Tensions between Iraq and the Kurdistan Regional Government (KRG) have reignited over oil exports through the Iraq-Turkey Pipeline (ITP). This long-running conflict is now threatening national unity, energy policy, and regional alliances. The pipeline, once a major export route, remains closed. Hopes raised earlier this year by a budget amendment have vanished.
Kurdistan oil exports captures the heart of this standoff. Baghdad has responded to the deadlock by suspending salaries for over 1.2 million public sector employees under the KRG. That move has sparked outrage across northern Iraq.
Iraqi officials remain worried about the possibility of Israeli access to Kurdish oil. Though there is no direct agreement between Erbil and Tel Aviv, oil from the Kurdistan region has previously reached Israel. Ship-to-ship transfers, often disguised or rerouted through Malta or intermediaries, helped bypass Baghdad’s authority.
One proposal aims to put Iraq’s State Oil Marketing Organization (SOMO) in charge of all Kurdish oil exports. However, once oil reaches the Turkish port of Ceyhan, control weakens. From there, third-party traders take over, often rerouting shipments. This raises doubts about whether future shipments will truly exclude Israel.
Turkey backed the KRG in 2013 when it connected a feeder line to the ITP. This move allowed independent Kurdish exports and bypassed Baghdad’s control. Israel emerged as a major buyer, though indirectly. Despite legal threats from Baghdad and rising tensions, the trade expanded. Some estimates suggested Israel received up to 77% of its crude from Kurdistan during peak periods.
Baghdad called the exports illegal and accused Erbil of smuggling oil. In 2022, Iraq’s top court annulled the KRG’s oil and gas law. That decision also invalidated contracts signed with international oil companies. Those companies now want compensation and contract protections before they will resume business.
At the same time, Iraq’s parliament passed an anti-normalization law that bans any contact with Israeli institutions. The law includes heavy penalties, even death, for violations. Analysts believe this could be used to crack down on Kurdish oil deals that indirectly benefit Israel.
In 2023, an arbitration ruling ordered Turkey to pay Iraq $1.5 billion in damages. The ruling confirmed Baghdad’s authority over oil exports. In response, Turkey shut down the pipeline. Only about 80,000 barrels per day in federal exports have been lost, while most Kurdish oil remains stranded.
Baghdad and Erbil attempted a deal in early 2025. The agreement would give SOMO full control over exports. But enforcement remains a challenge. Tankers can hide locations, swap cargoes, or mask buyers. Experts say tracking oil is nearly impossible once it enters international waters.
Meanwhile, U.S. interests add new complications. Washington has pressured Iraq to reopen the pipeline but also supported gas deals between the KRG and U.S. firms. Those deals were made without Baghdad’s approval, increasing federal resistance.
Turkey plays both sides. While publicly criticizing Israel, Turkey continues to export oil that may end up in Israeli ports. Analysts say Turkey values fees and energy leverage more than political messaging.
Looking ahead, a new pipeline agreement between Turkey and Baghdad—excluding the KRG—is due for review in 2026. It’s unclear what terms Turkey will push for, but access to Israeli markets may not be a top priority.