Iraq and Syria Eye 2M BPD Oil Pipeline: What It Means for Energy

Iraqi Prime Minister Ali al-Zaidi visited Syrian President Ahmed al-Sharaa in Damascus on Wednesday, October 28, 2026, to discuss boosting economic ties (Alarabiya). A key focus was the potential for a new oil pipeline with a capacity of up to 2 million barrels per day (bpd) (Alarabiya). This initiative could significantly re-route Middle Eastern energy flows and reshape economic relationships for both nations.

What happened in Damascus

Prime Minister al-Zaidi's visit marked the first by an Iraqi Prime Minister to Syria since the overthrow of Bashar al-Assad in December 2024 (Alarabiya). The primary goals included strengthening bilateral relations, enhancing economic and energy cooperation, and coordinating on regional security matters (Alarabiya). Discussions specifically covered the export of Iraqi oil through Syria's Baniyas pipeline, increasing overall trade volume, and collaborative efforts in agriculture (Alarabiya).

In July 2026, Damascus and Baghdad signed a memorandum of understanding to revive the historic Kirkuk-Baniyas oil pipeline (Alarabiya). A separate agreement followed with a consortium including Chevron, UCC Holding, and TI Capital, for technical and financial studies on a new pipeline (Alarabiya). Iraq has already begun limited oil exports to Syria, transporting approximately 500,000 tons of fuel oil per month to Baniyas port via tanker trucks (Alarabiya). In return, Syria imports about 5 million litres of gasoline daily through the same route to address its domestic shortfall (Alarabiya). Commercial traffic between the two countries has seen a notable increase in recent months, with over 100,000 transit trucks crossing the border (Alarabiya).

Why Iraq needs new oil routes

Iraq is strategically driven to diversify its oil export routes, aiming to reduce its heavy reliance on the Strait of Hormuz (Shafaq). This critical waterway is susceptible to regional conflicts, as demonstrated by disruptions in June 2025 that saw crude exports from Basra plummet from 3.6 million bpd to 870,000 bpd (Shafaq). Diversifying routes is essential for Iraq, which relies on oil for approximately 90% of its state revenue (Shafaq).

Syria views this as an opportunity to re-establish itself as a regional trade and energy corridor, generating crucial transit fees and potentially benefiting from the rehabilitation of its refinery infrastructure (Shafaq). The Kirkuk-Baniyas pipeline, originally built in 1952, had an initial capacity of 300,000 bpd but has been out of service since 2003 (Wikipedia). Earlier attempts to rehabilitate it in 2007 and 2010 did not come to fruition (Wikipedia). Syria’s seaborne oil imports surged by 354% in the first seven months of 2026, reaching 17.03 million barrels, with Baniyas port handling the majority (Sana).

"Syria is Iraq's maritime outlet," President al-Sharaa stated, adding that "Iraqi oil needs to be reconnected to Baniyas" (The National). Iraqi Oil Ministry spokesman Salim al-Rikabi affirmed that "Iraq is exploring alternative routes to its existing maritime outlets" (Arab News). This pragmatic cooperation signifies a shift in relations, moving towards mutual stability and economic partnership, as highlighted by Iraqi government spokesman Haider Al-Aboudi (Alarabiya).

What this means for your business and the region

For Iraqi households and businesses, diversifying oil export routes could stabilise public finances, reducing the economy's vulnerability to geopolitical risks in the Persian Gulf (Shafaq). For Syria, the revival of oil pipelines and increased trade would provide crucial revenue through transit fees, aiding its economy which has been severely impacted by conflict and sanctions (Shafaq). Increased trade activity is expected to boost Syria's logistics and transport sectors, with Iraqi investment already noted in areas like cement (Shafaq).

Investors should note the involvement of international companies like Chevron in studying new pipeline projects, indicating potential for investment in the region's energy infrastructure (Alarabiya). However, Iraq remains a high-risk market due to ongoing security threats and regulatory challenges (Shafaq). Regionally, this initiative could reconfigure energy flows and trade corridors, offering new alternatives to existing routes.

What to watch next

Feasibility studies for the proposed new 2 million bpd pipeline are currently underway (Alarabiya). The full rehabilitation of the existing Kirkuk-Baniyas pipeline is estimated to cost around $8 billion and could take four years, while a completely new pipeline might exceed $10 billion (Alarabiya). Officials are considering a partial restart of the existing pipeline at a reduced capacity to lower initial costs (Alarabiya). An extension of the Basra-Haditha pipeline is also a prerequisite for further development stages of the Baniyas project (Alarabiya). Iraq aims to significantly increase its oil production capacity in the long term, necessitating additional export routes (Shafaq). The current agreement for the Iraq-Turkey Pipeline to Ceyhan is scheduled to expire on July 27, 2027 (Alarabiya).

Key figures to consider:

• Proposed new pipeline capacity: Up to 2 million bpd (Alarabiya).
• Estimated cost for full rehabilitation: $8 billion (Alarabiya).
• Iraq's reliance on oil for state revenue: Approximately 90% (Shafaq).
• Syria's seaborne oil imports surge in 2026: 354% (Sana).

The bottom line

The Iraqi Prime Minister's visit to Syria marks a significant step towards economic re-engagement and crucial energy route diversification for Iraq. Its success hinges on overcoming substantial funding and security challenges for the ambitious pipeline projects. The outcome will likely shape regional energy dynamics and the economic futures of both nations.

This article is for information only and is not financial advice.