Six months into Baghdad’s customs centralization policy with the Kurdistan Region, traders are increasingly relocating their operations to Iraqi-controlled territories—a deliberate outcome aimed at reshaping regional trade dynamics. From the outset, this has been Baghdad’s strategic objective: to alter traders’ behaviors and commercial logistics in and around the Kurdistan Region.

The cornerstone of the policy was the establishment of two major customs checkpoints last July, strategically positioned to monitor goods entering central and southern Iraq from the Kurdistan Region. The first checkpoint, serving areas under the Kurdistan Democratic Party (KDP), was established near the Mosul Dam in Nineveh Province. The second, designated for Patriotic Union of Kurdistan (PUK)-controlled areas, was set up near Khanaqin in Mahmudiya. These checkpoints centralize customs revenue collection, granting Baghdad direct oversight and enhanced monitoring of imports from Turkey and Iran passing through Kurdish-controlled crossings.

A critical component of Baghdad’s strategy has been restricting trade routes. Of the 17 official and unofficial border points previously active in the Kurdistan Region, only four official crossings now remain authorized for transporting goods into Iraqi cities. This measure has severely impacted commercial activity in Kurdistan, particularly targeting smuggled goods that previously flooded the Iraqi market, harming local businesses. With these checkpoints fully operational, imports from Turkey and Iran must pass through Baghdad’s centralized points, providing the Iraqi government unprecedented insight into KRG revenues and customs manifests, as no cargo is permitted without documentation from these official Kurdish crossings.

The policy imposes a strict 72-hour transit window for all goods entering central and southern Iraq through the Kurdistan Region’s border crossings, while also prohibiting the unsealing or partial offloading of cargo prior to reaching areas under federal Iraqi control. Managed via a barcode tracking system, this dual restriction has significantly disrupted established trade flows across northern Iraq.

Previously, many traders imported consolidated shipments destined for both the Kurdistan Region and federal Iraq, offloading the Kurdistan-bound portion before continuing south. Under the new rules, however, shipments must remain sealed and intact until they pass through federal checkpoints—making it operationally unfeasible to separate and distribute goods mid-route.

As a result, businesses have been compelled to establish new storage and distribution facilities in Kirkuk, Mosul, and other areas under Baghdad’s control—marking a clear departure from previous practices, where goods arriving from Turkey and Iran were warehoused inside the Kurdistan Region and dispatched according to market demand.

For example, since the introduction of this policy, trade through the Ibrahim Khalil border crossing—the only major gate between Iraq and Turkey, located in Zakho—has declined by 20%. In just a few months, 50 companies in Zakho, once a key trade hub, have relocated their warehouses to Mosul, which is under the control of the Iraqi government.

The policy’s impacts have been swift and substantial. Imports managed by Kurdistan-based traders have considerably declined as traders increasingly opt for alternative routes. Interestingly shipments now often bypass Kurdistan entirely, entering directly through Basra for distribution to central and southern provinces—the outcome Baghdad intended when establishing these customs barriers.

Baghdad’s strategic calculus is increasingly clear. By redirecting import flows to checkpoints under its direct control—and amplifying rumors about potentially reopening the Rabia route linking Iraq with Syria—the central government systematically undermines the KRG’s role as a trade intermediary. The possible opening of alternative crossings represents an additional pressure point within Baghdad’s broader economic strategy.

The underlying strategic calculus behind Baghdad’s approach is now evident. By redirecting import flows to borders under its direct control and circulating rumors about potentially opening the Rabia route to Iraq with Syria, the central government has systematically undermined the KRG’s position as a trade intermediary. The speculated opening of alternative routes represents an additional pressure point in this economic reconfiguration.

Baghdad’s establishment of these customs checkpoints has achieved multiple objectives simultaneously: diminishing the KRG’s commercial influence, revitalizing Iraqi-controlled trade corridors, boosting economic activity within government-administered territories, and—perhaps most significantly—eroding the KRG’s geopolitical leverage. By targeting the economic foundations of Kurdish autonomy, the central government has strengthened its position in the ongoing negotiation of power relations within Iraq’s federal structure.

What was initially believed to be a plan to “unmask KRG’s customs revenues” has evolved into a broader policy that has been increasingly rerouting trade flows and reshaping regional economic geography. The policy’s increasing effectiveness demonstrates Baghdad’s growing capacity to assert central authority over cross-border commerce, with implications extending beyond mere customs revenue collection.