Impact of U.S. Sanctions on Iraq’s Energy Imports from Iran
The British energy consulting firm FGE has confirmed that the United States has decided not to renew exemptions from sanctions that previously allowed Iraq to import electricity from Iran. However, these sanctions do not extend to gas imports at this time.
Energy Dependency and Potential Shortfalls
Reports indicate that, in 2024, Iraq relied on Iran for approximately 22% of its total gas and electricity imports. Notably, Iranian electricity imports represented around 4% of Iraq’s overall energy consumption. According to the U.S. embassy, the implications of the sanction changes could leave Iraq vulnerable to significant electricity shortages.
Iman Nasseri, the administrative director for the Middle East at FGE, stated, "The exemptions apply solely to electricity imports; however, gas imports could be impacted if the U.S. believes that Iraqi payment methods violate the sanctions imposed on Iran."
Anticipated Electricity Crisis
Ahmed Moussa, spokesperson for the Iraqi Ministry of Electricity, indicated that a complete halt of electricity imports from Iran could lead to a 30% deficit in electrical supply. Energy experts caution that the termination of these exemptions, which officially ended on March 7, is poised to drastically affect Iraq’s ability to meet electricity demands, particularly as summer heat approaches, raising concerns about potential social unrest similar to previous years’ protests in Basra.
Finding Alternatives: Iraq’s Strategic Options
FGE suggests that Iraq may see Iranian gas imports shrink significantly from 820 million cubic feet per day to 70 million cubic feet per day by 2025. To mitigate these challenges, Iraq is considering transitioning to liquid fuel to partially alleviate the energy crisis.
In pursuit of alternative energy sources, the Iraqi Ministry of Electricity has requested the Ministry of Oil to ramp up gasoline imports to 100,000 barrels per day from the current 35,000 barrels, in preparation for the coming summer.
Further, the Iraqi government is actively exploring diversifying its energy portfolio, which includes the electrical connection project with Saudi Arabia and investing in gas capture projects to enhance energy production.
U.S. Influence and Iraq’s Energy Independence
For years, the United States has encouraged Iraq to achieve greater energy independence. Although exemptions from sanctions were deemed essential for maintaining stability during Iraq’s transitional phase, the recent policy shift underscores a strategic push for independence.
Mike Waltz, U.S. National Security Adviser, stated that the decision not to renew exemptions aligns with the "maximum pressure" strategy endorsed by the administration, aimed at curtailing Iranian influence in the region. He urged the Iraqi government to enhance collaboration with U.S. firms for energy investments and to work closely with the Kurdistan Regional Government to reopen a crucial pipeline to Turkey, which has been inactive for two years.
Negotiations between the Iraqi central government and the Kurdistan region have yet to yield results, primarily due to unresolved issues surrounding financial dues and the structuring of oil contracts. Sources within the negotiations suggest that while differences persist, there remains a possibility of reaching a compromise if both parties are willing to engage constructively.
This complex interplay of U.S. policy, regional dynamics, and Iraq’s energy strategies reflects the ongoing challenges and opportunities faced by the country in securing a stable energy future amid external pressures.
