Simon Watkins
Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…
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By Simon Watkins – Dec 08, 2025, 6:00 PM CST
Iraq has invited major U.S. oil companies to develop the giant West Qurna 2 field after Lukoil’s forced exit.
Russia and China had built deep energy and political leverage in Iraq, using oil contracts, pipeline control, and ties to Iran-backed groups, but Western companies are now regaining ground through major new deals by TotalEnergies, BP, Chevron, and ExxonMobil.
West Qurna-2 produces nearly 10% of Iraq’s output and can sustain 635,000–650,000 bpd, and U.S. firms are now positioned to take over development.
Iraq’s Oil Ministry has revealed that it has sent out exclusive invitations to several major U.S. energy firms to develop the country’s huge West Qurna 2 oilfield following the withdrawal of Russian oil number two Lukoil after Washington ratcheted up sanctions on Moscow. “It’s a huge turnaround in the trajectory it [Iraq] had been headed with Russia and China, marking a massive win for us [the U.S.] and Europe,” a senior legal source who works closely with the U.S. Treasury Department exclusively told OilPrice.com last week. “Stay tuned – there’ll be more of this to come,” he added.
The significance of this sea-change in Iraq’s geopolitical leanings can barely be overstated. Following the increasing perception among the Iraqi people that the U.S. had overstayed its welcome after it removed Saddam Hussein as leader in 2003, Russia and China – in that order – looked to boost their influence across the country for three key reasons. First, it offers a huge repository of oil at the world’s joint lowest average lifting cost of $2-4 per barrel, together with large quantities of associated and non-associated gas. Second, it occupies the geographical heart of the region, lying west of Iran, north of Saudi Arabia and Kuwait, east of Jordan and Syria (with its long Mediterranean coastline offering access to further critical sea routes), and south of Turkey (affording an entry into the European continent). And third, it is a key member of the ‘Shia Crescent of Power’ geopolitical arc that stretches from Iran through Iraq, Syria, and Lebanon, where Shia communities and Iran-backed groups exert significant influence over regional politics, economics, and security. In short, if you are a global superpower or wannabe, Iraq is where you need to be.
Related: French Major TotalEnergies Scales Up North Sea Operations
The pace of Moscow and Beijing’s involvement across the country picked up the more it looked like the U.S. might withdraw from the ‘Joint Comprehensive Plan of Action’ (JCPOA, or colloquially ‘the nuclear deal’), which it eventually did in May 2018. Just before then, Russia had stepped into the chaos caused by Iraqi Kurdistan’s vote for independence in September 2017 to enable Rosneft effectively to take control of the northern region’s oil sector through means analysed in full in my latest book on the new global oil market order. This more broadly allowed Russia to create further chaos in the political and financial dealings between the semi-autonomous Iraqi Kurdistan government in the north and the Federal Government of Iraq in the south. This in turn, provided Moscow with an opportunity to expand its presence in the south, and also did the same for its ally China. Because Beijing was in various stages of a Trade War with the U.S. at the time, it had to tread carefully in a country in which the U.S. was still active, which it did by using dozens of smaller ‘contract-only’ awards on oil and gas fields rather than headline-grabbing exploration and development awards.
Once the U.S. formally ended its combat mission in Iraq in December 2021, then all brakes were off, with China dramatically pushing its new field acquisitions in the south, while Russia consolidated its agitator position in the north through Rosneft mainly and in the south, including the West Qurna 2 contract of its number two oil producer Lukoil. At the same time, continued U.S. and allied military presences in Iraq became the focus of heightened pressure from Iran-backed militias (with direct and/or indirect support from Russia and China), including through rocket fire, drone strikes, and roadside bombs. U.S. and other Western oil firms were under further pressure on their ongoing exploration and development work due to the legacy of endemic corruption running through Iraq’s oil and gas business, and several began to downscale or withdraw in Iraq, including ExxonMobil, Chevron, BP, Shell, TotalEnergies, and ENI.
The aim of Russia and China at that point was to push out all Western firms from Iraq, so allowing Iran greater scope to extend its power across the region, as a proxy for Moscow and Beijing, at the expense of Washington, London, and Brussels and their former regional allies in Saudi Arabia, the UAE, Kuwait, and Bahrain, among others. As exclusively revealed to OilPrice.com some years ago by a very high-ranking official from the Kremlin: “By keeping the West out of energy deals in Iraq, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” On the other side of the superpower equation, the U.S. and its allies believe breaking the multi-layered links between Iraq and Iran will not only significantly weaken Baghdad’s neighbour but its key sponsors, China and Russia, too. The U.S. and Israel also have a further strategic interest in utilising the Iraqi Kurdistan region as a base for ongoing monitoring operations against Iran, as analysed extensively in my latest book. The West additionally sees this northern territory as a critical security bridge from NATO member Turkey into the Middle East and beyond.
It is in this context that the downscaling of Rosneft’s operations in Iraq’s northern Kurdistan region and Lukoil’s withdrawal from West Qurna 2 in the south should be seen. By losing its majority stake in in the Kurdistan Pipeline Company, Rosneft also loses control over the feeder pipeline network within the Iraqi Kurdistan region which connects oil fields (such as Taq Taq and Tawke) to the border metering station at Fishkhabur. And at Fishkhabur, the pipeline links up with the main Iraq-Turkey Pipeline system that moves Iraqi oil west. Lukoil’s withdrawal from West Qurna 2 is no less impactful to Russia, as the field holds an estimated 13 billion barrels of recoverable reserves and produces 460,000-480,000 barrels per day (bpd) – around 10% of Iraq’s total output. Together, the two firms export approximately 3.1 million bpd of crude oil, which the West sees as vital to Russia’s ability to keep funding its war in Ukraine.
For the West, Iraq’s special invitation to U.S. firms to bid now for West Qurna 2 at the expense of forced-out Russian giant Lukoil further builds on the extraordinary gains its firms have made across the country in just the past year or two. France’s TotalEnergies holds the key to Iraq’s ability to dramatically increase its oil output via the crucial Common Seawater Supply Project, as detailed in full in my latest book on the new global oil market order. And there are three other major projects included in its US$27 billion-dollar deal with Baghdad. The UK’s BP is now in a strategically key position to act as a conduit for change in Iraq’s north through its US$25 billion five-field deal recently formally activated. And there have been similar announcements from the U.S.’s Chevron and ExxonMobil, among others.
Both these firms are likely to feature in the ongoing process for West Qurna 2, according to a senior source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com last week. It may also be that at least one of them is set to reap extraordinary financial rewards too, as Ministry documents show that Lukoil had long been able to maintain sustainable production of 635,000 bpd on a sustained basis. Indeed, the source highlights that in test runs over extended periods in August and September 2017, Lukoil hit 650,000 bpd of production, although it kept it secret from the Ministry at the time. The Russian firm planned to negotiate a new per barrel remuneration rate (it was US$1.15 per barrel at the time) for the higher production rate before switching up operations to ‘hit’ the output it already knew it could generate. Moscow made it clear that the firm might exit the site if a higher rate was not paid. “They [the Oil Ministry] found out about the 650,000 production and told the Russians that it was fine if Lukoil wanted to leave but that before it did so it would pay compensation in lieu of the upfront investment that it promised in 2017 and promised again in 2019 as it was not meeting the time-sensitive oil production targets that it had agreed to,” said the Iraq source. “So they stayed, but now they’re out, never mind.”
By Simon Watkins for Oilprice.com
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Simon Watkins
Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…
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