Iraq and Syria sign deal to rebuild oil pipeline bypassing Strait of Hormuz

Iraq and Syria signed an agreement on Friday to rebuild an oil pipeline that would provide an alternative route to the Strait of Hormuz, a critical chokepoint for global oil shipments.

The deal was finalized at a Chamber of Commerce summit in Washington, D.C., focused on U.S. investment in Iraq. U.S. Energy Secretary Chris Wright presided over the signing by Basra Oil Company CEO Bassem Abdul Karim Nasr and Syrian Petroleum Company CEO Youssef Qablawi.

"There is so much room to drive improvement in Iraq, to raise oil production, to reduce dependencies on hostile neighbors, to bring freedom, prosperity and abundant energy to the nation of Iraq," Wright said before the signing.

Iraqi Prime Minister Ali al-Zaidi is visiting the U.S. this week and met with President Donald Trump at the White House on Tuesday.

Pipeline Details

• The pipeline stretches from Kirkuk in northern Iraq to Syria's Mediterranean coast.
• It has a nameplate capacity of 700,000 barrels per day, according to the U.S. Energy Information Administration.
• The pipeline has been closed since it was damaged during the U.S. invasion of Iraq in 2003.

Strategic Context

Iraq, the second largest oil producer in OPEC, has suffered heavily from disruptions to tanker traffic in the Strait of Hormuz during the U.S.-Iran war. Baghdad is heavily reliant on its southern port city of Basra on the Persian Gulf due to limited pipeline options for bringing its oil to global markets.

According to OPEC data, Iraq's oil production fell more than 50% — from approximately 4.2 million barrels per day (bpd) in February to about 1.9 million bpd in June — following U.S. and Israeli attacks on Iran.

Broader Regional Efforts

Several Gulf states are seeking to expand pipeline capacity to reduce their dependency on the Strait of Hormuz:

• United Arab Emirates: Building a second pipeline to the Port of Fujairah on the Gulf of Oman, which would double its export capacity outside the strait.
• Saudi Arabia: Considering expanding its pipeline to the Red Sea by 2 million bpd, sources told Reuters last week.

Analyst Caution

Analysts have warned that while pipelines can serve as a hedge against geopolitical risk in Hormuz, they do not eliminate the broader threat posed by Iran to regional energy infrastructure.

"The problem isn't the waterway," Bob McNally, founder of Rapidan Energy, told CNBC's "Power Lunch" on Monday. "It's that Iran can use weapons to attack loading facilities, pumping stations, the end stations, these terminals, and the storage units of these pipelines."

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