Iraq’s energy paradox: Oil power, electricity vulnerability

Holding roughly 145 billion barrels of proved crude reserves, Iraq ranks among the world’s major petroleum powers, yet its electricity system still comes under severe strain each summer. In 2024, available peak supply stood at about 25 GW, against roughly 48 GW needed to meet summer peak demand, according to the US Energy Information Administration (EIA). The mismatch reflects less a shortage of energy resources than decades of weak gas capture, inefficient generation and exceptionally high transmission and distribution losses.

Oil rich, power poor

The weakness begins inside the grid. The International Energy Agency estimates Iraq’s transmission and distribution losses at around 50–60 per cent, among the highest in the world. Ageing infrastructure explains part of the problem, but technical losses are compounded by weak metering, poor tariff collection and unauthorised consumption.

A new generation therefore enters a system that is itself unable to deliver electricity efficiently to consumers.

Fuel use exposes another distortion. The EIA estimates that Iraqi power stations burned an average of around 200,000 barrels of crude oil per day in 2023 because natural gas supply was insufficient. For a state whose public finances depend heavily on petroleum exports, using exportable crude simply to keep power stations operating is an expensive substitute for a functioning gas system.

The flaring problem and the Iranian lifeline

Iraq’s gas balance is more politically consequential than its oil abundance suggests. The country produces large volumes of associated gas, but for years has flared part of it while importing Iranian gas for electricity generation. Reuters reported that Iraq imported about 9.5 billion cubic metres of Iranian gas in 2024, covering roughly a third of its gas needs for power generation.

That dependence has placed a domestic electricity problem inside a wider sanctions architecture. In March 2025, Washington ended the waiver that had allowed Iraq to buy electricity directly from Iran as part of the renewed US “maximum pressure” policy.

Gas imports remained a separate issue, but Baghdad’s room for manoeuvre has repeatedly depended on US sanctions decisions and payment arrangements rather than on Iraqi energy policy alone.

Sanctions, swaps and the Turkmen route

Baghdad’s attempt to bring in Turkmen gas showed how difficult it is to diversify when the transit route remains politically constrained. Iraq planned to import 5.025 billion cubic metres of Turkmen gas annually through a swap arrangement with Iran, with Tehran retaining part of the gas rather than receiving a direct cash payment.

The arrangement failed to secure US approval. Reuters reported in September 2025 that Washington objected because the route still involved sanctioned Iran. Supplier diversification, in other words, offered little strategic insulation when both transit and settlement remained exposed to the same geopolitical pressure.

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Regional interconnection as strategic hedging

Iraq has meanwhile been widening its electricity links with neighbouring systems. The GCC Interconnection Authority is building a 400-kV line from Al-Wafrah in Kuwait to Al-Faw in southern Iraq, designed initially to supply about 500 MW and enable future electricity trade between Iraq and Gulf states.

The significance lies less in the first 500 MW than in the accumulation of options. Alongside existing or developing links with Iran, Jordan and Turkey, the Gulf connection gives Baghdad greater flexibility during shortages and reduces the risks of relying on a single corridor. Regional interconnection is most useful when treated as a hedge, not as a substitute for domestic reform.

GGIP and the problem of implementation

The domestic side of that reform is increasingly tied to the Gas Growth Integrated Project (GGIP). TotalEnergies says the programme includes an initial 300 million cubic feet per day gas treatment plant, recovery of previously flared gas from southern fields and a 1 GW solar facility. The processed gas is intended for Iraq’s national grid and power sector.

Yet GGIP also illustrates a recurring Iraqi difficulty: implementation. The agreement was signed in 2021, but disputes over the ownership structure delayed progress before a revised arrangement was settled in 2023. By September 2025, TotalEnergies said all major parts of the project were in execution. The project could materially reduce flaring and import dependence, but its history is a reminder that Iraq’s energy deficit has never been only a question of geology or finance.

From oil power to energy security

For decades, Baghdad’s energy strength was measured in barrels leaving Basra. Today, state capacity is tested elsewhere: in whether Iraq can capture the gas it currently flares, cut crippling grid losses and use regional interconnections to widen its strategic room for manoeuvre.

The ingredients of a more resilient system are already visible—domestic gas development, grid rehabilitation, solar generation and a broader network of cross-border links. What has been missing is the ability to make them function as one energy strategy. Iraq has never lacked energy resources; its persistent weakness has been the governance and infrastructure needed to turn them into reliable power and greater diplomatic autonomy.

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