WANA (Mar 13) – The United States has announced that it will no longer extend Iraq’s sanctions waiver for purchasing energy from Iran. While this decision appears to be aimed at pressuring Tehran, in reality, it plunges Iraq into an energy crisis, a geopolitical dilemma, and perhaps even a dangerous crossroads.

 

The chairman of Iraq’s parliamentary finance committee told the U.S. chargé d’affaires:

 

“Halting gas imports from Iran will have catastrophic consequences for Iraq and will lead to the collapse of our power grid.”

 

Iraq’s Dependence on Iranian Energy: A Crisis Long in the Making

Electricity has always been a crisis in Iraq. Since the Gulf War in the 1990s, the country has struggled with power shortages, and during scorching summers, widespread blackouts have sparked street protests. Despite billions of dollars invested in the energy sector, Iraq remains heavily dependent on Iranian gas to keep its power plants running.

 

According to official data, Iran exports around 40 million cubic feet of gas to Iraq daily. Without this supply, at least 6,000 megawatts of Iraq’s power generation capacity would be lost. While Iraq needs to produce 40,000 megawatts to meet national demand, its current output barely reaches 26,000 megawatts. Given this undeniable reliance on Iranian gas, Washington’s sudden decision to revoke the waivers has forced Baghdad to confront a harsh reality: breaking away from Iran overnight is not an option.

 

The U.S. move is not just an economic measure; it is a political maneuver. The Biden administration had initially extended these waivers, but with Trump’s return, the “maximum pressure” campaign against Iran is back in play.

 

In mid-February, Donald Trump signed a presidential memorandum to reinstate maximum pressure on Iran. However, he stated that he hopes the directive won’t need to be enforced and that a deal with Tehran can be reached.

 

Trump has reportedly sent a letter to Ayatollah Khamenei, though its contents remain undisclosed. However, he has claimed that the letter warns Iran of two choices: negotiate or face military action.

 

Despite this, Iran’s Supreme Leader reaffirmed his opposition to negotiations following Trump’s remarks.

 

U.S. Strategy: Squeezing Tehran and Pressuring Baghdad

Washington aims to tighten Iran’s financial constraints—something State Department spokesperson Tommy Bruce confirmed in an interview with Reuters:

 

“We will not allow Iran to benefit from any economic or financial assistance from any country.”

 

But beyond Tehran, another target of U.S. pressure is Baghdad. For years, Washington has sought to reduce Iranian influence in Iraq, but Baghdad has continually balanced its relations between Tehran and Washington. Now, by revoking the waivers, the U.S. is disrupting this balance and forcing Iraq to choose: either find an alternative energy source or face increased American pressure.

 

What Are Iraq’s Options?

1. Relying on domestic gas? Not feasible—at least two years are needed.

 

Ali Saadon al-Lami, a member of Iraq’s parliamentary oil and gas committee, has explicitly stated that Iraq currently has no alternative to Iranian gas. He warned that a sudden halt in imports would reduce electricity supply hours in Baghdad and other provinces.

 

 

2. Replacing Iran with other suppliers? Not anytime soon.

Iraq has explored importing electricity from countries like Turkey and Jordan, but these solutions require time and significant investment. Additionally, establishing the necessary infrastructure for LNG imports from Qatar or the U.S. would be a long and costly process.

 

 

3. Turning to Russia and using the Mir payment system? A possibility, but a risky one.

Some experts suggest bypassing U.S. sanctions by using Russia’s Mir payment system. However, this move would expose Iraq to further economic and political pressure from Washington.

 

Potential Fallout: Domestic Unrest and Political Instability?

As summer approaches, Iraq faces the risk of a major social crisis. For years, power outages in Baghdad’s 50°C (122°F) heat have fueled mass protests. Now, with the sanctions waivers revoked, large-scale demonstrations—especially in southern Iraq—are more likely, potentially impacting the entire region.

 

Some Iraqi lawmakers believe this situation could push Iraq toward closer cooperation with Trump’s administration, but it would also exacerbate the country’s liquidity crisis.

 

How Will Iran Respond?

From Tehran’s perspective, Iraq is a strategic partner in the region. Iran not only supplies Iraq with gas and electricity but also relies on the Iraqi market as a crucial source of foreign currency. In recent years, Tehran has used Iraq as a conduit to bypass sanctions, making the economic relationship between the two countries far more significant than just energy trade.

 

If Iraq is forced to seek alternative suppliers, economic ties between Baghdad and Tehran will be strained. However, will Iran simply allow this market to slip away?

 

Iran has two primary options:

1. Find a new financial mechanism to continue receiving payments from Iraq without relying on U.S.-controlled banking systems—such as barter trade or working with non-Western banks.

 

2. Cut gas exports to Iraq to demonstrate the consequences of halting cooperation.

 

Given Iran’s track record of maneuvering around sanctions, it is likely to explore indirect solutions to maintain gas exports. However, if the U.S. moves to block Iraq’s payment channels, the situation could quickly escalate into a broader crisis.