Closer ties with GCC can help Iraq dilute Iran's meddling power

Iraq’s southern neighbours have little influence in the country but there is much they could do to mutual benefit

A man checks the wiring on electric cables reaching out to homes in the Iraqi capital Baghdad. Iraq’s renewable energy plans have moved slowly so far. AFP

Post-invasion Iraq and Iran are linked by invisible bonds. On Thursday, it was reported that Iraqi prime minister Adel Abdul Mehdi would resign following weeks of protests, and more than 200 demonstrators killed by security forces. Iran, blamed by many of the protesters, was lobbying to preserve its interests.

But Iraq needs a more balanced relationship with its neighbours, and one key linkage is energy.

As well as the intangible chains of corruption, patronage and influence that bind many in the Iraqi establishment to Tehran, there are physical connections. Iran has export capacity of about 1.6 billion cubic feet of gas daily, as much as Iraq uses from its own fields. It also sends up to 1.2 gigawatts (GW) of electricity, about 6 per cent of peak generation capacity.

In September, Iraq signed a deal to connect to the GCC electricity grid, to carry 0.5GW next year and up to 2GW eventually.

Iran earns about $1 billion (Dh3.67bn) from gas and $700 million from electricity sales to Iraq per year – not an enormous amount, but useful while US sanctions have cut its oil export revenues to around $10bn annually.

Various significant rivers – the Karkheh, Karun, Lesser Zab and Diyala – flow from the Zagros mountains into the Tigris and the Shatt Al Arab, crucial for keeping Iraq cool and refreshed, but Iran has dammed these in recent years.

Last summer, a heatwave struck Iran, overloaded its power grid and dried out dams. Tehran also complained of Iraqi non-payment and cut off electricity supplies. Tens of thousands of Basrawis were hospitalised by contaminated water, due to lack of water treatment and exacerbated by upstream Turkish dams.

Widespread protests erupted throughout Basra and other parts of southern Iraq. This eventually undermined prime minister Haider Al Abadi’s campaign for a second term, despite his administration’s defeat of ISIS.

This year, a wet winter, sustained gas and power supplies from its eastern neighbour, and new investment in the electricity sector has considerably improved the situation. Protesters’ complaints have been more about unemployment, corruption and sectarian politics, with Baghdad the focal point rather than Basra.

The exports of energy and water are another source of leverage for Tehran, particularly over a government that might try to chart a more independent course. Meanwhile Turkey controls the headwaters of the Tigris and Euphrates, as well as the autonomous Kurdistan region’s oil and potential gas exports and has forged an alliance with the dominant Kurdistan Democratic Party.

Iraq’s southern neighbours, by contrast, have little influence in the country. Yet there is much they could do to mutual benefit, helping the Iraqi economy and living standards, building relationships and goodwill, and diversifying the country’s partnerships.

At September’s Iraq Energy Forum, there were some welcome signs, with senior attendance from regional companies in tandem with diplomatic overtures. Riyadh reopened its consulate in Baghdad in April and announced that the Arar border crossing, closed since the 1990 Gulf War, will be reactivated. Saudi Aramco and its now 70-per cent subsidiary Sabic have discussed investments in Iraqi gas fields and in the Shell-led Nebras petrochemical venture.

In September, Iraq signed a deal to connect to the GCC electricity grid, to carry 0.5GW next year and up to 2GW eventually. In February, it had agreed to build a connection for 0.3 GW with Jordan. An oil pipeline to Aqaba, to diversify its export routes away from the crowded and volatile Arabian Gulf, has long been discussed.

But there is much more that could be done. GCC states could work with the UK, which has pledged £2bn in export financing, and with the EU-Japan global infrastructure initiative backed by €60bn of European money.

Iraq flares off unwanted gas, polluting the Basra skies, while just a few kilometres to the south, Kuwait burns sulphurous oil and relatively costly imported liquefied natural gas for power. The neighbours could swap gas and electricity.

In July last year, the Iraqi electricity ministry announced, then denied, an agreement to buy power from a 3GW solar plant to be built in northern Saudi Arabia. As solar output in the GCC and Jordan grows, they will have a surplus at certain times. Their neighbour would be a useful outlet.

Iraq’s own renewable energy plans have moved slowly, due to ministry bureaucracy and the problems of defining acceptable payment mechanisms. But regional solar success stories such as Acwa, Masdar and a variety of smaller Jordanian and UAE firms could invest if backed up by their governments.

Iraq’s narrow sea frontage makes its oil export terminals vulnerable to sabotage and simple bad weather. The long pipeline to Aqaba is one alternative, but a simpler fix could be an agreement to tie into the Kuwaiti system. Iraq’s compliance with the Opec+ agreement on production cuts has been quite weak; incentives for better adherence could be through support on key priorities in reliable oil exports, storage and refining.

With Iraq and Iran sharing a 1458 kilometre border and much in the way of economic, religious, historic and cultural ties, GCC states can help Baghdad by deeper economic engagement that will help build relationships and institutions, and give Iraqis an alternative while diluting Iran’s influence.

Robin M Mills is chief executice of Qamar Energy, and author of The Myth of the Oil Crisis