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Two major energy agreements signed between US companies and the Kurdistan Regional Government (KRG) have sparked swift backlash from Baghdad and could undercut Iran’s long-standing economic and political grip on Iraq.
During a high-profile visit to Washington in May, KRG Prime Minister Masrour Barzani announced the deals with HKN Energy and WesternZagros, targeting development of the Miran and Topkhana-Kurdamir gas fields in the western part of the region near the Syrian border. Together, the projects are valued at $110 billion over their lifetime.
The US-KRG energy deals have sent a powerful message—both to Baghdad and to Tehran. If realized, they could shift Iraq’s energy independence and diminish Iran’s regional clout.
US Energy Secretary Chris Wright praised the deals at the Al-Monitor Global Institute in Washington on May 22, calling them “very aligned with President Trump’s agenda.”
He added, “We need Iraq and others off Iranian dependence.”
Secretary of State Marco Rubio met with Prime Minister Barzani in Washington on May 23. According to the State Department, the Secretary praised the energy agreements and reaffirmed US support for a strong and resilient Kurdistan Region within a sovereign and prosperous federal Iraq.
But analysts believe without a breakthrough in Baghdad-Erbil relations and tangible infrastructure investment, the deals remain aspirational—more of a political statement than a pipeline to regional transformation.
Iran’s gas grip at risk
Iran currently supplies around 25% of Iraq’s electricity needs through natural gas exports. Should the Kurdish projects proceed, that influence could be seriously eroded.
According to Iman Nasseri, Managing Director for the Middle East at FGE, Iran has little to gain financially from its gas exports to Iraq, and growing domestic shortages are shifting Tehran’s calculus.
He told Iran International, “They’re (Iraq) receiving gas for free because they have the excuse of not being able to pay due to US sanctions....Iran would welcome any scenario that could get Iraqis off the contract that they have signed with the Iranians [...] because they are short in natural gas at the moment."
Nasseri said that while the gas fields targeted by the US-KRG deals—estimated to hold 13 trillion cubic feet collectively—are indeed substantial, the main obstacles to their development have always been political and economic, not technical.
Strategic implications for Iran
Meanwhile, Baghdad swiftly denounced the agreements. Iraq’s Oil Ministry declared them “null and void." A senior Iraqi official told Reuters the central government had not been informed in advance.
KRG’s Ministry of Natural Resources defended the move, citing existing legal frameworks and long-standing contracts validated by Iraqi courts.
Energy analyst Dalga Khatinoglu told Iran International that the gas reserves in Iraqi Kurdistan—estimated at over 211.9 trillion cubic feet —are large enough to position the region as a major exporter to Turkey and Europe.
While Iran holds five times more gas, he warned, Tehran risks losing its most critical energy customers if the Kurdish fields come online.
“Iran earns $5 billion a year from gas exports to Iraq and Turkey,” Khatinoglu said, underscoring the threat to both revenue and regional influence. If Kurdish gas starts reaching Turkey and Europe, Iran not only loses market share—it loses geopolitical leverage.
US policy or political signal?
Ambassador John Craig, a former senior US diplomat, told Iran International the announcement may signal more of a “test” than a decisive turning point.
“The KRG is testing the water—to see how the Iranians react to it and how the US reacts to it,” he said, emphasizing that Iran “no longer has the punch” it once did following Israeli strikes that “took out all their munitions factories” and weakened Tehran’s regional leverage.
Craig is a former US ambassador to Oman under President Clinton and later served as director for the Middle East at the National Security Council under President George W. Bush.
He said that while the Kurdish leadership may see an opening to act more independently, the projects are far from being realized. “This is not going to happen in the next 10 months, no. It’s long term,” he said. “Exploration, production, development—it could take three to five years.”
Nasseri also described the deals as more symbolic than real, likening them to ‘wishful thinking’ without the conditions needed for execution. He emphasized that Kurdistan currently lacks a viable off-taker, adding, "you can’t develop gas without finding a place and an off-taker that can consume that gas.”
While suffering from severe gas shortages, Iran wastes a staggering volume of natural gas during production and transmission—equal to Spain’s annual consumption or about half of what Turkey or Italy use each year.
In regional markets, the wasted gas would be worth over $10 billion per year. It amounts to 40% of the gas used annually by Iranian households.
This massive loss stems from underinvestment in gas recovery infrastructure at oil fields and an aging transmission network.
Most recent data from the International Energy Agency (IEA) shows methane leaks from Iran’s oil and gas facilities exceeded 8 billion cubic meters in 2023.
Iran also flares over 20 billion cubic meters annually due to the lack of gas-capturing systems at oil production sites, according to the World Bank estimates.
Leaks and flaring
Iran ranks fourth globally in methane emissions from fossil fuel operations. Despite this, Iran has made little progress in cutting emissions.
IEA data shows most methane leaks originate from production facilities, with the rest linked to transmission infrastructure.
When it comes to gas flaring, Iran ranks second worldwide. For two decades, the government has done virtually nothing to capture associated gas—the byproduct of oil extraction—opting instead to burn it off at the wellhead.
This alone releases 38 million tons of greenhouse gases annually, nearly matching the total yearly emissions of Sweden or Norway.
Iran’s Oil Ministry estimates it would cost $5 billion to capture the flared gas. Yet investment in oil and gas fields has fallen sixfold in two decades and now stands at just $3 billion, according to the parliament’s Research Center.
As a result, flaring continues unabated, and gas production growth has slowed to a third of its pace a decade ago. Iran now faces gas shortages in all seasons.
Authorities often blame consumers for excessive use, overlooking the fact that losses during production and transmission account for 40% of the gas consumed by households.
Turning to imports
With domestic solutions stalled, Iran has increasingly looked abroad to cover its shortfall. But solving the crisis will take more than money—it also requires advanced technology and cooperation with international energy firms.
Recent efforts have focused on non-binding memoranda of understanding with Russian companies, none of which have led to concrete outcomes. Ironically, Russia itself suffers from even greater gas losses and lacks the technological capability to fix the problem at home or in Iran.
Iran has also tried to import gas from Turkmenistan and Russia. Turkmenistan, however, halted exports years ago over debt dispute. Russia recently agreed to supply small volumes via Azerbaijan, but pipeline capacity on that route is a fraction of peak deficit in winter.
Despite these shortages, Iran continues to export gas to Turkey and Iraq, often at the expense of domestic industries and power plants.
The reason? Price disparities. Exporting just 7% of its gas earns more revenue than selling the remaining 93% at heavily subsidized domestic rates, offering critical budgetary relief.
In its current budget, Iran projects gas exports of 16 billion cubic meters worth $5 billion—a 14% increase over last year.
But the future is uncertain. The 25-year gas deal with Turkey expires in 2026, and Iraq has announced plans to phase out Iranian gas imports within three years.
Without urgent investment, technological cooperation, and sweeping infrastructure reforms, Iran’s energy sector risks permanent decline—trapped in a cycle of waste, environmental damage, and economic self-sabotage.
Iran's President Masoud Pezeshkian, in a meeting with Oman's Sultan Haitham in Muscat, praised the Sultanate's "active and constructive role" in Iran-US talks.
"We appreciate the valuable efforts of the friendly and brotherly country of Oman in mediating the negotiations, and we hope this process will lead to positive outcomes," Pezeshkian said.
Mossad chief David Barnea and Israeli minister of strategic affairs Ron Dermer are visiting Washington DC to meet American officials for talks on Iran, Axios reported citing an American source.
Dermer is expected to meet White House Special Envoy for the Middle East and chief negotiator in Iran talks Steve Witkoff.
Barnea has also met CIA Director John Ratcliffe and other senior officials for talks on Iran, the report added.
Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araghchi arrived in Muscat on Tuesday for a two-day official visit to Oman, as indirect diplomacy between Tehran and Washington over Iran’s nuclear program continues.
The Iranian delegation was received by Omani Deputy Prime Minister Shihab bin Tariq al-Said and Foreign Minister Badr al-Busaidi, Iranian state media reported.
Tehran and Muscat have expanded economic ties in recent years, with Pezeshkian noting before his departure that bilateral trade had reached nearly $2.3 billion and was “increasing day by day.”
Foreign Ministry spokesman Esmail Baghaei said earlier on Tuesday that the visit had been scheduled in advance and follows Sultan Haitham’s trip to Tehran. He confirmed that regional issues — including nuclear negotiations with the United States — would be discussed.
“This visit is part of normal diplomatic exchanges,” Baghaei said. “Naturally, developments related to Iran-US talks may come up during meetings, but there is no planned negotiation with the American side on the sidelines.”
