Fueling the Future: Iraq’s Search for Energy Alternatives Amid Regional Turmoil

In the months since beginning his second term in office, President Donald Trump embraced a hard line against Iran as a part of efforts to push Tehran to ink a new nuclear agreement. The administration has introduced a raft of new sanctions against Tehran and has declined to renew sanctions waivers for certain countries in the Middle East that import Iranian commodities—particularly gas and electricity. Iran supplies roughly 30 percent of Iraq’s total energy consumption, as well as more than 40 percent of its natural gas; cutting off either would lead to a significant decrease in Iraqi electrical capacity, causing massive blackouts and social unrest. Perhaps inadvertently, Trump’s decision may reverse Iraq’s recent economic gains ahead of critical parliamentary elections this November.

The Trump administration’s “maximum pressure” policy on Iran could force regional states to decide whether to maintain their trade ties to Tehran. At the same time, Iran’s own severe domestic shortages have led it to cut gas exports to Iraq in the last few months. Despite internal fractiousness, the Iraqi government has made enormous efforts to boost Iraq’s domestic production of electricity and diversify its energy sources. For example, in 2022, Baghdad signed an agreement with Saudi Arabia to construct 435 km of new power lines with a capacity of 1 GW, linking the northern Saudi city of Arar to the Iraqi town of Yusufiya, near Baghdad.

The Dilemma of Diversification

By making Iranian energy more costly, the United States likely intends to push Iraq to reduce its reliance on Tehran. Nevertheless, Iraq is facing a surge in demand—associated with the summer months, when extremely hot weather leads to energy-intensive air conditioner use—which threatens to significantly exacerbate the shortage caused by the lack of Iranian electricity and gas.

However, achieving energy security is not a straightforward process. Simply replacing Iranian electricity with another source at this stage is likely impossible, as other regional states like Jordan are not able to meet Iraq’s rising demand due to insufficient production. The geography of the country also makes it more difficult for Iraq to diversify its energy relationships. Iraq’s largest urban areas are very close to Iran, and cut off from the rest of the region by the Gulf and a massive desert. This makes it far easier for Iraq to build infrastructure to import electricity and gas from Iran than from Turkey, Syria, Jordan, or the energy-rich Gulf monarchies. Thus, Baghdad faces a nearly impossible dilemma: its most economical energy strategy threatens to leave Iraq beholden to Iran and susceptible to U.S. sanctions.

Finding a New Supplier

Since the Trump administration re-imposed sanctions against Iran, Iraqi authorities have called on the United States to allow the current waivers to remain in place at least through 2028, by which time Iraq aims to achieve energy independence from its neighbor. If Washington refuses, however, the central government in Baghdad may find itself increasingly dependent on natural gas imports, likely from Iraqi Kurdistan. Baghdad has already begun seeking alternative suppliers such as Oman, Turkmenistan, and Qatar to avoid the disruptions that often afflict Iranian hydrocarbon imports during the summer months. However, imported natural gas from these countries would still flow through pipes transiting Iran, meaning that the gas contained therein would still profit Tehran and be subject to American sanctions. The fact that the Trump administration has, thus far, left the gas waiver intact suggests that Washington is aware of Iraq’s conundrum and wants to ensure that Baghdad can avoid sparking a broader energy crisis.

According to estimates, energy disruptions caused by secondary sanctions will result in Iraq losing 11,000 megawatts of energy per day, reducing its daily production to approximately 17,000 megawatts—a nearly 30,000-megawatt gap between the electricity it generates and its expected summer consumption figures. Iraq would need several months of preparation before importing more gas and electricity from alternative suppliers like Turkmenistan, which possesses huge reserves but would have to export its gas through the still-unrealized Caspian Sea pipeline. In the long term, the ideal solution—short of Iraqi capacity-building and self-reliance—would be for Iraq to cultivate energy partnerships with the hydrocarbon-rich Gulf countries. However, these connections will not be made overnight, meaning that Iraq will continue to rely on Iranian imports in the near future.

Accordingly, the Iraqi government feels pressured to negotiate with regional partners for additional energy imports while hoping that Washington accepts Baghdad’s continued reliance on Iranian energy. In Baghdad’s perfect scenario, Iraq would cut a deal with the Trump administration to continue importing gas and electricity from Iran, avoiding the societal unrest that large-scale blackouts would cause. However, failure to phase out Iranian energy imports in the long run would eventually lead to supplies being cut off—triggering mass demonstrations against the ruling government and undermining Iraq’s fragile social contract. Caught between geopolitical rivalries, domestic political pressure, and the unflinching demand for electricity during the hot summer months, any alternative that satisfies energy needs without collapsing the government or causing social upheaval will do.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.