Page 11 - DMEA Week 05

DMEA POLICY DMEA
Iraq looking at alternatives to Iranian gas
IRAQ
Iranian supply is judged as too unreliable.
THE spokesman of Iraq’s Electricity Ministry has said that Iraq is searching for alternatives to gen- erate the electricity it needs, including develop- ing its own natural gas production, because Iran is now exporting only a fraction of the natural gas agreed upon for the current year. Speaking to Al Sabah newspaper, Ahmed al-Abadi said Iran was currently exporting only around 3mn cubic metres of natural gas to Iraq out of the agreed 25 mcm quota for the current year.
According to an agreement signed between the two countries in 2011, Iran is obliged to deliver 50 mcm of natural gas to Iraq per day. But Iran’s production is apparently not enough to satisfy domestic demand and meet the coun- try’s full export commitments. Iraq heavily relies on Iranian natural gas imports to fuel its power plants, as its own resources have not been developed. In a country where the government has struggled for years with meeting electricity and gas demand, an energy shortage can have serious political rami cations: blackouts and gas shortage can potentially fuel mass protests. Baghdad could ease its energy dependency if it can nd a contractor to capture natural gas ares from its oil elds, which are currently burned o . Abadi said ministers had already met “to discuss alternative fuel sources and prepare the Ministry of Oil [MoO] to ll the shortage that has occurred at production stations”. Given the instability in sanctions-hit Iran, the gas short- age could become more acute. “It is possible that there could be further drops in gas pumped for longer periods... this drop happens every year,
but the drop has been higher this year,” Abadi added.
Iran has struggled to recoup payments for its electricity and gas from Iraq since the US gov- ernment withdrew from the 2015 nuclear deal and re-imposed economic sanctions on Tehran, which effectively cut Iran off from the global nancial system. In February 2019, when Iran’s central bank governor Abdolnasser Hemmati met with his Iraqi counterpart in Baghdad, they signed an agreement on a payment mechanism for Iraq to settle its dues, but owing to payment issues resulting from US sanctions during the past year Iraq has not been able to pay in dollars, and foreign currency-deprived Iran has not con- sented to be paid in Iraqi dinars, which, given the circumstances, is the only possible way. e last 90-day waiver that the US gave to Iraq to con- tinue purchasing gas and electricity from Iraq will expire in February, a er which date Iraq’s Commerce Bank has to stop any transactions with Iran.
According to Iran’s Oil Minister Bizhan Zan- ganeh, Iraq now owes $2bn to Iran for gas and electricity imports, which it cannot pay. While the tendering process is still underway to con- tract a rm to capture Iraq’s gas ares, Abadi said the government was hoping for another waiver “due to Iraq’s urgent need for electricity”. e US has long urged Iraq to wean itself o Iranian energy imports. In a bid to diversify its sources of energy, Baghdad has been developing network connections with its wealthy Arab Gulf neigh- bours. ™
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