Iraq’s bid to alleviate power crisis with Turkmen gas deal fails under US pressure

Iraq’s attempt to ease its chronic electricity shortage by importing natural gas from Turkmenistan via Iran has collapsed under US pressure, forcing Baghdad to urgently seek alternative energy sources.

The 2023 proposal involved a gas swap: Turkmenistan would export roughly 5 billion cubic metres (bcm) of gas annually through Iran to Iraq, using Iran’s state-owned National Iranian Gas Company (NIGC) as the intermediary. Under the arrangement, Iran would not receive any payment but would retain up to 23% of the daily gas volume for domestic use. To avoid violating US sanctions on Iran, Iraq offered to involve a third-party international monitor to ensure compliance with anti-money laundering and sanctions regulations, Reuters reports.

Despite months of lobbying, Washington refused to approve the deal.

“Proceeding (with the Turkmen deal) could trigger sanctions on Iraqi banks and financial institutions, so the contract is currently suspended,” said Adel Karim, an adviser to Iraq's prime minister for electricity affairs.

A US source told Reuters that the Trump administration would not endorse any deal that might benefit Iran, although it continues to work with Iraq to meet its energy needs.

Iraq, OPEC’s second-largest oil producer, has long depended on Iranian gas to cover nearly a third of its power generation. In 2024, imports reached 9.5 bcm, but a lack of domestic infrastructure means much of Iraq's own gas is flared rather than captured.

“If we lose Iranian gas, we’ll face a serious problem in electricity generation,” Karim warned.

In March, the US ended a sanctions waiver that had allowed Iraq to pay for Iranian electricity and gas since 2018. The move resulted in a loss of 3,000 megawatts of generation capacity—over 10% of Iraq’s total—impacting an estimated 2.5 million homes. A May 27 letter from Iraq’s electricity ministry warned that without the Turkmen deal, Iraq could face severe shortages during peak summer demand. The warning proved prescient as a nationwide blackout hit in August.

With the Turkmen option blocked, Iraq is turning to liquefied natural gas (LNG) imports from Qatar and Oman, and plans to lease a floating LNG terminal, according to Hamza Abdul Baqi, head of the South Gas Company. Iraq has also partnered with global energy giants like TotalEnergies, BP, and Chevron to accelerate domestic gas development.

“We’re expanding our gas-fired power plants,” Karim added. “We’ll need more gas and more sources.”

By Vafa Guliyeva