For the past two decades, energy interconnectivity has been one of the pillars of Iran’s regional relations. From the early days of the so-called oil swap deals between Iran and Central Asia in the 1990s through the expansion of a regionally structured grid of gas pipelines, and to a growing connectivity of electricity grids, Iran has gradually become the region’s main energy hub. In this process, Iran is not just focusing on expanding its own export potential, but on the notion of regional energy interdependency. In fact, the latest initiative — a planned crude pipeline from Iraqi Kurdistan to Iran — highlights the country’s indispensable role as an energy hub in the entire region.

Indeed, Iran and the Kurdistan Regional Government (KRG) have reportedly agreed on the technical details of a plan to build a pipeline with a capacity of up to 250,000 barrels per day (bpd) of crude oil to Iran. Reports highlight that the pipeline would connect Koysinjaq in the KRG, crossing the border at Parvez Khan and then go to Kermanshah in western Iran, where the crude would be inserted into the Iranian pipeline system and potentially used in the country’s northern refineries.

The idea of a pipeline connecting the KRG with one of Iran’s western refineries had been initiated in 2014 following major disagreements between the KRG and the Baghdad government regarding the flow of payments from Baghdad for oil exports through the existing pipeline going to the Turkish port of Ceyhan. Tensions between Baghdad and Ankara over Turkey’s position toward the so-called Islamic State as well as the deepening Syrian crisis were additional parameters in the Kurdish calculation to develop an alternative oil export route. However, Tehran needed to make sure that the move would not upset the Baghdad government — an important regional ally for Iran. As such, a balancing act started in the triangle between Tehran, Baghdad and Erbil and also a careful weighing of the different interest groups that would benefit or be undermined as a result of crude oil flowing from the KRG to Iran.

From the KRG’s perspective, setting up a second export route in addition to the pipeline to Ceyhan had been a priority for some time. In fact, over the past two years, a growing segment of the Kurdish oil had been transported through trucks into Iran and used in northern Iranian refineries. While this gradually created a justification for the planned pipeline, the dynamic also introduced more and more stakeholders into the complex picture that includes Kurdish, Iraqi, Iranian and Turkish interests, including traders organizing crude deliveries from the KRG to Iran and Turkey through trucks.