US, Iraq, Syria revive 70-year-old pipeline to bypass Hormuz

The US, Iraq and Syria are moving to restore a 70-year-old pipeline corridor that could divert as much as 1 million barrels a day of crude away from the Strait of Hormuz, where President Donald Trump declared the US the guardian after Iran's February blockade.

"A US-Qatari group has been commissioned to study the feasibility of the Iraq-Syria route, which would fundamentally alter the region's oil transit architecture," a senior energy source familiar with the matter told OilPrice.com.

The pipeline plan comes after Iran's effective closure of the Strait of Hormuz on Feb. 28 forced Iraq to shut production wells and fill storage tanks to capacity. Before the blockade, about 95 percent of Iraq's crude — representing more than 90 percent of Baghdad's annual budget — flowed through the strait to Asian buyers including China. Turkey separately agreed to a one-year temporary protocol in July to keep about 200,000 barrels a day flowing through the Iraq-Turkey Pipeline corridor to Ceyhan, according to Khazal Hostani, director general of contracts at the Kurdistan Region of Iraq's Ministry of Natural Resources.

If completed, the Syria route would provide the first major alternative to the Hormuz chokepoint in decades, potentially reducing the geopolitical risk premium embedded in Brent crude prices and shifting the balance of power in Middle Eastern energy. The project faces significant hurdles, including security conditions in Syria after the US-led removal of President Bashar al-Assad and the need for multi-billion-dollar investment.

Pipeline Economics and the Turkey Factor

Turkey's cooperation remains critical to any alternative export route. Ankara secured a one-year deal in July covering the entire Iraq-Turkey Pipeline corridor, treating the two parallel pipelines as a single mechanism under the original 1973 agreement. Turkey has demanded a higher fixed tariff — currently $1.00 and $1.25 per barrel on the Baghdad-controlled pipeline — along with multi-layered joint ventures across oil, gas, petrochemicals and electricity, according to the energy source. It also wants Iraq to commit to a high continuous daily volume with one-for-one fines if that volume is not met.

The pipeline negotiations unfold against a broader realignment of Iraqi energy policy. Baghdad has shifted markedly toward the West since Trump's second term, with multiple major oil and gas deals awarded to Western firms rather than Chinese or Russian competitors. The US-led removal of Assad in Syria, President Nicolas Maduro in Venezuela and Supreme Leader Ali Khamenei in Iran discouraged further expansion by Beijing and Moscow into Iraq, the source said.

The Kurdish Dimension

The pipeline plan also intersects with long-standing tensions between Baghdad and the semi-autonomous Kurdistan Region of Iraq. The KRG had sought independent oil export authority since a 2013 bill, culminating in a 2017 independence referendum where more than 90 percent of voters supported secession. Baghdad blocked the move, fearing that independent oil revenue would fund a Kurdish breakaway. The unified Oil Law enacted under then-Prime Minister Mohammed Al-Sudani now governs all oil and gas production in both Iraq and the Kurdistan region.

What Happens Next

The feasibility study by the US-Qatari group is expected to take several months. If the pipeline proceeds, it would mark the most significant reconfiguration of Middle Eastern oil transit since the Suez Canal expansion. Failure to secure the route, however, would leave Iraq dependent on the volatile Hormuz passage and the temporary Turkey corridor, which could lapse if Ankara's demands are not met.

"The one-year agreement's been done, although Ankara's still looking to optimize its own benefits from the deal over the longer term with Iraq," the energy source said. "If it doesn't get what it wants, then it could well fail to extend the deal or even break the one-year term."

This article is for informational purposes only and does not constitute investment advice.