Economic concerns are mounting in Iraq following U.S. President Donald Trump’s decision to revoke the exemption that allowed Iraq to import electricity and gas from Iran. This action is part of a broader sanctions strategy targeting Iran, further complicating Iraq’s ongoing electricity crisis, as the nation has yet to secure alternative gas sources beyond Iranian supplies.
In a related development, the Iranian National Gas Company has attempted to clarify misconceptions regarding the cancellation of Iraq’s exemption, affirming the existence of a long-term contract for gas supply to Iraq. However, they cautioned that sanctions could extend to other methods of gas importation, raising questions about potential new crises for Iraq.
Iraq has relied on Iranian gas for nearly a decade to power its electricity generation facilities, particularly during the sweltering summer months, which typically trigger widespread public protests due to shortages in gas and electricity. In recent months, Iraq has suffered a significant loss of over 5,500 megawatts in electricity generation due to the halting of Iranian gas supplies, with the government struggling to mitigate this shortfall, leading to reduced power availability across numerous cities.
Saeed Tokli, CEO of the Iranian National Gas Company, reaffirmed in a recent statement that gas exports to Iraq are ongoing, citing the renewal of a favorable export contract. He emphasized that while the volume of exports may fluctuate in accordance with contractual terms, the stability of the gas supply network appears intact, with 72% of domestically produced gas being utilized. He noted that citizen cooperation would be vital to maintaining this stability in the upcoming days.
Tokli did not elaborate on the implications of potential sanctions related to “other forms of importing gas,” leaving open the possibility that sanctions could also affect future collaborations with Turkmenistan via Iran.
On a political front, Prime Minister Mohammed Shia Sudani has appealed to the U.S. administration to continue granting exemptions for Iraq’s imports of Iranian gas. He highlighted that prior U.S. administrations had afforded such exceptions, which are critical given Iraq’s energy landscape.
Sudani further articulated Iraq’s strategic vision for energy independence by 2028, asserting the need for ongoing exemptions during this transition period.
In a recent announcement, President Trump indicated a return to stringent sanctions policies against Iran, mirroring actions from his first term. The presidential memo officially revoked Iraq’s exemption for Iranian gas and electricity imports, urging immediate action in coordination with the Treasury Secretary and relevant agencies to prevent the Iraqi financial system from being utilized as a conduit for circumventing sanctions. The memo also emphasized the necessity to reassess any licenses that provide Iran or its affiliates with economic or financial leniency.
Energy expert Kovand Sherwani emphasized that a complete cessation of gas supplies from Iran could lead to a deficit of 7,000 to 8,000 megawatts, making the forthcoming summer particularly challenging for Iraq. He advised the country to seek alternative energy sources or activate natural gas investment projects in southern Iraq. He expressed concerns about an existing contract with Turkmenistan, which involves purchasing gas via Iran, as this arrangement could potentially conflict with U.S. sanctions.
On October 19, 2024, the Ministry of Electricity signed a contract with Turkmenistan to deliver up to 20 million cubic meters of gas daily. This agreement stipulates that Luxon Energy, a Swiss company, will supply the gas through Iranian pipelines using a swap mechanism to streamline transportation.
However, the contract to import gas from Turkmenistan has yet to be operational despite the months that have passed since its signing, hindered by procedural issues with the Iraqi Trade Bank (TBI).