For years, Iraqi Kurdistan and Iran have been in talks to construct a pipeline that would transport Kurdish oil to the Iranian market. Until now, the negotiations have lagged as the Kurdistan Regional Government (KRG) instead focused on developing an oil export route through Turkey. But new momentum may be building in favor of the Iranian option, particularly as Kurdish coffers run low and Tehran maneuvers to minimize Ankara's influence. If finalized, the new pipeline would bring the KRG one step closer to the financial independence it seeks.
For Iran, the impending agreement makes practical, political and strategic sense. Iran's largest oil-producing regions lie in the south, well away from the country's northern refineries and population centers. Swapping oil with its western neighbor would give Tehran a way to support those areas without sending its own crude north. Furthermore, Iran's influence in Arbil has been steadily eroding as Iraqi Kurdistan has pushed for financial independence from Baghdad — a move that, though successful, has merely replaced Arbil's reliance on Baghdad with dependence on Ankara. Now that Western sanctions hindering business with Iran have been lifted, Tehran will more aggressively pursue long-term deals with Iraqi Kurdistan — and the international oil companies operating there — to try to counter Turkey's rising regional prominence. Greater sway over Iraqi Kurdistan and its oil output would also give Tehran more leverage in future dealings with Baghdad.
As a landlocked region that is autonomous but lacks independence, Iraqi Kurdistan will continue to be pulled in different directions as Iraq, Iran and Turkey vie for influence over its government. Kurdish energy exports will remain the central focus of their rivalry. For now, Turkey's relationship with the KRG and its control of oil export infrastructure have given Ankara the upper hand, but Iran may be able to use its own energy sector to shift the balance in its favor.
