Russian President Vladimir Putin has moved quickly to adapt to the Iraqi federal government’s retaking of Kirkuk and disputed territories through the use of Iraqi forces, all the while seeking to limit any fallout with Iran in Iraq and Syria.

Putin had been banking on the Iraqi Kurdistan Regional Government to expand Russia’s regional influence and energy assets. Rosneft, the Russian energy company, had made a roughly $4 billion investment in the region’s energy sector. What Putin did not bank on was that Iraqi Kurdistan President Massoud Barzani, despite warnings from all quarters, would proceed with a disastrous independence referendum that led to the Iraqi central government reclaiming Kirkuk and disputed territories in what Cengiz Candar has labeled the worst setback for Iraqi Kurds since 1975, when the Kurdistan Democratic Party lost the support of Iran and was crushed by Saddam Hussein’s forces.

This Week in Review column wrote Oct. 1, as the crisis over the Iraqi referendum was unfolding, that Putin was boxed in in Iraq, with much at risk, but was not without options. “If he misplays his hand in northern Iraq by banking on a weakened Barzani, he may end up finding himself exposed and on defense in both Syria and Iraq, and at odds with Iran and Turkey — the worst of all worlds,” we suggested. “Or he can tactfully shift toward the Iran-Turkey alignment, which is gaining traction and strength, quietly distancing himself from dependence on Barzani while opening discussions with Baghdad to pursue Russia’s energy interests in northern Iraq.”

And Russia has indeed pivoted to Baghdad, and the Iran-Turkey alignment, to keep pace with events. Iraq and Russia seem on the verge of an agreement that would expand bilateral economic and security ties, including possible arms sales, and that, from an energy perspective, Russia will seek to lessen its exposure in the north and make clear it is ready to do oil and gas deals with Baghdad. Iraq, signaling a new chapter in the Iraqi oil industry, has already invited BP to develop the reclaimed oil fields around Kirkuk. Chevron has suspended operations in Iraqi Kurdistan.