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MEOG Commentary MEOG
investors are losing interest. Iraq may be espe- cially displeased. Its oil production of around 4.5 million barrels a day will soon hit a ceiling of around 5 million barrels a day, with more growth achievable only by installing big-budget infrastructure projects that centre on pipeline capacity and water injection into oil fields to boost reservoir pressure.
There are some interim steps that Iraq could take, such as increasing the use of industrial water and water recycling, or expanding capac- ity at the Qarmat Ali Water Treatment facility, according to Ahmad Mehdi of OIES. But neither is a substitute for the big projects that Iraq really needs.
Several months before the January 3rd drone strike, the International Energy Agency (IEA) had already revised down its forecast for future Iraqi oil production, from 7.5 down to 6 million barrels per day by 2030. The heightened security risks and Iraq’s increased anti-American state- ments may well force the IEA to push that fore- cast down further.
threat of waiver cancellation
Iraq may have serious problems in securing its energy needs if the United States doesn’t extend a waiver for an Iraqi bank to process payments for Iraq’s imports of electricity and natural gas from Iran.
Major Iraqi power plants are dependent on Iranian natural gas supply, and Iraq imports elec- tricity from Iran, as Baghdad’s power generation is not enough to ensure domestic supply.
The US has regularly extended the waivers for Iraq to continue buying natural gas and elec- tricity from Iran, even after the US slapped sanc- tions on Iran and continued to ramp up those sanctions over the past year. The waiver for the
Iraqi bank handling the payments to Iran in Iraqi dinars expires next month. If the US doesn’t extend the waiver, the bank— Trade Bank of Iraq (TBI)—will stop processing payments, the head of the bank Faisal al-haimus told AFP on Tuesday.
“If the waiver ended, of course TBI will not
pay for any gas or deal with any Iranian entity over gas or electricity. Absolutely,” the bank’s executive told the agency. The bank cannot afford not to comply with all regulations, includ- ing US sanctions on Iranian entities, he said.
The US sanctions typically work by cutting off access to the US banking system of persons or entities that deal with sanctioned countries and businesses, as is the case with Iran.
Iraq’s energy sector may become collateral damage in the recent US-Iran tensions which unfolded on Iraq’s territory. US President Don- ald Trump threatened sanctions on Iraq earlier this month, after Iraq’s parliament called on the Iraqi government to expel foreign troops out of the country.
If the US follows through with the threat, it could block Iraq’s access to a US-based account, where Iraq deposits its oil revenues that make up 90 per cent of the Iraqi budget. Such a sanc- tion move could cause an economic “collapse” in Iraq.™
Week 04 29•January•2020 w w w. N E W S B A S E . c o m P5