As temperatures soar this summer, Iraq faces another electricity crisis that threatens to leave millions grappling with prolonged power cuts amid the stifling heat.
The combination of rising power demand and infrastructure limitations has put immense strain on the national grid, exacerbating an already dire situation.
“It’s like disco lights,” Baghdad resident Hasanain Ahmed told The National from his upscale Al Mansour district.
As is the case with many Iraqis, the father of four depends on his own generator and a communal one that powers the neighbourhood.
“Nearly a quarter of my income, about $1,000, goes to electricity per month in order to keep the lights, AC [air conditioning unit] and other apparatuses on in my home and the clinic,” said Mr Ahmed, 52, a dentist.
Iraq has spent at least $60 billion on the electricity sector since 2003 US-led invasion that toppled Saddam Hussein, former prime minister Mustafa Al Kadhimi said in late 2020.
Aside from money lost to corruption, much has been misallocated.
The heatwaves that have enveloped the country have led to a huge surge in electricity demand as citizens increasingly rely on air conditioning and other cooling systems.
However, the strained national grid has struggled to meet the increase in demand, resulting in prolonged power cuts and a lack of respite from the oppressive heat.
Last week, the Electricity Ministry announced that power generation stood at 24,000 megawatts, an increase of 22 per cent from the same period last year.
“But that’s still not enough to supply electricity for 24 hours,” Minister Zaid Ali Fadhil told a state-run TV station, adding that demand was about 34,000MW.
Power cuts, which have become a daily occurrence for many Iraqis, have had a devastating impact on everyday life.
Homes, businesses, hospitals and other critical centres are left without electricity for extended periods, leading to disruptions in essential services.
This has spoilt food supplies and heightened health risks, particularly for vulnerable populations.
Iraq’s southern province of Basra, the country’s hottest region, endured a power cut of nearly 24 hours last week before supplies were restored gradually.
“It was like hell,” said Munthir Ali, 33, a supermarket owner in Basra. “Freezers and refrigerators stopped as private generators were not able to work for hours, spoiling all food supplies such as ice creams and meat.”
The country's power infrastructure has deteriorated due to decades of war and neglect, exacerbated by insufficient investment.
The outdated and overburdened transmission network struggles to cope with the demands of a rapidly expanding population.
The situation has led to public frustration and protests, with citizens demanding immediate and sustainable solutions to the electricity crisis.
Many Iraqis argue that resolving this issue should be a top priority, given the crucial role electricity plays in maintaining a decent standard of life, particularly during extreme weather.
“It’s a shame. We are awash with oil revenue but we have not been able to fix our power grid,” Mr Ali said.
To alleviate the crisis in the short term, the government has introduced a rotating power cut schedule in an attempt to distribute available electricity more equitably across different regions.
It offers subsided fuel to neighbourhood generators and sets the tariffs. Offenders who charge above that will be jailed, it warns.
However, sporadic electricity supplies continue to cause significant inconvenience and economic disruptions that affect businesses and productivity.
Despite being Opec’s second-biggest producer, Iraq depends on Iran for about a third of its power needs. When gas supplies drop, several areas in the country are in the dark for hours.
However, since last year, Iraq has taken some steps to develop its natural gas resources and the electricity sector, signing multibillion deals with international companies, including GE from the US and Germany’s Siemens.
It has also awarded deals for renewable energy projects.
Baghdad is also in talks with Gulf states and Jordan to import electricity but these discussions have yet to result in permanent deals.
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Company%20Profile
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Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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