US seeks resumption of Kurdish oil exports

US President Donald Trump's administration is piling pressure on Iraq to allow Kurdish oil exports to restart or face sanctions alongside Iran, eight sources with direct knowledge of the matter told Reuters.

An advisor to the Iraqi prime minister denied in a statement there had been a threat of sanctions or pressure on the government during its communications with the US administration.

A speedy resumption of exports from Iraq's semi-autonomous Kurdistan region would help to offset a potential fall in Iranian oil exports, which Washington has pledged to cut to zero as part of Trump's "maximum pressure" campaign against Tehran.

The US government has said it wants to isolate Iran from the global economy and eliminate its oil export revenues in order to slow Iran's development of a nuclear weapon.

Iraq's oil minister made a surprise announcement on Monday that exports from Kurdistan would resume next week. That would mark the end of a near two-year dispute that has cut flows of more than 300,000 barrels per day (bpd) of Kurdish oil via Turkey to global markets.

Reuters spoke to eight sources in Baghdad, Washington and Erbil, the capital of Iraqi Kurdistan, who said that mounting pressure from the new US administration was a key driver behind Monday's announcement.

All of the sources declined to be named due to the sensitivity of the issue.

Iran views its neighbour and ally Iraq as vital for keeping its economy afloat amidst sanctions. But Baghdad, a partner to both the United States and Iran, is wary of being caught in the crosshairs of Trump's policy to squeeze Tehran, the sources said.

Trump wants Iraqi Prime Minister Mohammed Shia al-Sudani to sever economic and military ties with Iran. Last week, Reuters reported that Iraq's central bank blocked five more private banks from dollar access at the request of the US Treasury.

Iraq's announcement on export resumption was hurried and lacked detail on how it would address technical issues that need to be resolved before flows can restart, four of the eight sources also.

Iran wields considerable military, political and economic influence in Iraq through its powerful Shi'ite militias and the political parties it backs in Baghdad. But the increased US pressure comes at a time when Iran has been weakened by Israel's attacks on its regional proxies.