August 14, 2026 | Policy Brief
Iraq Struggles To Find Oil Export Options, but the UAE May Be Able To Help
August 14, 2026 | Policy Brief
Iraq Struggles To Find Oil Export Options, but the UAE May Be Able To Help
Iraq relies on oil revenue for over 90 percent of its budget. With exports hovering at around half of the usual 3.4 million barrels per day (bpd) that were exported before Iran closed the Strait of Hormuz, Baghdad is struggling to make ends meet.
The United Arab Emirates (UAE) has provided a partial solution. Ali Nizar, director general of Iraq’s State Oil Marketing Organization (SOMO) which is responsible for marketing Iraq’s oil, confirmed that Iraqi oil is being sold to the Abu Dhabi National Oil Company (ADNOC) amidst a slight increase in Iraqi exports via Hormuz.
ADNOC has been shuttling oil across the Persian Gulf and through the Strait of Hormuz on so-called dark transits — journeys with the ship’s tracking system turned off. Once outside the strait, the oil is transferred to vessels that transport it to buyers, most of whom are located in Asia.
Shuttling is not, however, a foolproof method to avoid the Iranian threat to shipping. On August 13, the UAE condemned Iranian attacks on two ADNOC vessels transiting Hormuz without clarifying if those vessels were involved in shuttling oil. Still, ADNOC’s shuttle operation offers Iraq an important export avenue at a time when Baghdad is in desperate need of options.
Iraq Can’t Avoid Persian Gulf Exports
Prior to the closure of Hormuz, around 94 percent of Iraq’s oil exports moved through the Persian Gulf. Around 90 percent of Iraq’s oil production comes from its southern fields. Iraq lacks the pipeline infrastructure to route that product north for export.
Iraq has two main alternatives to Persian Gulf export routes: the Iraq-Turkey Pipeline (ITP), which moves oil from northern Iraq to the Turkish port of Ceyhan, and trucking fuel oil overland to Syria’s Baniyas port and Jordan’s Aqaba port. During the closure of Hormuz, exports via ITP have not exceeded 200,000 bpd, while trucks cannot match exports moved via tanker.
Tehran and Baghdad are reportedly in talks to enable Iraq to export its oil via the Persian Gulf. Iran stated in April that Iraq was not subject to restrictions on exports via Hormuz, but that did not lead to a meaningful increase in Iraqi maritime exports. In part, this is due to Iraq’s lack of a national tanker fleet and reliance on foreign-owned vessels, which are hesitant to make the trip despite Iranian assurances. Any mechanism negotiated now may include benefits for Iran such as payment or smuggling Iranian oil by circumventing the U.S. blockade of Iranian ports.
Iraq’s Collapsed Exports Have Led to a Budget Crisis
In late July, Iraqi government spokesman, Haider al-Aboudi, acknowledged that without its dominant revenue stream, Baghdad is in a financial crisis and struggling to pay salaries for government employees. Iraq’s revenue in May and June was just over $2 billion, well below the more than $6 billion that the country spends monthly on the public sector work force, retirees, and social security. In 2025, over 10 million people, around a quarter of Iraq’s population, received government checks, and many more people depend on those funds.
Employees across Iraq’s public sector are facing delays in their July salary. Some workers have received payment, but in partial installations. On August 5, workers from the Ministry of Electricity protested payment delays as did university employees in at least six governorates across Iraq, demonstrating the potential for protests to spread.
Washington Should Encourage Iraq-Gulf Cooperation To Ease Baghdad’s Struggles
While no one method will replace free transit through the Persian Gulf, Iraq needs maximum export options to minimize the country’s financial crisis. Washington should encourage Iraq to partner with the Gulf to not only export oil, but also as a step to repair relations.
Iran-backed militias in Iraq conducted hundreds of attacks against Gulf countries during the conflict between the United States and Iran, straining Baghdad’s relationships. The Trump administration should encourage partnership between Baghdad and Gulf countries, who can offer Iraq investment, electricity, support in developing its energy sector and more. This partnership would support Iraq in escaping Tehran’s sphere of influence.
Bridget Toomey is a research analyst at the Foundation for Defense of Democracies (FDD). For more analysis from Bridget and FDD, please subscribe HERE. Follow FDD on X @FDD. Follow Bridget on X @BridgetKToomey. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.
Facts Only
* Iraq relies on oil revenue for over 90 percent of its budget.
* Oil exports are around half of the usual 3.4 million barrels per day (bpd) before Iran closed the Strait of Hormuz.
* Ali Nizar, director general of Iraq’s State Oil Marketing Organization (SOMO), confirmed Iraqi oil is being sold to ADNOC.
* ADNOC uses "dark transits" to shuttle oil across the Persian Gulf and through the Strait of Hormuz.
* The UAE condemned Iranian attacks on two ADNOC vessels transiting Hormuz.
* Prior to the closure of Hormuz, approximately 94 percent of Iraq’s oil exports moved through the Persian Gulf.
* Around 90 percent of Iraq’s oil production comes from southern fields.
* Iraq lacks pipeline infrastructure to route product north for export.
* Exports via the Iraq-Turkey Pipeline did not exceed 200,000 bpd during the Hormuz closure.
* The Iraqi government acknowledged a financial crisis without its dominant revenue stream.
* Public sector employees in Iraq faced delays in July salary payments, leading to protests on August 5.
Executive Summary
Iraq faces significant economic strain due to reliance on oil revenue, which constitutes over 90 percent of its budget, leading to financial struggles for the government. Exports are currently around half of pre-Hormuz levels, creating an urgent need for alternative export options. The United Arab Emirates has facilitated a partial solution by enabling Iraqi oil sales to the Abu Dhabi National Oil Company (ADNOC) via "dark transits" through the Persian Gulf and Strait of Hormuz. This method allows ADNOC to move oil to Asian buyers, though it is not a guaranteed method to avoid shipping risks.
Alternative export routes, such as the Iraq-Turkey Pipeline or overland trucking to Syrian and Jordanian ports, offer limited capacity compared to prior Persian Gulf exports. Discussions are ongoing between Tehran and Baghdad regarding facilitating Persian Gulf exports for Iraq, with potential benefits involving payments or circumvention of U.S. sanctions. Despite these efforts, public sector employees in Iraq are experiencing salary delays, leading to protests and demonstrating a financial crisis. The recommendation is that Washington should encourage cooperation between Iraq and the Gulf states to facilitate oil exports while simultaneously repairing relations strained by external geopolitical conflicts.
Full Take
The situation reveals a tension between immediate economic necessity and long-term geopolitical realities regarding Iraqi energy exports. The reliance of the Iraqi state on oil highlights structural vulnerabilities; the lack of national pipeline infrastructure forces reliance on external transit routes or overland alternatives that offer marginal capacity. The mechanism provided by the UAE, involving ADNOC's shuttling operations, acts as a pragmatic, albeit risky, bridge to sustain export flow when traditional routes are blocked. This demonstrates how energy dependencies can be leveraged into diplomatic leverage, positioning Gulf cooperation as a means to mitigate external pressures from Tehran and potentially redirect influence.
The persistence of internal financial crises—manifested by salary delays and public unrest—demonstrates that external energy mechanisms cannot resolve the core governance failure; they merely manage symptoms. The suggestion for Washington to foster Iraq-Gulf partnerships shifts the focus from purely transactional resource management to addressing broader security architecture. This implies that economic stability is fundamentally linked to geopolitical alignment, suggesting that escaping Tehran's sphere of influence requires more than just logistical solutions; it demands a fundamental restructuring of external relationships and investment flows. The pattern suggests that in fractured geopolitical environments, transactional cooperation often masks deeper, unresolved power dynamics, where financial support becomes interwoven with spheres of influence.
Bridge Questions: If the UAE-facilitated export mechanism is sustained, what are the long-term risks to Iraqi sovereignty and leverage? How can international actors design partnerships that ensure economic relief translates into genuine autonomy rather than temporary dependency on Gulf powers? What systemic changes are required within Iraq's energy sector to mitigate future reliance on volatile transit routes?
Sentinel — Human
The analysis presents a narrative structure typical of policy briefs, effectively linking Iraq's domestic financial crisis to complex international energy transit options, suggesting human editorial oversight.