Iraq to import Iranian gas until 2025 despite US opposition

Iraq’s oil minister Ihsan Abdul-Jabbar says his country is planning to produce its own gas to meet domestic needs, but imports from Iran will continue for the next five years.

Iraq is under pressure from the US to make itself less dependent on Iran's energy, but Iraqi leaders say the demand is a bar set too high given the Arab country’s state of infrastructure which is still badly battered decades after the US invasion and sanctions and economic decline.

US leaders were hoping to bring Iraq on board as Prime Minister Mustafa al-Kadhimi visited Washington last week. President Donald Trump said US companies were involved in many prospects in Iraq’s oil business.   

Ahead of Kadhimi’s visit, five US firms signed agreements with the Iraqi government aimed at boosting what the White House characterized as Iraq’s energy independence from Iran.

The US Department of Energy in a statement said that Honeywell International, Baker Hughes, General Electric, Stellar Energy and Chevron had signed commercial agreements worth as much as $8 billion with the Iraqi ministers of oil and electricity.

US energy companies have been trying to expand their involvement in the oil-rich nation. In 2018, the Trump administration reportedly warned Iraqi officials to forgo a $15 billion power generation deal with Germany’s Siemens and award it to General Electric instead.

According to Bloomberg News, senior US officials warned former Iraqi prime minister Haider al-Abadi at the time that signing the deal with Siemens would seriously jeopardize Iraq’s relations with the United States.

Iraq's finance minister Ali Allawi said in an online interview with the Atlantic Council, an American international affairs think tank, Friday that Baghdad could "significantly" reduce its heavy reliance on Iranian energy imports by as soon as next year by linking up with the Persian Gulf power grid.

“This has been going on for several years now, it is unlikely we can find a short-term substitute, but a medium-term effort can be done by linking the Iraqi grid to the Persian Gulf grid,” Allawi said. “The dependence on Iranian electricity and energy will begin to trail down significantly sometime next year.”

The US State Department said last month that the six countries that make up the Persian Gulf Cooperation Council Interconnection Authority (GCCIA) — Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the UAE — had affirmed their shared support for the project to supply electricity to Iraq.

Allawi was part of a delegation accompanying Prime Minister Kadhimi on his visit to Washington where the US pressed the Iraqi side on allowing energy investment by Saudi Arabia.

“Saudi Arabia is to invest in the Iraqi energy and gas sector, including Saudi-owned companies Aramco and Aqua group,” Allawi confirmed in the Atlantic Council interview.

Oil Minister Abdul-Jabbar was quoted Tuesday as saying that at least 80 percent of the gas projects in Iraq are already under implementation.

But a halt to imports from Iran will come no sooner than five years from now. “We will not import gas by 2025,” he told al-Iraqia TV in an interview.

Iraq imports 1200-1500 megawatts a day of electricity from Iran, in addition to 38 million cubic meters of natural gas to power 40 percent of its electricity generation.

So far, the United States has “granted” nine rounds of waivers to allow Iraq to continue imports from Iran. The current waiver, issued in May, gives the country 120 days to continue its energy imports without being punished for trade with Iran which came under the most aggressive US sanctions in 2019.  

Iraqi officials have complained that American demand acknowledges neither Iraq’s energy needs nor the complex relations between Baghdad and Tehran.

In addition to natural gas and electricity, Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, and air conditioners.

Last month, Prime Minister Kadhimi visited Tehran “to strengthen historical ties”. The two sides, he said, discussed implementing agreements between them, including connecting their railway through Khorramshahr in Iran and Basra in Iraq.

Iranian Energy Minister Reza Ardakanian said the two neighbors had finalized two agreements to rehabilitate and develop the Arab country’s power grid.

“It was decided that the contracts related to reducing losses on the electricity distribution network in the provinces of Karbala and Najaf, as well as the contract for repairing Iraq’s distribution transformers would be finalized and signed,” the Iranian minister said.

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