With the revocation of Iraq’s exemption to purchase electricity from Iran, gas imports from Iran have also been affected. As a result, Iraq is looking for an alternative energy supply, and Qatar and Oman are likely to replace Iran in meeting Iraq’s energy needs.
The U.S. State Department announced that, as part of the “maximum pressure” campaign on Iran, the exemption that allowed Iraq to pay Tehran for electricity imports has been revoked. The exemption expired at the end of Saturday, March 8. Washington has stated that the non-renewal of this exemption “ensures that we do not allow Iran to gain any degree of economic or financial relief.”
Mike Waltz, the White House National Security Advisor, emphasized in a phone call with Iraqi Prime Minister Mohammed Shia’ Al-Sudani on Sunday, March 9, that the non-renewal of Iraq’s sanctions waiver for purchasing electricity from Iran aligns with the U.S. President’s strategy of “maximum pressure” on Iran.
One of the reasons for not renewing Iraq’s sanctions waiver for importing electricity from Iran is to reduce Iran’s influence in Iraq. In this regard, U.S. Secretary of State Marco Rubio had discussed various issues, including the “reduction of Iran’s influence in Iraq,” in a conversation with Mohammed Shia’ Al-Sudani.
Iran’s energy exports to Iraq have geopolitical, economic, and security benefits. If Iran’s energy exports are cut off, although Baghdad will face short-term challenges in meeting its electricity needs, it will ultimately benefit in the medium term. The cessation of energy imports from Iran would mean a reduction in Tehran’s political influence on Iraq’s domestic and foreign policy.
Donald Trump signed the “Presidential Memorandum” in mid-February to resume maximum pressure on Iran but expressed hope that it would not need to be implemented and that an agreement could be reached with Tehran.
He also warned, in a letter to Ayatollah Ali Khamenei, Iran’s Supreme Leader, that Tehran had only two options: a deal or military action.
However, following these remarks, Iran’s Supreme Leader, Ayatollah Khamenei, once again reaffirmed his opposition to negotiations.
Iran’s Reaction
Iranian officials were quick to condemn the U.S. decision, calling it “illegal.” Abbas Araghchi, Iran’s Foreign Minister, took to X (formerly Twitter) to describe the move as “targeting innocent Iraqi people and depriving them of essential services like electricity, especially on the eve of summer.” He emphasized that “We stand with the people of Iraq and remain committed to working with the Iraqi government to counter the United States’ illegal actions.”
Meanwhile, inside Iran, electricity production has dropped to a level far below domestic demand. Even during the winter, nearly all parts of the country, including the capital, experienced widespread power outages. The government’s move to publish scheduled blackout timetables is seen as a clear indication that these conditions are likely to persist, including throughout the upcoming spring and summer.
Iraq’s Sanctions Waiver
Strengthening Iraq’s energy independence—despite being one of the world’s largest oil and gas producers—and reducing its reliance on Iran are key objectives of U.S. foreign policy. However, Iraq’s oil and gas fields have suffered from years of underinvestment. Since 2018, Washington has been compelled to issue sanctions waivers for Iraq, allowing Baghdad to purchase electricity from Iran.
During Donald Trump’s first presidential term (2017–2021), he regularly issued waivers allowing Iraq to import electricity and gas from Iran and pay for it. This policy continued under Joe Biden (2021–2025).
However, a presidential national security memorandum, signed by Trump just weeks after taking office in January, paved the way for this shift.
The U.S. State Department emphasized that all sanctions waivers providing Iran with any economic or financial advantage would be reviewed. Nevertheless, Trump administration officials had urged Iraq to reduce and ultimately eliminate its dependence on Iranian electricity imports.
Despite this, the U.S. State Department spokesperson downplayed the impact of Iranian electricity imports on Iraq’s power grid, stating: “In 2023, electricity imports from Iran accounted for only 4 percent of Iraq’s total electricity consumption.”
Alternatives to Iranian Electricity for Iraq
Over the past decade, Iraq has become heavily dependent on Iranian energy imports, as years of wars and international sanctions have severely damaged the country’s energy infrastructure.
Although Iraq possesses some of the largest oil reserves in the world, it lacks sufficient facilities to process gas and adequate power generation capacity to meet domestic demand.
As a result, importing energy from Iran has been crucial in preventing widespread blackouts, especially during the summer months when temperatures regularly exceed 50°C (122°F) and electricity consumption surges.
In this regard, Iraq is actively exploring several alternative energy sources to reduce its dependence on energy imports from Iran. The country has resumed electricity imports from Turkey via a new 115-kilometer transmission line, which was inaugurated in July 2024, and has begun importing electricity from Jordan through a 340-kilometer transmission line, which was launched in March 2024.
In addition, Iraq is planning to complete its connection to the Gulf Cooperation Council (GCC) electricity grid by the end of 2025. This project includes a 77-kilometer transmission line from Kuwait to al-Faw in the Basra Governorate.
Baghdad is also negotiating with countries like Saudi Arabia and Kuwait for natural gas imports, and discussions are underway to import 20 million cubic feet of gas from Turkmenistan. Besides gas imports, Iraq is expanding its domestic natural gas production in collaboration with the French company Total and has several local gas projects underway, which could take three to five years to complete.
Alongside these efforts, Iraq is also focusing on renewable energy, with plans to increase its solar capacity to 12 gigawatts by 2030 and to have renewable energy account for 30 percent of the country’s electricity supply. The resumption of oil exports from the Kurdistan region of Iraq via the Ceyhan port in Turkey could also help meet some of the country’s energy needs.
Despite these efforts, Iraq still faces challenges in completely replacing its energy imports from Iran in the short term. To achieve energy independence, the country needs to implement a combination of alternative energy sources, improve its domestic infrastructure, and reduce energy wastage.
Iraq Seeking Alternatives to Iranian Gas
Despite the attention the news caught, Iran does not play a significant role in directly supplying electricity to Iraq; it only exports an average of 1.2 gigawatts, which is a small portion of Iraq’s electricity demand. However, Iran’s natural gas supplies power plants in southern Iraq and the 3-gigawatt Bismayah plant in Baghdad.
As a result, the Iran-Iraq energy trade has primarily been focused on gas. Baghdad has been importing up to 50 million cubic meters of gas daily from Iran, based on a five-year contract extended last year with Tehran.
According to Iraqi officials, the country has been paying between 4 and 5 billion dollars annually for imported gas. The volume of gas contracted from Iran, equivalent to 50 million cubic meters, can meet over one-third of Iraq’s electricity needs.
After the U.S. move to prevent the export of electricity and gas from Iran to Iraq, purchasing gas from countries like Qatar and Oman has become a potential alternative for Iraq, should similar restrictions be applied to gas trade with Iran. In other words, Qatar and Oman are set to replace Iran in supplying Iraq’s energy needs.
On the other hand, Iraqi officials are already looking for alternatives to replace Iran with other countries to meet their energy needs. On Monday, March 9, just two days after the announcement of the U.S. decision, Hamza Abdul-Baqi, the Iraqi head of the state-owned South Gas Company, confirmed that Baghdad is considering Qatar and Oman as potential alternatives to Iran for its gas supply. This decision comes amid concerns that Washington might implement the same policy regarding Iran’s gas exports.
In this context, Mohammed Shia’ Al-Sudani, the Prime Minister of Iraq, requested that the U.S. extend the waivers until 2028, by which time Iraq hopes to achieve “energy self-sufficiency.”
However, with the previous waiver expiring on March 8, it has been reported that Al-Sudani has announced that Iraq will comply with U.S. sanctions.
The potential elimination of gas imports from Iran would lead to a reduction of more than 30 percent in Iraq’s daily electricity production. Currently, Iraq’s daily electricity production is around 27,000 megawatts.
To mitigate the impact of a potential halt in gas imports from Iran, Baghdad plans to rent a floating LNG terminal. Abdul-Baqi mentioned that Iraq’s government has tasked the Ministry of Oil with finding an alternative. The LNG terminal contract with UAE-based Breeze Investment (BI), will be signed at the end of March and is expected to be operational by mid-2025, allowing Iraq to import gas from Qatar and Oman.
The terminal will be located at the Khor al-Zubair Port and will transfer gas via a 45-kilometer pipeline under construction to a point near Basra, Iraq’s main oil port in the south. This project will enable Iraq to supply at least 500 million cubic feet of gas per day, or about one-third of Iran’s current supply to the country.
In recent years, several agreements have been signed by the Iraqi government to produce gas from its fields. In this context, Iraqi and American companies signed a series of agreements on April 18, 2024, to extract natural gas and use it for domestic electricity generation while simultaneously reducing Baghdad’s dependency on energy imports from Iran.
These agreements, signed in Washington in the presence of Mohammed Shia’ Al-Sudani and U.S. officials, aim to encourage investment to extract 8.5 million cubic meters of natural gas per day from the Ben Omar oil field. The investment amount by the American companies involved in the project has not been disclosed.
The agreements also include the construction of a 400-kilometer pipeline for gas transport, an offshore export terminal, a gas processing plant, and other infrastructure.
A joint statement issued during Sudani’s visit to Washington states, “Iraq has the capacity to harness its vast natural gas resources, invest in new energy infrastructure and renewable energy, and achieve energy self-sufficiency by 2030.”
Geoffrey Pyatt, Assistant Secretary for Energy Resources at the U.S. State Department, told that these projects will be developed over the next two years.
On the other hand, in order to increase oil and gas production capacity in the Kirkuk oil fields, a new agreement has been signed between the Iraqi government and BP (British Petroleum). According to BP’s report, this agreement includes plans for drilling, well rehabilitation, and the construction of new infrastructure, including gas development projects.
Due to a lack of technology and investment, natural gas from Iraq’s oil fields has traditionally been flared. Iraq flares twice the amount of gas it imports from Iran. At times, the country has accelerated associated gas-gathering projects, but these efforts have largely stalled in the past decade, especially due to the sharp decline in oil prices in the first half of the previous decade and the ISIS crisis.
On the other hand, Iraq has significantly reduced its gas flaring at its oil fields, dropping from 47 percent in 2021 to 33 percent in 2024. Iraq’s goal is to reduce this figure to 20 percent by 2025.
The recent agreement between Iraq and BP indicates that the country will likely no longer rely on Iranian gas in the medium term. However, an immediate halt to gas imports from Iran would present challenges for Iraq. Such an action before 2028 would pose a significant risk unless Iraq constructs LNG-receiving terminals, which would take months to complete. Furthermore, the gas transmission infrastructure from the southern ports to all regions of the country would need to be overhauled, which would be very costly. In the case of electricity, it is likely that the import of electricity from Iran will cease in the short term.
Baghdad has also signed a $27 billion contract with Total, which is expected to increase Iraq’s production by 17 million cubic meters per day.
In line with energy independence, Mohammad Shia’ Al-Sudani emphasized that Iraq has a clear vision for 2028 when gas imports will end, and the country will achieve energy independence.
Why have Qatar and Oman Replaced Iran?
Qatar, as one of the largest producers and exporters of liquefied natural gas (LNG) in the world, has the capacity to supply LNG to Iraq. Oman, with its recent expansion of capacities, has also become an important option for supplying gas to regional countries. Key reasons why Qatar and Oman have been able to replace Iran in such positions include attracting foreign investors, developing gas and oil infrastructure, international cooperation, technology, and forward-thinking development strategies.
Qatar, through massive investments in liquefied natural gas, has become the largest LNG exporter in the world. The country has solidified its gas market by establishing export infrastructure and signing long-term contracts with international companies. In recent years, Oman has developed its gas and petrochemical industries by attracting investors and has significantly increased its export capacity.
In contrast, Iran has been unable to develop its gas infrastructure due to international sanctions and limitations in attracting foreign investment. Many of Iran’s gas projects have either been left unfinished or have been halted due to financial and technological obstacles.
One of the main factors that has allowed Oman and Qatar to replace Iran is their balanced foreign policies and extensive international relations. Qatar has strong relations with the United States and European countries and is recognized as one of the U.S.’s key partners in the Middle East. The country also has extensive trade relations with China, Japan, and South Korea, making it a major player in the global energy market.
Due to its balanced relations with the world and regional neighbors, Oman has managed to stay immune from economic and political sanctions, expanding its commercial partnerships without restrictions. In contrast, Iran, due to diplomatic constraints and sanctions, cannot easily enter international contracts or fully capitalize on its economic and energy potential.
Qatar and Oman have flexible business structures that enable them to quickly establish their positions in new markets. Meanwhile, Iran, due to its limited, complex contracts and sanctions, faces challenges in competing with these countries to meet customer needs.
Conclusion
Iraq has the potential to meet its electricity and natural gas needs from domestic sources and could even become an electricity exporter in the long term. However, this is contingent upon the successful implementation of all natural gas projects, particularly the ‘Associated petroleum gas (APG)’ projects in oil fields, as well as the development of renewable energy. Additionally, Baghdad’s plan to import LNG from neighboring and African countries can play a crucial role in ensuring Iraq’s energy security.
The implementation of these projects will not only strengthen Iraq’s energy security but will also operationalize the diversification of energy sources. This process will also reduce Baghdad’s dependence on Iranian energy, which could ultimately lead to increased political and economic independence for Iraq at both the regional and international levels.
However, without sufficient alternative energy options, Iraq may face increased electricity blackouts, which could lead to public unrest, particularly in the southern provinces where temperatures are expected to rise significantly.
It is likely that Iraqi officials will accelerate negotiations with alternative suppliers, although building the necessary infrastructure and logistical connections will be time-consuming. Meanwhile, some reports suggest that Washington may not pursue strict punitive measures if Baghdad violates sanctions and continues to import certain forms of energy from Iran.
