On Wednesday, US President Donald Trump signed an executive order that effectively ended a waiver allowing Iraq to import natural gas from Iran for electricity generation. The move has raised concerns among experts and lawmakers, who warn that it could exacerbate Iraq’s ongoing power shortages, further destabilizing the country’s already fragile political, economic, and security situation.
The order, titled The National Security Presidential Memorandum (NSPM-2), aims to increase pressure on Iran by denying its ability to produce nuclear weapons and counteracting its influence in the region. However, the order’s impact extends beyond Iran, affecting Iraq’s energy and financial sectors as well.
As part of the executive order, the US Secretary of State is tasked with ramping up sanctions on Iran, revoking financial waivers, blocking oil exports, and isolating Tehran diplomatically. The US also seeks to prevent Iran from using Iraq’s financial system or Gulf states to bypass sanctions. The order further directs US agencies to lead international efforts to isolate Iran, restricting the movement of the Islamic Revolutionary Guard Corps (IRGC) and affiliated groups. This could also include pro-Iran militias operating in Iraq.
Experts have already raised alarms about the potential consequences for Iraq. Harry Istepanian, an independent energy expert based in Dubai, told The New Arab that Iraq may face even more severe electricity shortages in the coming months. He noted that Iran is struggling to meet the agreed supply of 50–55 million cubic meters of gas per day to Iraq and is also facing challenges in securing payment for the fuel.
Istepanian suggested that Iraq could explore joining Russia’s Mir payment system and collaborate with international oil companies to expedite local gas projects. However, he warned that without a solution to replace Iranian gas, Iraq may see another wave of protests or riots, especially in the southern regions where power shortages are most severe.
He further cautioned that Trump’s policy towards Iran could destabilize the entire region, potentially emboldening extremist groups like ISIS, as the situation in Syria worsens.
Efforts to Address Electricity Shortages
Iraq’s electricity ministry, in response to the growing crisis, announced plans to expand power generation by adding 35,000 megawatts through new steam and gas plants. The government is seeking foreign investment, international loans, and state funding, with companies like GE and Siemens playing key roles in the initiative. This plan, linked to domestic gas development, aims to reduce the energy gap and establish a stable electricity network within the next 4 to 5 years.
Impact on the Kurdistan Region
Trump’s executive order also affects the semi-autonomous Kurdistan Region, with Kurdish authorities now being asked to halt the daily smuggling of up to 25,000 barrels of oil to Iran. Failure to comply could result in US sanctions. In response, the Kurdistan Regional Government (KRG) has instructed its natural resources ministry to work with international oil companies and Iraq’s State Organization for Marketing of Oil (SOMO) to restart Kurdish oil exports as soon as possible.
This development follows a recent amendment to Iraq’s federal budget law, which raised compensation for international oil companies operating in the Kurdistan region to $16 per barrel.
Mixed Reactions in Iraq
Jamal Kocher, an Iraqi lawmaker from the finance committee, stated that while the US measures could have both positive and negative implications, the key issue remains how Iraq can replace Iranian gas. He acknowledged that the US policies might bring positive changes, especially if Iraq aligns more closely with Washington. However, he pointed out that Iraq faces significant challenges in terms of cash liquidity, with no easy solutions in sight.
Since the beginning of the year, Iraq has stopped its daily dollar auctions at the Central Bank of Iraq (CBI) and has instead sought foreign deals to supply private banks with foreign currency. Critics argue that the daily sales, which totaled around $274 million, were used to funnel hard currency to Iran and neighboring countries under false pretenses, worsening Iraq’s liquidity crisis.
As summer approaches, Iraq is bracing for higher electricity demand. This, combined with the country’s ongoing economic struggles, could lead to widespread public discontent, further destabilizing an already volatile situation.
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