Iraq: The Country Most Trapped by the Strait It Cannot Influence
Iraq is the second-largest producer in OPEC and the country most completely helpless in a Hormuz closure scenario. Nearly all of its oil exports — the revenue that funds approximately 90 percent of the government’s budget — move through terminals near Basra in the far south of the country, load onto tankers in the northern Gulf, and transit the strait to reach their buyers. Iraq has no bypass pipeline capacity of consequence, no alternative export route, and no political influence over the parties whose conflict would cause the closure. It is a bystander to its own financial ruin.
The Basra Oil Terminal and the Khor al-Amaya terminal handle the overwhelming majority of Iraqi crude exports. The infrastructure at Basra has been expanded progressively since the early 2000s, with additional single-point mooring buoys added to increase simultaneous loading capacity. The investment reflects the government’s correct assessment that its fiscal survival depends on maximizing throughput. What the investment cannot change is the geographic fact that every barrel loaded at these terminals must pass through Hormuz before reaching its customers.
Iraq’s political relationship with Iran complicates any analysis of how Baghdad would respond to a closure triggered by Tehran. The Iranian-backed political factions that dominate significant portions of the Iraqi parliament, and the Iranian-linked militias that operate as a parallel security force alongside the official military, create a political environment in which Baghdad cannot straightforwardly align with a US-led response to Iranian aggression in the strait. The same factions that would resist US military operations in Iraq would be suffering directly from the revenue collapse that an Iranian-initiated closure would cause. The internal contradiction is real and would produce political paralysis at precisely the moment when clear decision-making would be most valuable.
Turkey provides Iraq’s only meaningful alternative export route through the Kirkuk-Ceyhan pipeline, which runs from the Kurdish-administered north to the Turkish Mediterranean coast. The pipeline’s history is a catalogue of political problems. Disputes between the Kurdistan Regional Government and the federal government in Baghdad over revenue sharing have caused extended shutdowns. Turkish political leverage over Iraqi exports creates a dependency that Baghdad has not fully resolved. The pipeline’s throughput capacity, even when it is operating, handles only a fraction of total Iraqi export volumes. It provides partial relief for northern Iraqi production. It does nothing for Basra.
The fiscal arithmetic is unambiguous. Iraq’s government budget is built around an assumed oil price and export volume. A 30-day Hormuz closure would eliminate export revenues entirely for that period and would require emergency drawdown of foreign reserves and international borrowing to fund basic government operations, including salaries for the security forces, government employees, and the social transfer programs that underpin political stability. A 90-day closure would produce a fiscal crisis severe enough to threaten the government’s ability to function. The scenario is not abstract to Iraqi planners, who have watched sanctions, price collapses, and regional conflicts affect their revenue repeatedly and who maintain a perpetual undercurrent of anxiety about the single piece of geography that their national finances run through.
The Kurdish region adds a complication. The KRG has at times explored independent export arrangements through Turkey that bypass the federal government entirely, a practice that Baghdad considers unconstitutional and that has been the subject of ongoing legal and political dispute. In a Hormuz closure that collapsed federal revenues, the pressure on Baghdad to resolve the KRG revenue dispute in whatever direction allows Kurdish exports to continue would intensify, potentially producing either a federal concession or a federal confrontation at the worst possible time.
Iraq’s dependence on Hormuz is absolute. Its ability to influence the conditions of the strait is near zero. The combination has defined its strategic position for decades and will continue to do so.