Iraq’s oil-export collapse has begun to reverse, but the recovery remains incomplete and the crisis has changed how Iraqi crude reaches international markets. The monthly data now show a clear sequence: normal exports before the war, an extraordinary collapse after the disruption of the Strait of Hormuz, and a gradual recovery since June that still depends overwhelmingly on the southern route.

Iraq exported 107.6 million barrels in January and 99.9 million in February, earning $6.49 billion and $6.82 billion respectively. After the war began and Hormuz was disrupted, exports fell to 18.6 million barrels in March and just 9.88 million in April, while revenue dropped to $1.96 billion and $1.09 billion. The official SOMO figures therefore show Iraq moving from around 3.5 million barrels per day before the crisis to only 329,000 bpd at the April low.

May remained close to the bottom at roughly 14 million barrels, while June recovered modestly to 18.1 million. SOMO published the two months together, reporting combined revenue of $2.34 billion. Based on the separate monthly volumes, that implies working estimates of roughly $1.02 billion for May and $1.32 billion for June, although SOMO did not publish the revenue split separately.

July marked the first substantial recovery. SOMO officials said crude sales reached roughly 42 to 42.5 million barrels, with around 35.5 million moving through the southern export system and 7 million through Ceyhan. At an average realised price of about $60 per barrel, July crude revenue was roughly $2.5 billion. The recovery accelerated further in August, with the oil minister saying around 26 million barrels were exported during the first 13 days of the month, equivalent to roughly 2 million bpd. At current realised prices, that represents around $1.56 billion in crude sales in less than two weeks.

A Reversed Export Geography: The route breakdown is more important than the headline recovery because it shows how sharply Iraq’s export geography changed under pressure. Before the crisis, Iraq was overwhelmingly dependent on the Gulf. In February, roughly 94.3 million barrels moved through the southern system, compared with only 5.55 million through Ceyhan. Around 94% of Iraqi crude exports therefore depended on Hormuz.

By April, that relationship had temporarily reversed. SOMO recorded 4.59 million barrels of Basra crude against 5.30 million barrels exported through Ceyhan. Of the Ceyhan total, 4.96 million barrels were federal Kirkuk crude and only 339,000 barrels came from KRI production. Ceyhan had therefore stopped functioning primarily as a Kurdistan export route and had become an emergency outlet for federal Iraqi oil.

That followed the March agreement between Baghdad and Erbil allowing Kirkuk crude to enter the Kurdistan Region’s pipeline system, move to Fishkhabur and then continue through Turkey to Ceyhan. By April, the overwhelming majority of crude using that route was federal Kirkuk oil rather than KRI production.

This remains significant because Baghdad’s own federal Kirkuk-Ceyhan line is still not operating at meaningful commercial scale. The government has repeatedly described the pipeline as close to completion since April, but the continued use of KRG infrastructure is itself the clearest indication that the federal route is not ready. If Baghdad had a reliable independent line from Kirkuk to Fishkhabur, there would be little reason to continue routing federal crude through KRG-controlled infrastructure.

The old federal line had been largely unusable since 2014, and its rehabilitation has proved more extensive than early official statements suggested. Successive updates have referred to inspections, hydrostatic testing, damaged sections, replacement pumps, line filling and commissioning. What was initially presented as a short repair process has effectively become a rolling rehabilitation project, with further requirements emerging as the system was tested.

This also puts the new Iraq-Turkey agreement into perspective. The one-year arrangement signed in August provides a framework for roughly 750,000 barrels per day through Turkey, but actual flow remains only around 170,000 to 225,000 bpd. The agreement therefore reflects intended capacity rather than current throughput. The wider corridor can theoretically handle around 1.5 million bpd, but reaching even 750,000 will require the federal Kirkuk line to become operational and, eventually, additional central and southern Iraqi crude to be connected northward.

That matters because northern production alone cannot sustain 750,000 to 1.5 million bpd of exports while also feeding domestic refineries. Ceyhan can only become a serious national alternative to Hormuz if Baghdad ultimately connects Iraq’s much larger central and southern production base to the northern network.

Syria has meanwhile emerged as a third outlet, but mostly for petroleum products rather than crude. Since April, Iraq has moved large quantities of fuel oil by tanker truck through Syria to Baniyas, where it is stored and re-exported by sea. By June, volumes exceeded 600,000 tonnes in a month, equivalent to roughly 4 million barrels of fuel oil depending on density. These volumes should not be added to SOMO’s crude-export figures because they represent a separate petroleum-products trade. Jordan, by contrast, has contributed virtually nothing despite repeated discussions over restarting the previous small crude-supply arrangement.

The broader pattern is therefore clear. Iraq has moved from an export system dominated almost entirely by Hormuz to one in which Ceyhan and Syria have become materially more important. But neither is yet large enough to replace the Gulf. This is why the recovery since June has come mainly from getting southern crude through Hormuz again rather than from a major expansion of alternative routes.

Ceyhan has remained around 0.2 million bpd, while national crude exports rose from roughly 0.45–0.60 million bpd in May and June to around 1.37 million in July and roughly 2 million bpd in the first half of August. Most of the recovery therefore reflects the southern route coming back rather than Iraq having solved its underlying export vulnerability.

The Budget Gap: This distinction matters because Iraq’s export crisis quickly became a cash-flow crisis for the state. January Ministry of Finance data put monthly current spending at around 8.35 trillion dinars, including 5.09 trillion for salaries, 1.6 trillion for pensions and 458 billion for social welfare. Those three categories alone amounted to around 7.15 trillion dinars, or roughly $5.45 billion every month.

More recent government estimates put the combined salaries, pensions and social-welfare burden somewhat higher, at around 7.8 trillion dinars, or roughly $6 billion a month, while broader salaries and essential state obligations have been put at around 10.8 trillion dinars. The precise figure varies according to what is included, but the underlying point does not: Iraq carries a very large fixed monthly spending obligation that cannot adjust nearly as quickly as oil revenue.

At the April low, SOMO generated only $1.087 billion from crude exports. Even allowing another $300–400 million from customs, taxes and other non-oil sources, total inflows were only around $1.4–1.5 billion against a salary, pension and welfare obligation of at least $5.45 billion. On that basis, the gap was roughly $4 billion in a single month, before most other government operations or capital spending were counted.

The comparison is necessarily approximate because SOMO export sales and Ministry of Finance cash receipts do not settle on exactly the same timetable. But subsequent cash data point in the same direction. A government source said actual state revenues during May and June were only around 3 trillion dinars, or $2.3 billion, per month, still far below the government’s current obligations.

That is why the crisis eventually became visible in salaries themselves. The government continued to insist that payroll would be protected, but July payments were delayed before the Finance Ministry eventually began releasing funding late in the month. The significance is not that Iraq stopped paying salaries; it did not. It is that the gap had become large enough for the timing of salaries to depend increasingly on active cash management and financing rather than routine monthly oil receipts.

The government has acknowledged this. Officials have discussed domestic and external borrowing, continuing spending under the monthly one-twelfth rule and using temporary financing legislation while a broader budget framework is resolved. Prime Ministerial adviser Mudher Mohammed Saleh has described emergency borrowing mechanisms as a bridge rather than a substitute for a sustainable budget. That distinction is important: borrowing can move the financing problem forward in time, but it does not replace the oil revenue that normally pays for the state.

The improvement in exports has nevertheless changed the immediate trajectory. July crude revenue recovered to roughly $2.5 billion, more than twice April’s level, while maintaining the current August export rate for a full month would generate roughly $3.5–3.7 billion at current prices. That would still leave oil revenue below the monthly salary, pension and welfare bill, but the gap would be much smaller than it was in April, May or June.

How Long Can This Hold: Iraq therefore no longer faces the same immediate cash crisis it did at the April low, but neither has the fiscal problem disappeared. The state has been able to protect salaries through a combination of accumulated buffers, domestic financing and compression or postponement of less politically sensitive spending while oil exports gradually recover.

Those buffers are substantial, but they are already being used. Iraq entered the crisis with roughly $97 billion in international reserves in mid-February. By May, S&P put reserves at $91.9 billion. That remains a large cushion, but the decline matters because central-bank reserves are not simply a fiscal account that can be spent indefinitely on government salaries. They also support the dinar, finance external payments and underpin confidence in Iraq’s monetary system.

Using those buffers aggressively can therefore solve one problem while creating another. Sustained reserve depletion or monetary financing would increase pressure on the exchange rate and prices, while heavier domestic borrowing shifts more of the fiscal burden onto Iraqi banks and the domestic financial system.

The credit-rating story captures the same balance. S&P initially placed Iraq on CreditWatch negative in March as the oil shock intensified, but in June it removed the rating from CreditWatch while maintaining a negative outlook. The change did not mean the fiscal risk had disappeared; rather, S&P’s baseline assumed that oil exports would gradually recover in the second half of the year. The July and August figures are so far moving in that direction.

That means the original question of “how long can this hold?” now has a more nuanced answer. If exports had remained at April levels, the financing model would have become increasingly difficult to sustain. They did not. Southern exports partially recovered in June, rose sharply in July and reached around 2 million bpd in the first half of August, buying Baghdad materially more room.

But the structural problem remains. Before the war, Iraq earned around $6.5–6.8 billion a month from crude exports. April produced only $1.09 billion, May around $1 billion, June roughly $1.3 billion and July around $2.5 billion. Even a full August at the current pace would generate only around $3.5–3.7 billion at current prices.

The crisis has therefore moved from an immediate collapse in revenue toward a slower fiscal squeeze. Baghdad can continue protecting salaries as long as exports recover, borrowing remains available and its financial buffers remain credible, but it is still financing a state built around pre-war oil income with substantially less oil revenue.

This is why the export-route question and the salary question are ultimately the same problem. Ceyhan, Baniyas and other alternative routes are not simply logistical conveniences; they determine how reliably Iraq can turn its oil and petroleum resources into the cash that finances the state. The crisis has accelerated efforts to diversify those routes, but for now they remain supplementary. Iraq’s fiscal recovery still depends primarily on how much southern crude can pass through the Strait of Hormuz.