Economy News – Baghdad
Iraq is currently navigating a pivotal moment in its energy landscape, facing the imminent cessation of exemptions for the importation of Iranian gas. This development has prompted the Iraqi government to expedite efforts to identify sustainable alternatives, particularly in light of potential significant energy losses should the U.S. decision materialize.
On Saturday, the Trump administration formally rescinded the exemptions that previously permitted Iraq to make payments to Iran for electricity, a stance aligned with its “maximum pressure” campaign targeting Tehran.
A spokesperson from the U.S. State Department emphasized that this decision was designed to prevent Iran from achieving any economic or financial relief.
According to Iraq’s Ministry of Electricity, the nation requires approximately 50,000 megawatts to satisfy its summer energy demands, yet production is currently at about 28,000 megawatts as per official statistics.
Walid Al-Sahlani, Deputy Head of the Parliamentary Energy and Electricity Committee, underscored the potential ramifications of eliminating Iranian gas imports. He indicated that the complete cessation of this supply could result in the loss of over 8,000 megawatts, severely disrupting the Iraqi energy infrastructure.
As for viable alternatives, Al-Sahlani noted the existence of options such as renewable energy projects, emphasizing the need for a government-led initiative to promote solar energy and expedite the development of local gas fields such as Al-Crutch and Mansuriya to stabilize Iraq’s energy system.
He stated, “We need more than 3,500 million cubic feet of gas,” highlighting the current import volume from Iran, which stands at 1,700 million cubic feet, or roughly 40-45% of the necessary supply to support gas-dependent power plants.
The Vice-President of the Parliamentary Energy Committee has called for the formation of a dedicated task force tasked with developing a strategic long-term vision for Iraq’s energy sector.
During a discussion with Prime Minister Mohammed Shia Al-Sudani, U.S. National Security Adviser Michael Waltz commended the Prime Minister’s commitment to enhancing Iraq’s energy independence, advocating for greater participation of Western and American firms in Iraq’s oil and gas sectors.
Exploring Alternatives
In recent years, Iraq has sought to diversify its sources of gas in response to ongoing U.S. warnings directed at Iran. The country has previously entered agreements with Turkmenistan for the supply of 20 million cubic meters of gas daily.
The Swiss company LoxStone Energy has been contracted to facilitate the transport of Turkmen gas to Iraq utilizing the Iranian pipeline network, applying a SWAP exchange mechanism to ensure effective delivery.
The Iraqi government spokesman, Ahmad Al-Awadi, disclosed that various scenarios have been charted to address potential outcomes related to gas imports.
He noted that Iraq currently imports approximately 50 million cubic feet from Iran, which comprises a significant portion of Iranian energy production. The government is prepared for both potential renewal and expiration of the exemptions.
Al-Awadi indicated that Turkmen gas is expected to reach Iraqi energy facilities in the coming two months via Iranian routes.
If this route becomes unfeasible, Iraq may pivot towards using floating gas platforms, which would connect directly to electrical stations in Basra.
It is noteworthy that the nation relies on Iranian electricity and gas imports for approximately 30-40% of its energy needs, particularly critical during summer months when temperatures soar to 50 degrees Celsius and energy demands peak.
However, Iraq faces challenges in financing these imports due to U.S. sanctions, which restrict Iran’s ability to engage in many types of financial transactions, limiting fund flow to non-sanctioned goods like food and medicine.
Electricity Ministry spokesman Ahmed Moussa outlined three alternative scenarios for gas procurement and expressed optimism that Iraq would soon be able to pivot to national gas resources and ongoing projects that diminish reliance on foreign imports.
The outlined scenarios include importing gas through new floating platforms, sourcing from Turkmenistan, and enhancing domestic gas utilization in collaboration with the Ministry of Oil.
Moussa also referred to efforts to attain 24-hour electricity provision by examining models from the Kurdistan Region, Iran, Jordan, Turkey, and Saudi Arabia, while advocating for initiatives aimed at modernizing the electrical grid and implementing smart meter technologies.
He cautioned that achieving a reliable 24-hour electricity supply is a complex challenge requiring substantial investment in new power stations as well as improvements in energy transportation and distribution infrastructure.
The U.S. has leveraged the reconsideration of exemptions as a tool to exert pressure on Baghdad regarding crude oil exports from the Kurdistan region through Turkey. This strategy aims to bolster global oil supplies and maintain market price stability while continuing efforts to curtail Iranian oil exports.
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