For years, Baghdad relied on US-issued waivers to continue importing Iranian gas, enabling Iraq to power its electricity stations. [Getty]
US President Donald Trump on Wednesday signed an executive order that ended a waiver to Iraq buying gas from Iran to generate electricity.
Experts and lawmakers told The New Arab that the measures might worsen Iraq’s chronic power shortages, which destabilise the country’s fragile political, economic and security crises.
The executive order, entitled The National Security Presidential Memorandum (NSPM-2), aims to impose “maximum pressure” on the Iranian government, denying Iran from producing a nuclear weapon, and countering Iran’s “malign influence”, however, it also impacts Iraq’s energy and financial systems.
The Secretary of State was tasked with tightening sanctions on Iran by revoking financial waivers, blocking Iranian oil exports, isolating Tehran diplomatically, and preventing Iran from using Iraq’s financial system and Gulf states to evade sanctions.
The order also directs US agencies to lead international diplomatic efforts to isolate Iran, restricting the movement and safe haven of the Islamic Revolutionary Guard Corps (IRGC) and affiliated groups beyond Iran’s borders.
Pro-Iran militias in Iraq thus are expected to be included in the sanctions.
“Early warnings for next summer have already been issued by the government, signalling challenging times ahead—especially as Iran is unable to supply Iraq with the agreed volume of approximately 50–55 million cubic meters per day. Additionally, Iraq faces difficulties in securing a payment mechanism for the purchased fuel,” Harry Istepanian, an independent energy expert based in Dubai told TNA.
“One potential solution is joining the Russian Mir payment system while urging IOCs and local oil companies to develop gas projects to expedite their completion and finalize a gas swap agreement with Kazakhstan,” he added.
“The electricity crisis could destabilize Iraq’s political landscape—an issue the United States must take into account. Without an immediate solution to replace Iranian gas, Iraq may face another wave of protests or even riots, particularly in the south,” Istepanian cautioned.
He also warned the Trump administration that isolating Iran might “destabilise the entire region,” particularly because Syrian developments could embolden extremist factions like ISIS.
Electricity Woes
Ahmed Musa, spokesperson for Iraq’s electricity ministry, this week told Iraq’s News Agency that the ministry plans to expand power generation with steam and gas plants, adding 35,000 megawatts to meet rising demand. The government is pursuing foreign investment, international loans, and state funding, with GE and Siemens as key partners. Linked to domestic gas development, the initiative aims to bridge the energy gap and establish a stable electricity network within 4-5 years.
Trump’s executive order also affects the semi-autonomous Kurdistan Region. Kurdish authorities are being asked to halt truck smuggling of up to 25,000 barrels of regional oil to Iran per day, or else they would be subject to US sanctions.
The Kurdistan Regional Government (KRG) on Wednesday instructed its natural resources ministry to collaborate with international oil companies and Iraq’s State Organization for Marketing of Oil (SOMO) to restart Kurdish oil exports “as soon as possible.”
The KRG’s directive followed a recent amendment to the federal budget law passed by Iraq’s parliament, which raised compensation for international oil companies operating in the Kurdistan region to $16 per barrel.
Jamal Kocher, an Iraqi lawmaker from the finance committee, told TNA “The US measures will have both negative and positive implications. The key question is how Iraq can replace Iranian gas—experts must address this. Although chaos plagues Iraq due to foreign interference, these US policies might ultimately bring some positive changes.”
Kocher suggested the measures may not harm the dinar’s exchange rate against the dollar and could benefit Iraq if the government aligns more closely with the Trump administration. Still, he pointed out that Iraq suffers from a cash liquidity problem with no simple fixes in sight.
Since the start of this year, Iraq has ceased its daily dollar auctions at the Central Bank of Iraq (CBI), opting instead for deals with foreign nations to supply private banks with foreign currency. Critics argue that the daily sale—previously about $274 million—funnelled hard currency to Iran and neighbouring states under false pretences, worsening Iraq’s liquidity woes.
Iran, which wields substantial political and military influence in Iraq, has traditionally used its neighbour to circumvent international sanctions.
As summer approaches, rising electricity demand could spark public anger that could lead to destabilise the country.
