Is Iraq on the Verge of Its Most Significant Geopolitical Shift in Recent Years?

Chevron Emerges as Key Player in Iraq’s Oil Sector Shift

After Iraq’s Oil Ministry extended exclusive invitations to leading U.S. energy companies to develop the vast West Qurna 2 oilfield—following the compelled departure of Russia’s Lukoil—Chevron has positioned itself as a primary candidate. This transition is expected to follow a temporary nationalization of the field to maintain output during Lukoil’s exit. Chevron is also set to advance the Nasiriyah project, which includes four exploration blocks in Dhi Qar province, and the Balad oil field in Salah al-Din province. Additionally, Chevron and Quantum Energy Partners are reportedly preparing a joint bid for Lukoil’s estimated $22 billion in overseas assets, a move prompted by the recent tightening of U.S. sanctions. These developments raise the question: Is Iraq now pivoting decisively back toward the U.S. and its Western allies, distancing itself from Russia, China, Iran, and their partners?

Sanctions Open Doors for Western Oil Companies

The renewed opportunity for Chevron and other Western firms in Iraq is a direct result of a strategic escalation of sanctions by the U.S., U.K., and E.U. In October of last year, the U.S. imposed new restrictions targeting Russia’s two largest oil producers—Lukoil and Rosneft—along with any entities in which they hold a majority stake. Together, these companies export about 3.1 million barrels of oil daily, a crucial revenue stream for Russia’s ongoing conflict in Ukraine. Shortly after these sanctions, Lukoil relinquished its interests in Iraq, including the significant West Qurna 2 field—a move described by a senior U.S. Treasury advisor as a pivotal moment in countering Russian and Chinese influence in Iraq. Rosneft soon followed by reducing its stake in the Kurdistan Pipeline Company from 60% to 49%, signaling a broader retreat.

Impact of Sanctions and Shifting Alliances

The swift response from Russia’s top oil companies highlights the seriousness with which Moscow views these sanctions—a message likely noted in Beijing as well. According to a senior Trump advisor, lessons learned between presidential terms have led to more effective strategies now being implemented. The latest sanctions, which also impact other Russian and Chinese entities operating in Iraq, are part of a comprehensive set of measures enforced by the U.S. Treasury’s Office of Foreign Assets Control (OFAC). This marks a significant escalation from earlier sanctions that targeted smaller Russian firms. The E.U. has mirrored these actions, most recently with its 19th sanctions package, which included new restrictions on Russia’s so-called “shadow fleet” used to circumvent embargoes. For the first time, the E.U. also targeted Russia’s liquefied natural gas (LNG) sector, having previously committed to ending all Russian gas imports by January 2027—a year ahead of schedule.

Background: Russia and China’s Growing Influence in Iraq

Before the latest wave of Western sanctions, Russia and China had been steadily expanding their presence in Iraq and the broader Middle East. After the U.S. ended its combat mission in Iraq in late 2021, China accelerated its acquisition of oil fields in the south, while Russia, through Rosneft and Lukoil, strengthened its foothold in both northern and southern Iraq. As a result, Chinese companies now directly control about 24 billion barrels of Iraq’s reserves and are responsible for producing roughly 3 million barrels per day—amounting to over a third of Iraq’s proven reserves and two-thirds of its current output. Meanwhile, U.S. and allied forces in Iraq became frequent targets of attacks by Iran-backed militias, often with support from Russia and China. Corruption in Iraq’s oil and gas sector further complicated matters, leading several Western firms—including ExxonMobil, Chevron, BP, Shell, TotalEnergies, and ENI—to reduce their operations or withdraw entirely.

Geopolitical Stakes and Strategic Interests

Russia and China’s strategy was clear: by sidelining Western companies, they aimed to give Iran more room to expand its regional influence, thereby weakening the position of the U.S., U.K., E.U., and their Gulf allies. A senior Kremlin official once remarked that excluding the West from Iraq’s energy sector would mark the end of Western dominance in the Middle East. Conversely, the U.S. and its partners believe that severing Iraq’s ties with Iran would undermine both Tehran and its backers in Moscow and Beijing. The U.S. and Israel also view Iraqi Kurdistan as a vital base for intelligence operations against Iran and as a strategic link between NATO-member Turkey and the Middle East.

Western Oil Majors Return to Iraq

With new sanctions in place, Western companies have begun to reassert their presence in Iraq’s vital oil and gas infrastructure. France’s TotalEnergies is spearheading a $27 billion initiative that includes the Common Seawater Supply Project—a critical undertaking that could enable Iraq to boost oil production to 12 million barrels per day if executed properly. Meanwhile, BP has secured a $25 billion agreement covering five fields in northern Iraq, which could help the West counter Russian and Chinese efforts to bring Kurdistan more firmly under Baghdad’s control. Chevron’s involvement in developing major fields like West Qurna 2 further aligns Iraq’s interests with those of the West. The West Qurna 2 field, with recoverable reserves estimated at 13 billion barrels and some of the world’s lowest extraction costs, was originally slated to reach 1.8 million barrels per day, later revised to a peak of 1.2 million. The Nasiriyah Project’s initial target was 600,000 barrels per day. If Iraq continues on this course, its long-awaited realignment with the West may finally be underway—this time with momentum that will be difficult for Moscow, Beijing, or Tehran to reverse.

By Simon Watkins for Oilprice.com