The global oil market is entering a new phase of structural uncertainty, shaped by shifting geopolitical alignments, evolving demand trends, and the accelerating urgency of the green energy transition. Amid this turbulence, Iraq—OPEC’s second-largest oil producer—is quietly recalibrating its energy diplomacy. Recent deals with China, India, and France point to a strategic effort to diversify trade partnerships, hedging Baghdad’s economic future between Eastern and Western powers. Yet beneath these agreements lies a deeper dilemma: how to transform oil diplomacy into durable economic leverage in a country still contending with institutional fragility and enduring political volatility.

Oil has long been Iraq’s economic foundation. In 2024, crude oil accounted for roughly 88% of government revenue and nearly 92% of national exports the year prior. But this heavy dependence has made Baghdad deeply susceptible to global economic shocks—from the 2014 price crash to the demand collapse during the height of the pandemic. Iraq’s energy strategy has traditionally focused on exports to Western markets; however, persistent political instability has led many Western firms to hesitate about long-term investment. In response, Baghdad is now pivoting more decisively toward Asia and, to a lesser extent, Europe in pursuit of economic stability and geopolitical relevance.

China has rapidly emerged as Iraq’s most significant energy partner, importing 1.19 million barrels per day—roughly a third of Iraq’s oil exports. This partnership is underpinned by a recent contract granting Beijing control over Iraq’s first fully integrated energy project, focused on expanding production at the Tuba oil field. The deal builds on the 2021 Iraq-China Framework Agreement, a broad oil-for-infrastructure initiative that allows Chinese firms to finance major development projects in exchange for guaranteed oil supply. While not officially part of the Belt and Road Initiative, the agreement reflects a similar logic—embedding Chinese state-backed firms into Iraq’s reconstruction while locking in long-term access to strategic commodities. Yet, as China entrenches itself through large-scale investments and commodity control, another Asian power is gaining ground through a more understated, less aggressive form of energy diplomacy.

India, now the world’s third-largest oil consumer, has steadily ramped up its purchases of Iraqi crude. In fact, India has overtaken Saudi Arabia as Iraq’s top oil export destination. In 2024 alone, Iraq’s oil exports to India topped $29 billion. This growing energy partnership has created an opportunity for new India-Iraq dialogues centered on energy security. Indian state-owned firms are also stepping up commitments: Hindustan Petroleum Corporation, for instance, plans to boost its annual Iraqi crude intake by 43% in 2025. These developments underscore two broader dynamics—India’s emergence as a neutral actor in the Middle East and Iraq’s increasingly central role in Asia’s energy security architecture.

Meanwhile, Iraq’s revived oil diplomacy with France adds a key European layer to Baghdad’s diversification strategy. In 2023, Iraq signed a $27 billion energy agreement with TotalEnergies, aimed at increasing oil production. Originally launched in 2021, the deal stalled for two years amid disagreements within Iraq’s political establishment. Its eventual ratification underscores Baghdad’s willingness to pursue deeper engagement with European stakeholders. Importantly, the deal also includes solar infrastructure—a nod to the reality that fossil fuel dominance has an expiration date. Just as crucially, the French partnership signals Iraq’s desire to keep diplomatic doors open with the West, even as it expands eastward.

Despite these new alignments, Iraq’s energy posture remains shaped by powerful regional actors—chief among them Iran and Turkey. Iran has long leveraged its role in Iraq’s electricity supply to exert political influence. Baghdad’s recurring failure to pay for Iranian energy has triggered periodic blackouts, giving Tehran significant sway over Iraq’s domestic stability. Turkey’s ambition to serve as a regional energy corridor often clashes with Iraq’s infrastructural constraints.

Nowhere is this more evident than in the case of the Kirkuk-Ceyhan pipeline—a vital crude export artery that has been out of operation since 2022. Legal disputes over Kurdish oil exports and revenue sharing have complicated its reopening, although bilateral negotiations scheduled for early 2025 may yield progress.

Within this wider context, Iraq’s energy diplomacy appears both expansive and constrained. On one hand, Baghdad is actively broadening its economic base and diversifying its international partners. On the other, its ability to implement long-term policy vision remains compromised by internal divisions and external dependencies. The Iraqi government’s current Five-Year Plan calls for greater economic diversification, yet implementation has been halted. Without deeper structural reform, oil diplomacy risks becoming a short-term fix for more profound governance failures.

Still, Iraq’s evolving strategy carries significant weight. As global oil demand flattens and energy geopolitics shift toward a multipolar order, middle-tier producers like Iraq are poised to play an outsized role in shaping future energy dynamics. Baghdad’s careful balancing act—building relationships across Asia and Europe while avoiding overdependence on any one actor—reflects a maturing approach to strategic hedging, one that other oil-producing nations may eventually emulate. Whether this approach succeeds depends not just on international engagement but also on the state’s capacity to rebuild domestic institutions and policy infrastructure.

In the end, Iraq’s energy diplomacy is about more than barrels and buyers. It represents a broader experiment: can a resource-rich but politically fragile state convert economic necessity into geopolitical advantage? If Iraq succeeds, its emerging energy strategy could mark the beginning of a new chapter—one defined not only by diversification of buyers, but by a recalibration of its foreign policy. By courting both Eastern and Western powers, Baghdad is asserting itself not merely as a passive supplier, but as an increasingly deliberate actor in the future of global energy politics.