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The Regional Contest Over Iraq’s Electricity

Iraq has remained a contested geopolitical arena since the 2003 invasion. As Iran’s primacy in Iraq remains mostly unchallenged, it has managed to exert great control over various sectors of the Iraqi economy. Given that successive Iraqi governments have failed for the past two decades to restore electricity to full capacity, Iran partially filled the vacuum, connecting its electrical grid to Iraq’s and selling its excess power into the Iraqi grid and natural gas to Iraq’s domestic power plants. Tehran not only benefited from the hard currency it earns selling its electricity and gas to Baghdad, but with another tool to pressure the Iraqi government, has increased its regional influence. To counter that influence, the United States and its partners in the Middle East are trying to increase their influence in Iraq while reducing Iran’s by supplying Iraq with electricity. The success of this gambit, however, is far from certain.

A Perennial Problem

Even before the U.S.-led invasion in 2003, international sanctions imposed on the Saddam Hussein regime had crippled the Iraqi electric grid denying round-the-clock electricity. The governments that succeeded Saddam Hussein failed to address this problem. Although the disparity between supply and demand is widening because of population increase and other concerns, corruption remains the largest obstacle to a reliable electricity grid. It is estimated that electricity demand within Iraq will double by 2030; at its current rate, demand is increasing by 1000 megawatts per year, while current Prime Minister Mustafa al-Kadhimi admitted that the state has spent $62 billion since 2003 without fully restoring reliable electricity. The Iraqi government’s failure to rehabilitate the electricity sector has compelled it to seek electricity purchases from other countries in order to maintain a stable supply.

Consequently, Iraq relies heavily on Iranian gas to generate electricity. The country’s domestic electricity production is nearly 22,000 megawatts, but this amount is insufficient to meet its demand of 35,000 megawatts, which reaches its peak in the country’s searing summer months. To fill the gap in supply, Iran provides approximately 1,200 megawatts directly into the electric grid and 40 million cubic meters of gas for Iraqi generators. The importation of Iranian gas and electricity also comes with certain political and logistical problems. For instance, there are international sanctions against Iran; each time Iraq seeks to renew its import contract, it must receive a waiver from the United States allowing it to deal with Iran. Additionally, Iran’s own growing domestic electricity shortages put the long-term viability of exports to Iraq in question. The future of Iran’s supply is by no means guaranteed; Tehran cut off electricity to Iraq because of delayed payments in 2018, sparking popular protests. This situation created a perceived opportunity by Iran’s adversaries to lessen Iraq’s dependence on Iran.

Rebalancing Influence

In order to ease the pressure on Iraq and diversify its sources of electricity, Iraq and the GCC Interconnection Authority (GCCIA) signed an agreement during the recent summit in Jeddah. The initial framework of the agreement was signed in 2019; it initially aimed at supplying Iraq with electricity by 2020, but the target date was later delayed until 2024. The expressed purpose of the agreement has been to “establish … electrical interconnection lines from the authority’s substations in Kuwait to the Al-Faw station in the south of Iraq to supply about 500 megawatts of energy from the GCC countries,” with the possibility of increasing the transmission to 1800 megawatts over time.

The GCCIA deal was not the first time that Iraq sought the electricity from countries other than Iran. For example, Jordan has already signed a deal with Iraq to connect the two nations’ power grids, a project that is expected to be completed by the end of 2022. Moreover, Iraq plans to purchase 500 megawatts from Turkey to alleviate its electricity crisis while Baghdad has already signed a deal for an interconnection from Northern Saudi Arabia with a capacity of 1,000 megawatts. For many of these countries, and particularly for the United States and Saudi Arabia, weaning Iraq off Iran’s gas and electricity serves two purposes: bringing Iraq into an increasingly tight-knit coalition against Iran after the stalemate in reviving the JCPOA, and cutting Tehran off from the sanctions-free hard currency that it receives from Iraq. But will these plans succeed?

Intractable Obstacles

Although international cooperation with Iraq in general, and specifically in the realm of electricity, is a positive step toward displacing Iranian influence and restoring Iraqi sovereignty, the path remains long. One critical obstacle is the size of Iraq’s electricity deficit. Iraq needs approximately 13,000 megawatts in order to maintain 24-hour electricity—a shortfall that the regional deals have failed to close. Second, the significance of Iran in the electricity sector comes not only from the amount of electricity that it provides, but also from imported Iranian natural gas, which powers nearly half of Iraq’s domestic electricity production. As stated by Iraqi Electricity Minister Adel Karim, Iraq’s own natural gas sector is comparatively undeveloped, so Baghdad will continue to need Iranian natural gas for years to come. Finally, there are also domestic Iraqi factors that might hinder the implementation of the project. Iran’s proxies within Iraq are already voicing their objection to cooperation with the GCC, adding another complicating dimension to the negotiations. For example, Uday al-Khadran, a leader in the pro-Iran “Fatah Coalition,” claimed that the electricity connection with Saudi Arabia was stillborn and that the 500 megawatts Iraq would receive would not be enough to power a single neighborhood Baghdad. Moreover, the cost of modernizing Iraq’s electricity sector and connecting it with the GCC’s will require costly investment by Baghdad that is already overwhelmed by corruption—not to mention the ongoing danger posed by militant activity, as the grids will be a target for terrorist attacks. Finally, the differences in voltages between electricity frequency in Iraq and Saudi Arabia complicate linking the grids.

Providing Iraq with electricity means countries other than Iran might have influence that could help balance Iraq’s foreign policy. However, these agreements will not necessarily curtail Iran’s influence. It is noteworthy that Iraq’s cooperation with Iran in the electricity sector is only one tool of many that Iran has to influence Iraq. Moreover, the impact of the GCC-Iraq cooperation also depends on other variables, such as the possible détente with Iran, Iraqi domestic politics, and the future demand for (and supply of) electricity.

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

Dr. Massaab Al-Aloosy is a Non-Resident Fellow at Gulf International Forum and a researcher focusing on Iraq, Iran, and Shia non-state armed groups. He holds a PhD from the Fletcher School-Tufts University and is the author of The Changing Ideology of Hezbollah, Palgrave 2020.

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