Iraq Faces Energy Challenges as US Halts Iranian Energy Waivers

The US decision to end energy waivers for Iranian electricity imports presents Iraq with substantial challenges, as the country relies on Iran for 22% of its energy needs. Iraq is working to mitigate potential shortages by increasing fuel oil supplies and enhancing energy partnerships, while still navigating complex diplomatic pressures from the US regarding its energy policies.

Iraq is facing significant challenges in adapting to the United States’ recent decision to halt renewals of energy waivers specifically concerning electricity imports from Iran, although it is important to note that gas imports are not included in this decision. According to FGE, Iraq relies on Iran for 22% of its total gas and electricity, raising concerns about its ability to maintain a stable power grid without alternative energy supplies.

Iman Nasseri, the Middle East managing director at FGE, cautioned that even though gas imports are technically exempt from sanctions, US authorities may impose sanctions on Iraq’s payment mechanisms should they violate these restrictions. The decision could disrupt supply chains considerably, as experts emphasize that Iraq’s dependency on Iranian gas remains critical for its energy infrastructure.

The Iraqi Electricity Ministry has expressed that the country could lose over 30% of its electricity grid capacity if gas imports are restricted, with spokesperson Ahmed Moussa warning that such energy shortages might lead to renewed protests, particularly in Basra, where previous blackouts have caused public unrest.

To mitigate potential shortages, an FGE analysis suggests transitioning from gas to liquid fuels. Iraq is actively seeking to increase its fuel oil supplies from 35,000 barrels per day to 100,000 barrels per day, as reported by Platts. Additionally, the government is exploring expanded grid connections with Saudi Arabia and promoting investment in associated gas projects to reduce its reliance on Iranian energy imports.

The US decision to retract the waivers aligns with President Donald Trump’s “maximum pressure” campaign targeting Iran. National Security Advisor Mike Waltz stated that the pressure would intensify if Iran continued its nuclear weapons program and supported terrorism throughout the region. He encouraged Iraq to deepen collaborations with US energy firms and to engage with the Kurdistan Regional Government (KRG) to reopen the Iraq-Turkiye pipeline, which has remained dormant due to ongoing disputes.

Despite facing diplomatic pressures from the US, negotiations between Baghdad and Erbil have yet to resolve conflicts over payment mechanisms and oil contracts, as indicated by a source from an involved oil company who mentioned the possibility of a compromise despite ongoing tensions.

In summary, the cessation of American energy waivers poses considerable challenges for Iraq, particularly regarding its reliance on Iranian energy. The Iraqi government is exploring various strategies to counter potential energy shortages, including increasing fuel oil supplies and fostering connections with neighboring Saudi Arabia. The geopolitical pressures from the US indicate a complex environment for Iraq in balancing its energy needs and diplomatic relations. Overall, the situation requires thoughtful navigation to prevent energy crises and civic unrest.

Original Source: shafaq.com