Jalal Khan
Iran and Iraq share a deeply intertwined energy and economic relationship due to their geographic proximity, shared history, and mutual dependence on energy trade. Both countries hold vast oil and gas reserves and are major players in the global energy market. While their relations are complex and occasionally strained due to political and sectarian differences, the energy sector remains a cornerstone of cooperation.
Key Areas of Energy Cooperation
- Natural Gas Exports • Iran’s Role: Iran is a major supplier of natural gas to Iraq, primarily to fuel Iraq’s electricity generation plants. Iran exports around 20-30 million cubic meters per day of natural gas to Iraq.
• Significance for Iraq: Iraq faces chronic electricity shortages, especially during the summer months, and relies heavily on Iranian gas to meet its energy demands. About 40% of Iraq’s electricity supply is dependent on Iranian gas imports.
• Challenges: Payment disputes and U.S. sanctions on Iran have occasionally disrupted gas supplies. Iraq often struggles to pay Iran on time due to its financial constraints and fears of secondary sanctions. - Electricity Imports • Dependence on Iran: Iraq imports electricity directly from Iran through cross-border transmission lines. This arrangement supplements Iraq’s inadequate power generation capacity.
• Capacity: Electricity imports from Iran range between 1,000 and 1,500 megawatts, crucial for stabilizing Iraq’s national grid.
• Impact: These imports have been vital in reducing blackouts in southern and central Iraq, areas that are most affected by power shortages. - Oil Sector Collaboration • Joint Oil Fields: Iran and Iraq share several cross-border oil fields, including the Azadegan, Yadavaran, and Majnoon fields. These fields represent significant untapped reserves and opportunities for joint development.
• OPEC Collaboration: Both countries are members of OPEC and coordinate on production quotas and strategies to stabilize global oil prices.
• Challenges: Disputes occasionally arise over the development and production rates of shared fields, with both sides accusing the other of over-extraction. - Infrastructure Development • Pipeline Projects: There have been ongoing discussions to build pipelines connecting Iran’s oil and gas fields to Iraqi refineries and power plants. For instance, a proposed gas pipeline from Iran’s South Pars field to Basra could significantly enhance energy security in Iraq.
• Electricity Grid Interconnection: Plans to integrate the Iranian and Iraqi electricity grids could further stabilize Iraq’s energy sector.
Economic Impact on Both Countries
- For Iraq • Energy Security: Dependence on Iranian gas and electricity has helped Iraq avoid severe energy crises, particularly during peak demand seasons.
• Budgetary Strains: Iraq spends billions annually on energy imports from Iran, which strains its budget, especially when oil prices are low.
• Sanction Pressures: U.S. sanctions on Iran have created challenges for Iraq in maintaining this energy relationship. Iraq has repeatedly sought waivers from the U.S
