Iraq and Syria signed a memorandum of understanding on Friday to rehabilitate a long-dormant crude oil pipeline, the centrepiece of a $60 billion package of US-Iraqi commercial agreements unveiled during Prime Minister Ali al-Zaidi’s visit to Washington. The pipeline, which would run from Iraq’s northern fields to the Syrian port of Baniyas on the Mediterranean, is designed to carry an initial 2 million barrels per day (bpd) once rebuilt, offering Baghdad an export route that avoids the Strait of Hormuz. The waterway has been repeatedly disrupted since the US-Iran war began on 28 February, halving Iraq’s oil output to roughly 1.9 million bpd in June and triggering a fiscal crisis in a country where hydrocarbons fund more than 90 per cent of the state budget.

The pipeline route, originally built in 1952 and damaged during the 2003 US-led invasion, will be rehabilitated by a US-led international consortium, with Chevron confirming its participation. The US State Department described the project as priority strategic infrastructure and said it would connect Iraqi production to Mediterranean and global markets. Analysts at Goldman Sachs estimate that seven pipeline projects under development across the region could, by the end of 2028, carry about 60 per cent of the crude that previously transited Hormuz. The Iraqi-Syrian corridor is the most advanced of these, and Washington’s ambassador to Turkey, Thomas Barrack, said the programme would make the strait “an afterthought”.

Viewed from Washington, the deals represent an effort to replace conflict with commerce and to anchor Iraq within a new regional security architecture. Energy Secretary Chris Wright told the US Chamber of Commerce that the aim was to transform a region “torn apart by too much conflict”. From Baghdad, the urgency is starkly economic: the World Bank projects Iraq’s GDP will contract by 8.9 per cent this year as oil revenues collapse. Al-Zaidi, who made Washington his first foreign trip as prime minister despite reported pressure from Tehran not to do so, stressed that the partnership with the United States was “not emotional, it’s about money” and that his government was pursuing an open-door policy for investors.

The pipeline memorandum is preliminary and non-binding, and significant hurdles remain—financing, security along the Syrian segment, and the construction of a new link from Iraq’s southern fields to the northern network. Yet the move is part of a broader Gulf-wide push to diversify export routes. Saudi Arabia and the United Arab Emirates are also expanding overland pipeline capacity, and if all planned projects are completed, the three countries that previously shipped 10 million bpd through Hormuz could largely bypass it. The next milestone will be the finalisation of technical and financial agreements with the consortium and the start of rehabilitation work on the ground.