Minister Ali Allawi's comments to the Atlantic Council on the future of his country's energy sector follow Iraq's latest round of strategic dialogue with the United States, a longtime adversary of Iran.
“This is 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 Gulf grid,” Allawi said. “The dependence on Iranian electricity and energy will begin to trail down significantly sometime next year.”
Allawi was part of a delegation accompanying Iraqi prime minister Mustafa al-Kadhimi on his visit last week to Washington, where a second round of US-Iraq strategic dialogue took place. Talks focused on security, economic, and energy cooperation between the two countries.
Iraqi Prime Minister Mustafa al-Kadhimi and US President Donald Trump both highlighted expanding economic ties in comments to the media after a meeting in the White House on Thursday.
Baghdad and Washington signed a series of oil and energy agreements to develop Iraq’s energy sector. Among them was an agreement with US energy giant Chevron to "develop the Iraqi oil and gas sector," the finance minister told the Atlantic Council.
Also discussed in Washington was energy sector investment from Riyadh.
“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.
Iraq has long suffered from chronic outages and shortages of electricity in a country where summer temperatures reach 50 degrees Celsius. Rampant electricity shortages have in past years been a rallying call for protestors, most notably in the summer of 2018.
War, corruption, insecurity and lack of investment have all together contributed to a deteriorating grid, leaving Iraqis at times with as little as five hours of national electricity per day. Privately owned generators set up in neighborhoods try to supplement the lost hours, making Iraqis pay twice for electricity.
To make up for the shortage, Iraq has been importing electricity and natural gas to power its generation stations from neighboring Iran, much to the ire of Washington, which has imposed crippling economic sanctions on Tehran.
Washington has granted Baghdad several waivers to continue imports of Iranian energy without penalty, but ultimately expects it to gradually reduce its reliance on Iranian gas and electricity imports.
The current waiver, Iraq’s ninth, issued in May, gives the country 120 days to continue its energy imports without financial penalties for the trade that has otherwise been banned by the US, after Washington withdrew from the 2015 nuclear deal and began reimposing sanctions on Iran in November 2018.
The current waiver is due to expire next month.
Iran exports 1200-1500 megawatts of electricity to Iraq on a daily basis, in addition to 38 million cubic meters of natural gas to feed several of Iraq’s power stations, according to Sayyid Hamid Hosseini, secretary general of Iran-Iraq Joint Chamber of Commerce. In June, Baghdad and Tehran signed a two-year contract to continue the imports.
Iraq has also signed deals with German giant Siemens and American General Electric to overhaul its outdated electricity grid.
