Iraq Approves Three-Month Crude Export Contracts to Diversify Routes

Iraq's Council of Ministers approved new three-month crude export contracts starting September 1. The contracts allow shipments through multiple outlets. The announcement came from the media office of Prime Minister Ali Faleh Al-Zaidi, and it is part of Baghdad's efforts to diversify export routes amid regional oil trade disruptions.

The cabinet also approved provisions governing crude purchases under the mechanism. Buyers pay the lower of the price set by Iraq's SOMO or the federal budget price. A 30% annual discount is applied to that purchase price. In effect, Iraq is offering steeply discounted barrels to keep exports flowing.

Alongside the contracts, the cabinet approved recommendations for exceptional measures to raise export and import capacity. The measures authorize the Minister of Oil to establish additional transportation routes for existing contracts, renew those contracts, and approve petroleum product imports when needed to ensure stable supplies and prevent shortages. They are designed to give the ministry flexibility without requiring a new cabinet decision for each shipment. The statement did not disclose which companies were selected or what volumes would be shipped.

The measures are a direct response to Iraq's dependence on the Strait of Hormuz. Before the conflict, Iraq produced around four million barrels per day and exported roughly 3.5 million. Most of that crude went through Hormuz, and Khudair noted that exports through the strait had previously reached 3.4 million barrels per day. Disruptions there have cost Iraq more than $40 billion in revenue since the conflict began, according to Muzhar Saleh, financial adviser to the prime minister. Saleh said losses could approach $50 billion if the disruptions continue. For a government that relies on oil revenue, that scale of lost income is a direct threat to its budget.

Iraq is also pursuing longer-term alternatives. Reuters reported that Baghdad is working on a new crude pipeline through Syria to the Mediterranean. The project is expected to cost at least $15 billion and take around four years to build. Oil Minister Basim Mohammed Khudair said a deal was reached with a consortium led by US energy company Chevron to construct the pipeline, carrying crude from Basra in southern Iraq to the north.

In the meantime, Iraq is gradually increasing exports through Türkiye's Ceyhan terminal. The target is 750,000 barrels per day by combining Kirkuk crude, road tankers from Basra, and the existing Strategic Pipeline.

August exports averaged two million barrels per day, the highest since the war began. That remains well below the pre-conflict average of 3.5 million. The new three-month contracts give Baghdad a near-term hedge until the pipeline and Ceyhan route gain traction. The 30% discount embedded in the purchase price, however, means Iraq is still selling at a significant concession to keep barrels moving. The terms are designed for a market where Iraq can no longer count on its traditional export artery.