Economy Insights – Baghdad
Hassan Hafez, former OPEC spokesman, highlighted on Tuesday that Iraq is currently grappling with a significant energy crisis, exacerbated by the lack of viable alternatives to Iranian gas. He noted that the complexities associated with gas transportation present greater challenges compared to crude oil, thereby restricting Baghdad’s strategic options.
In a statement, Hafez observed that U.S. sanctions on Iran have detrimental effects on the Iranian economy, as oil exports represent a critical revenue stream for the Iranian government, influencing its capacity to finance projects and fulfill payroll commitments.
Specifically, Hafez pointed out that Iran produces over 3 million barrels of oil per day, and sanctions have curbed its export capabilities, which in turn impacts global energy markets. He recalled that sanctions imposed during the Trump administration led to a notable decline in Iranian oil exports, a move that corresponded with spikes in oil prices.
Potential Alternatives Amid Sanction Fallout
Despite the sanctions, Hafez remarked that alternative sources could mitigate the loss of Iranian oil exports. For instance, Saudi Arabia maintains a production surplus of 3 million barrels per day that could be swiftly brought to market. Similarly, the United Arab Emirates possesses the capacity to augment its production by a comparable volume.
Additionally, the Kurdistan region’s entry into oil production and exportation could serve as another alternative to Iranian oil supplies. However, it is essential to note that the region’s gas production, particularly from the Khormore fields, is insufficient to meet local demands. Currently, the output stands at approximately 600 million cubic feet, primarily allocated for regional electricity generation, which remains inadequate to satisfy total local consumption.
Iraq’s Reliance on Iranian Gas
Hafez emphasized that Iraq does not have the luxury of selecting Iranian gas; rather, it is compelled to import it due to the lack of feasible alternatives. He elaborated on the complexities of gas transportation, which is far more challenging than that of crude oil, given that oil can be efficiently transported via tankers.
Iraq heavily relies on Iranian gas to operate its power plants. The establishment of a gas pipeline connecting the Iranian pipeline network with Iraq has facilitated gas transfers in recent years. However, Hafez cautioned that options for the Iraqi government are limited, especially since the Kurdistan region cannot fulfill Iraq’s gas needs, given its restricted production capabilities that fail to meet even regional demand.
For ongoing updates, subscribe to our channel on Telegram
