OPINION: Iran has long helped keep the lights burning in Iraq through much-needed power supplies and gas exports.
Iran accounts for about 30% of Iraq’s generation capacity of 17 gigawatts a year through electricity and gas exports.
However, that vital role is under threat as US President Donald Trump turns the screws on Iran, which is viewed as a destabilising force in Iraq and beyond through its alleged pursuit of nuclear weapons and support for proxy militias.
Trump has reinstated UN sanctions against Iran, much to the annoyance of other world powers who see the move as lacking legitimacy since he pulled out of the 2015 nuclear agreement that kept Tehran’s weapons activities in check.
The US is now likely to push Iraq to end energy imports from Iran as part of renewed efforts to further suffocate Iran's already crippled oil and gas sector.
Such a move is likely to lead to anger in the streets of Iraq where acute electricity shortages have frequently led to violent protests in the oil producing hub of Basra and helped fan social unrest across the country.
Iraq is now facing a shortage of 13GW and demand is expected to rise to 50GW by 2025.
Up to 60% of all electricity produced in Iraq is lost through theft and poor transmission, while heavy subsidies and dismal fee collections keep investors at bay.
Power shortages are unlikely to abate any time soon, with Iraq failing to harness abundant associated gas production that is being flared.
Currently over 50% of all associated gas, around 3 billion cubic feet per day, is flared.
Efforts by Iraq's Oil Ministry to harness this wasted resource to help meet rising electricity needs have been stymied by lack of funds, byzantine bureaucracy and failure to attract private investment.
The ministry is reducing flaring but progress has been slow, with the timeline to eliminate flaring pushed back to 2025 from 2022.
Iraq has a poor track record in completing major projects and there is no guarantee that the new deadline will be met, ensuring Iran’s pivotal role in preventing the country from plunging deeper into darkness.
(This is an Upstream opinion article.)