How the Iranian oil 'lifeline' ended up suffocating Iraq

Flames rising from the burning of excess hydrocarbons at the Nahr Bin Omar natural gas field, north of the Basra on 22 January, 2018. [Getty]
4 min read
28 May, 2021
Analysis: Iran is trying to economically and politically subjugate Iraq through its oil exports, as shortages trigger mass electricity blackouts and demonstrations.

Iraqi protests can be directly linked to the country’s energy situation, as electricity shortages demonstrate both the government’s failure to provide essential services and the extent of Iranian influence in the country. 

The situation in Iraq may soon become explosive, as the country’s Ministry of Planning indicates that this summer's supply of electricity is unlikely to meet demand.

Electricity production capacity is decreasing as Iran restricts oil exports, while energy demand is increasing (at a rate of 7% - 10% annually) due to population and economic expansion. Iraq has suffered from limited access to electric power since the Iraq War in 2003, which has forced Iraqis to resort to costly alternatives, such as electric generators, to live and work.

Iraqi protest 

In the past week, hundreds of protesters from southern Iraq have travelled to Baghdad to demonstrate against the murder of activists, reputedly by Iran-backed militias. 

This activism is a continuation of an anti-government protest movement that has occupied parts of Baghdad and southern Iraqi cities since 2019, decrying Iraq's corrupt political system, Iranian interference in politics, Iranian support for armed militias, and the deterioration of services, including drinking water and electricity.

Past protests have struggled against repression at the hands of government authorities and Iran-backed militias.

When protests paused in 2020 due to Covid-19, the government continued to assassinate dissenting activists and journalists. These assassinations reignited protest, which was, once again, repressed using deadly force by Iraqi authorities, paramilitaries, and militias such as the Popular Mobilization Forces and Militia Rubu Allah.

 "Assassinations reignited protest, which was, once again, repressed using deadly force by Iraqi authorities, paramilitaries, and militias"

To this day, security forces confront protesters in Baghdad and southern Iraqi cities with excessive force and violence.

Iraq's overdue gas bill

Iran's creeping economic and political influence in Iraq has nurtured Iraqi dependence on Iranian oil.

This summer, Iran is reducing oil exports to Iraq by 90% due to overdue payments, a move bound to exacerbate an already-acute electricity shortage in Iraq.

Harry Istepanian, an energy expert based in Washington DC, said, "The electricity shortage is worsening, mainly because Iran reduced the gas supply from 50 million cubic metres to 5 million a year ago, due to the overdue payments."

He noted that, at current levels of Iranian oil import, Iraq is producing 15,000 MW of electricity. The expert forecast severe electricity shortages this summer, when Iraq is predicted to need at least 22,000 MW.

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Iraq currently owes more than $2.76bn to Iran. Iraq’s financial crisis and political corruption have prevented the repayment of debts.

Sabah Eulu, an Iraq expert, reports that Iran “blackmails” the Iraqi government, preventing it from economically opening up to neighbouring countries. Iran then uses its monopoly to sell marked-up oil to Iraq at a rate estimated to be five times the global price. 

Furthermore, reportedly, Iran is attempting to keep Iraq politically and economically in its shadow by obstructing investment, especially in energy and gas. 

The insecurity surrounding Iraq’s promising Akkas and Mansouriya fields have contributed to the retreat of most international investment companies from working and investing in Iraqi oil. Furthermore, instability around the Umm Qasr and Khor Al-Zubair ports in Basra prevents Iraq from importing oil from maritime neighbours, such as Qatar.

With reduced investment in Iraqi oil infrastructure, restricted import potential, and high electricity demand, Iraq finds itself with no other option than importing Iranian oil. 

"Iran is attempting to keep Iraq politically and economically in its shadow"

Wasted natural resources

Energy experts confirm that Iraq has the ability to compete in the global market if its oil production is developed. Promising sites include the Mansouriya Field, which contains five trillion cubic metres of oil, and the Akkas Field, which contains 11.5 trillion cubic metres of oil.

Eulu stated that, despite Iraq’s status as eleventh in the world in terms of natural gas resources, the country does not benefit from its production of natural gas. As the oil drilled in the area contains high levels of minerals such as hydrogen sulfide and sulfur, Iraqi oil needs extensive processing. 

This oil needs to be processed by expensive refining stations in order to be suitable for consumption and export, however, such stations are severely underfunded. Therefore, 180 million cubic metres of Iraqi oil are burned each year to extract crude oil.

Iraq burns more than half of the natural gas that its fields produce, with the soot falling on houses near oil fields. This pollution increases the likelihood of many diseases, including asthma and certain types of cancer. These effects have been especially pronounced in Basra, southern Iraq.

Despite all of the negative externalities caused by Iraq's reliance on Iranian oil, experts predict that Iraq will not be able to cut its dependence for at least five years. To do so, Iraq needs to regulate energy consumption, build more power stations and infrastructure, and develop alternative energy sources.

Sanar is an Iraqi journalist covering Baghdad with a special focus on gender, refugees, and displacement.

Follow her on Twitter: @HasanSanar