditha in western Iraq, reaching the Ceyhan port in Turkey and Syria’s Baniyas port. It’s projected to transport around 2 million barrels daily.
Goldman Sachs’ analysis suggests that, by 2028, this and other regional pipelines in development may manage about 60% of the oil currently routed through the Strait. Approximately 14 million barrels per day might go through these pipelines. Before the conflict with Iran, 23 million barrels per day passed through Hormuz.
Post-February 28, when the U.S. and Israel initiated their military action against Iran, Iraq, rich in oil and having both U.S. bases and Iran-backed militias, found itself heavily affected. Syria, remaining relatively neutral, proposes using its territory as an alternative corridor for transporting energy supplies. Syria continues to face challenges from its 14-year civil war, yet presents itself as a stable route.
The war significantly reduced exports through the Strait of Hormuz, prompting some oil shipments to be trucked from Iraq to Syria, then to Europe via Syria’s Baniyas port. This bypasses the Hormuz passage. A border crossing between northern Iraq and Syria reopened in April, after more than a decade, intended as another energy export route. This overland path proves less efficient and costlier than maritime routes through the strait.