Iran says it signed two-year deal to export electricity to Iraq

A crippled utilities network was a key factor fuelling protests across Iraqi provinces during summer months, when temperatures can easily reach 50°C. AFP

Iran signed a two-year agreement with neighbouring Iraq to export electricity as Baghdad struggles to add power capacity following months of political deadlock and an ongoing health crisis.

"We signed a contract with Iraq for exporting electricity in 2020 and 2021,” Iranian energy minister Reza Ardakanian said following his visit to Baghdad on Wednesday, in comments reported by Iran’s official news agency Irna.

"With coordination of the Iranian embassy in Iraq, half of the disbursement worth $400 million (Dh1.47bn) was received during the trip,” he added.

The Iraqi oil ministry was not reachable for comment.

Rebuilding Iraq's power infrastructure, damaged by decades of war, is high on the government’s list of priorities. A crippled utility network has been a key factor behind protests across Iraqi provinces during summer months, when temperatures can easily reach 50°C, occasionally requiring government-mandated holidays to cope with the extreme weather.

US Secretary of State Mike Pompeo announced a 120-day waiver in May for Baghdad to continue importing electricity from Iran.

This followed an earlier temporary waiver in April granting continued imports of Iranian electricity.

Iraq's electricity rehabilitation programme, which relies on multinational companies to rebuild damaged utilities, develop new schemes and tackle persistent gas flaring, has dragged following geopolitical tensions earlier this year between the US and Iran, in which Baghdad was caught in the crossfire.

Iraq also plans to import electricity from neighbouring Jordan as well as from the regional GCC Interconnection Authority grid, though reliance on Iranian gas is set to continue for the forseeable future.

The International Energy Agency said last month it would 'step up' its support for Iraq, Opec's second-largest oil producer, as it faces possible delays in implementing critical projects due to the fall in oil prices.

Iraq's net revenue from oil could fall by as much as 70 per cent this year as a result of the slowdown in demand from the Covid-19 pandemic and supply restrictions put in place by producers to rebalance the market, according to the Paris-headquartered body.

Oil prices declined more than 70 per cent in April – the bleakest month for demand – from the beginning of the year, widening fiscal deficits for many of the Middle East's oil exporters.

The delay in the formation of a new government in Iraq by nearly six months has also impacted the implementation of several critical projects.

The electricity ministry had planned to raise overall power capacity in Iraq to 22GW by the summer of 2020, Iraq's outgoing electricity minister, Luay Al Khateeb told The National in an interview in September last year. The country's power generation capacity currently stands at 19.2GW.