The ongoing US-Iran War of 2026 has disrupted the equilibrium of international oil trade. It is now five months since Operation Epic Fury began, with no end in sight. As a response to the Strait of Hormuz becoming a dangerous route to pass through for commercial shipping, according to the UN’s International Maritime Organization, countries in the region are looking for alternate routes to move their supply of oil and natural gas. Iraq, a country which must use the Strait to move oil to its most important buyers, is now exploring a forgotten and buried alternative.
The Iraqi government, in cooperation with American businesses, are considering restarting a historic oil pipeline.
On June 15, the American Embassy in Iraq published a joint statement with Prime Minister of Iraq Ali Al-Zaidi. This was a reaffirmation of the Iraqi government’s commitment to “advance a memorandum of understanding with TI Capital to rehabilitate the Kirkuk-Baniyas Pipeline as a vital oil export route.”
The Kirkuk-Baniyas pipeline is a 500-mile oil pipeline that starts in Kirkuk, Iraq, and ends in Baniyas, a coastal city in Syria. The pipeline began operations in 1953. However, due to Syria’s support of Iran during the Iran-Iraq war of the 1980’s, the pipeline ceased operations. The pipeline would suffer extensive damage during the American invasion of Iraq in 2003, not to mention the 14-year Syrian Civil War. Now in 2026, the new Syrian government has re-established diplomatic relations with the United States but remains cautious of the Iraqi government.
Iraq is a crucial player in the international oil industry as the fifth-largest producer of oil in the world, with about 4.39 billion barrels produced per day. The country exports its excessive supply of crude oil to other countries, with the biggest customers being China, India, and South Korea. China, the second largest economy in the world, has seen a significant drop in crude oil imports in June of this year, down to levels not seen since 2016. India, in response to the war and the US government issuing a waiver on its sanctions against Russian oil, has imported more oil from Russia during Q1 2026 than during Q1 2025.
This all leads to Iraq losing out on potential customers that otherwise may buy their supply. Iraq and the other nations that exported oil through the strait of Hormuz have had to shut down several oil wells to prevent excess production and swelling of supply, which could cut into profits later in 2026 and beyond. According to the IMF, around 90 percent of the Iraqi government’s revenue comes from oil profits. It is in Iraq’s best interests to have oil flowing again.
A major factor in the success or failure to bring this pipeline back online is cooperation with American companies. In mid-July, Iraqi Prime Minister Ali Al-Zaidi visited the United States. While here, he and his delegation signed multiple memorandums with Western oil companies, including Chevron and British Petroleum. Ryan Lance, the CEO of Conoco, said that “We are anxious to bring our technology, our know-how, our people, and our capital to help the Iraqi people.”
What are the potential long-term effects of these deals? If these investments from Western companies are used wisely to restart the Kirkuk-Baniyas pipeline, there will be a shift in global supply chain logistics. Less oil would flow through a contentious strait and instead go into the much safer Mediterranean Sea. For oil heading to Asia, the tankers would head through the Suez Canal and through the Bab Strait near Yemen and Eritrea. While further trouble could arise from the Iran-allied Houthi rebel group, their offensive capabilities remain smaller than those of Iran. For oil heading to Europe and America, the tankers have a much safer journey. This change in oil flow would affect not only the price of oil, but because of its near universal use in modern life, the prices of many goods and services worldwide.
For now, the recommissioning of the Kirkuk-Baniyas pipeline remains conceptual. Even if the regional and global partners can come to an agreement, the reopening of the pipeline could still be years away. Furthermore, reviving the Kirkuk-Baniyas pipeline would not eliminate the risks facing global oil markets, but it could give Iraq a valuable alternative to the Strait of Hormuz and reduce pressure on one of the world’s most vulnerable shipping routes.
Written by Francisco Gutierrez, Public Policy Intern
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.