Iraq's Oil Pivot: Chevron In, Russia Out Amid Sanctions

A significant shift is underway in Iraq's energy landscape, with U.S. oil giant Chevron emerging as the lead contender to develop the massive West Qurna 2 oilfield. This follows the forced exit of Russia's Lukoil, triggered by a fresh wave of Western sanctions. The Iraqi Oil Ministry has already sent exclusive invitations to several major American energy firms for the project.

This move is part of a broader trend suggesting a potential geopolitical realignment for Iraq. Chevron is also expected to advance development on the Nasiriyah project in Dhi Qar province and the Balad oil field in Salah al-Din province. Meanwhile, Chevron and private equity group Quantum Energy Partners are reportedly preparing a bid for all of Lukoil's international assets, valued at an estimated $22 billion.

These developments raise a critical question: Is Iraq decisively pivoting back toward the U.S. and its allies, and away from the influence of Russia, China, and Iran?

Sanctions Force a Strategic Handover

The opportunity for Chevron and other Western companies to re-enter Iraq is a direct result of escalating sanctions from Washington, London, and Brussels. A key turning point came on October 22 last year when the U.S. targeted Russia’s top oil producers, Lukoil and Rosneft, including any entity where they hold a stake of over 50%.

The impact was immediate. Lukoil quickly relinquished its interests in Iraq, including its stake in the giant West Qurna 2 field. Rosneft followed suit by scaling back its operations in Iraqi Kurdistan, reducing its share in the crucial Kurdistan Pipeline Company from 60% to 49%. Together, Lukoil and Rosneft export around 3.1 million barrels of oil per day, which the West views as a critical source of funding for Russia's war in Ukraine.

These sanctions, overseen by the U.S. Treasury's Office of Foreign Assets Control (OFAC), represent a significant escalation from previous measures that targeted lower-tier Russian firms. The European Union has mirrored these prohibitions, with its 19th sanctions package targeting Russia's shadow fleet of oil tankers. The EU also took aim at Russia's LNG sector for the first time and moved up its deadline to halt all Russian gas imports to January 1, 2027, a year earlier than planned.

The Geopolitical Chessboard in Iraq

Before this recent pressure campaign, Moscow and Beijing were steadily expanding their influence in Iraq and the wider Middle East. After the U.S. formally ended its combat mission in December 2021, China accelerated its acquisition of southern oilfields, while Russia used Rosneft and Lukoil to consolidate its presence in both the north and south.

As a result, Chinese companies now hold direct stakes in approximately 24 billion barrels of Iraq's reserves and manage the production of roughly 3 million barrels per day. This means China controls over a third of the country's proven reserves and two-thirds of its current output.

During this period, Western firms faced increasing pressure. Iran-backed militias, with support from Russia and China, targeted U.S. and allied military positions. Entrenched corruption in the oil and gas sector also prompted companies like ExxonMobil, BP, Shell, and TotalEnergies to scale back or withdraw. The clear goal for Russia and China was to push Western companies out of Iraq, creating space for Iran to expand its regional influence at the expense of the U.S. and its partners.

For the U.S. and its allies, countering this trend is a strategic priority. Breaking the multi-layered connections between Iraq and Iran is seen as a way to weaken Tehran and its backers in Moscow and Beijing. Furthermore, the West views the Iraqi Kurdistan region as a vital base for monitoring Iran and as a security bridge connecting NATO member Turkey to the Middle East.

Western Oil Majors Stage a Comeback

As sanctions take hold, major Western energy firms are re-establishing their footprint in Iraq's critical oil and gas infrastructure.

• TotalEnergies: The French company is leading a $27 billion four-part deal, which includes the Common Seawater Supply Project—a venture essential for Iraq to meaningfully increase its long-term oil production.

• BP: The British firm has agreed to a $25 billion deal covering five fields in northern Iraq, a move that could help counter Russian and Chinese efforts to undermine the Kurdistan region's semi-autonomy.

• Chevron: The American major's potential takeover of West Qurna 2 would anchor Baghdad's interests more firmly with the West.

The West Qurna 2 field alone holds an estimated 13 billion barrels of recoverable oil reserves, with production costs as low as $2-3 per barrel. While currently producing up to 480,000 barrels per day (bpd), its development plan targets a peak output of 1.2 million bpd. The Nasiriyah Project is also designed for an initial capacity of 600,000 bpd.

If Baghdad continues on this trajectory, its long-awaited pivot back to the West could finally solidify. With major Western investments locking in new economic and strategic alignments, the momentum may prove difficult for Moscow, Beijing, or Tehran to reverse.