Post-2003 Iran–Iraq Cooperation in the Oil and Gas Sector: Initiatives, Challenges, and Future Scenarios

Abstract

Iran–Iraq cooperation in the oil and gas sector took shape after the 2003 war as relations between the two countries improved with the assumption of power by a Shia-led government in Baghdad. The two Persian Gulf neighbors recognize the importance of joint or unitized development of cross-border oil fields and have taken preliminary initiatives to that end. Inter-state pipelines for energy export and import are binding them into a tight economic embrace, and combined backing for high oil prices as well as mutual support for raising production quota in the Organization of the Petroleum Exporting Countries (OPEC) speak of their similar imperatives for high revenue. However, Iran and Iraq continue to face challenges to their collaborative ventures, which stem from their historical rivalry over oil production and sales, persisting Iraqi suspicion of Iranian domination, absence of a hydrocarbon law in Iraq, and Iraq’s energy agreements with Iran that add to regional tensions with Baghdad’s Sunni neighbors. The road ahead is likely to see dynamic cooperation in areas that are less contentious, such as building of oil and gas pipelines, whereas the prickly issue of unitization of shared fields would take a backseat.