Oil is never just oil in the Middle East; it involves politics, sovereignty and survival. When Ankara announced plans to end the pipeline agreement with Iraq by 2026, President Recep Tayyip Erdoğan described it as “a necessary move to protect Türkiye’s rights and reshape its energy future.” This decision, along with the cautious restart of crude exports through the Kirkuk-Ceyhan pipeline after a two-year freeze, signifies more than just a technical fix. It reopens one of the region’s key energy routes and raises the question of whether oil will divide or unite Türkiye and Iraq in the coming decade.

Why it collapsed

The Kirkuk-Ceyhan pipeline, opened in 1977, was once a vital channel for Iraq’s northern oil exports. At its peak, it delivered over 1 million barrels per day to Türkiye’s Ceyhan port, providing access to global markets. But its political foundations weakened quickly, just as its steel joints corroded.

In the early 2010s, the Kurdistan Regional Government (KRG) in northern Iraq started exporting oil independently through the pipeline, bypassing Baghdad’s federal marketer, the State Organization for Marketing of Oil (SOMO). These shipments, supported by Türkiye, provided essential revenue to the KRG but angered Iraq’s central government, which considered them unconstitutional. Baghdad accused Ankara of violating the original 1973 pipeline treaty, which required Iraqi federal consent for exports.

This conflict led to an international legal battle. In March 2023, the International Chamber of Commerce tribunal ruled in favor of Iraq, ordering Türkiye to pay about $1.5 billion in damages for facilitating unauthorized Kurdish exports from 2014 to 2018. Citing technical reasons and ongoing arbitration, Türkiye halted pipeline operations. Oil shipments from the KRG stopped overnight, causing Irbil to lose up to $1 billion per month in revenue, tightening Baghdad’s budget even further and damaging Türkiye’s reputation as a reliable transit country.

As Bassam Fattouh from the Oxford Institute for Energy Studies noted in his July 2024 report, “The oil market is undergoing structural transformations due to shifts in demand and supply, policy changes, investment behavior, and energy geopolitics.” The stoppage of the Kirkuk-Ceyhan pipeline highlighted how law, politics and market dynamics intersect in ways that simple supply-demand logic can’t explain.

Why it is back

Fast-forward to 2025, and political practicality is breathing new life into the pipeline. Erdoğan’s choice to end the 1973 agreement by July 2026 was not a break but a strategic reset. By discarding the outdated framework, Ankara compelled all parties, Baghdad, Irbil and international oil companies, to renegotiate.

Baghdad and the KRG reached a tentative agreement: SOMO would officially manage exports, while the KRG would still receive a share of the revenue. Türkiye, for its part, regained its role as a transit country, insisting that future agreements cover gas, electricity, and petrochemical cooperation in addition to crude oil.

The restart is modest, at about 200,000 barrels per day, but it holds significant symbolic value. As Ankara’s Deputy Energy Minister Ahmet Berat Conkar recently stated, “We are striving to take both energy transformation and our long-standing relations with Iraq to a new phase.” This statement underscores Türkiye’s goal to not only reopen the pipeline but also to position itself as a crucial hub in the region’s energy landscape.

What is at stake

The benefits are real but uneven.

For Iraq, restarting northern exports offers much-needed liquidity. Oil accounts for more than 90% of state revenue, and the halt since 2023 worsened fiscal deficits. Channeling KRG oil through SOMO allows Baghdad to strengthen its position relative to Irbil and consolidate budget control.

For the KRG, this deal is a lifeline. Its finances suffered due to the suspension, salary delays and rising political dissatisfaction. Gaining access to export revenue, even with federal oversight, provides critical breathing room.

For Türkiye, the rewards are both economic and strategic. Transit fees are welcome, but the greater asset is credibility. Türkiye has long sought to be an energy hub linking Middle Eastern suppliers to European markets. Resuming oil flows from Iraq enhances that narrative and counters the doubts raised by the arbitration ruling. Furthermore, Türkiye has proposed integrating gas imports, electricity connections and infrastructure improvements into the agreement, expanding cooperation beyond crude oil.

For global markets, the return of 200,000 barrels per day, while modest, is significant. In a market shaken by disruptions, from Ukraine to the Red Sea, even a slight increase in supply matters. More importantly, it shows that two historically conflicted neighbors can collaborate, reducing the geopolitical risk that often drives up oil prices.

Still, this reset is not guaranteed. If Baghdad and Irbil conflict again over revenue sharing, the pipeline may shut down. If Türkiye aggressively seeks to recover its arbitration debts, relations could sour. International oil companies, cautious due to past disputes, remain hesitant. Norway’s DNO, a major operator in the KRG, recently declined to restart shipments because of unpaid debts.

Market instability poses another risk. If oil prices drop sharply, the motivations for all parties weaken. Plus, geopolitical issues, from Iran’s influence in Iraq to regional security concerns, could destabilize the corridor once more.

As historian Daniel Yergin pointed out in “The Prize,” “Oil flows follow the currents of politics more than the dictates of geology.” The Kirkuk-Ceyhan reset illustrates this reality: Technical ability means little without political trust.

Beyond oil: New corridor?

For the deal to be sustainable, it must extend beyond crude oil. Iraq has large associated gas reserves that are currently flared; Türkiye has the demand and infrastructure to convert wasted gas into electricity. Connecting their electricity grids could stabilize Iraq’s struggling power supply while fostering regional trade. Both countries also have ambitions for renewable energy. Iraq aims for 12 GW of solar by 2030, while Türkiye already leads the Middle East in wind and solar energy deployment.

As someone who has closely studied the link between energy policy and regional diplomacy, I believe the Türkiye-Iraq reset is not just about oil. It is a test of whether the Middle East can foster energy cooperation that goes beyond hydrocarbons.

If Ankara and Baghdad seize this opportunity to create a corridor encompassing oil, gas, electricity and renewables, they can both stabilize revenue and align with global energy transition trends.

At its core, the Kirkuk-Ceyhan pipeline represents a metaphor. It can serve as a bridge, bringing Türkiye and Iraq into deeper interdependence, or a fault line, reopening disputes over sovereignty and control. Erdoğan’s strategic choice to end the old treaty and initiate renegotiation has opened new possibilities. However, as history shows, chances in the Middle East can vanish quickly.

The decision facing Ankara and Baghdad is clear: Will Kirkuk-Ceyhan remain a fragile remnant of past conflicts, or can it develop into a foundation for modern energy cooperation? As Bassam Fattouh reminds us, the future of oil markets will be shaped not just by geology, but by policy changes, investment patterns and energy geopolitics.

The world will be watching how crude flows and whether a corridor of the past can transform into an energy bridge for the future.