Iraq signs historic “oil-gas” swap deal with Iran and with China in construction

Iran – which supplies more than a third of Iraq’s electricity on average – decided in early July to halve its gas exported to Iraq for power plants (-5,000 MW) and shut down the three electrical interconnection lines (-1000 MW).

This caused power generation in Iraq to plummet from 26,000 MW to 20,600 MW within days, compounding an already existing shortage with demand estimated at 34,000 MW. To justify its decision, Tehran had argued an accumulation of unpaid bills from Baghdad. While Iran has been under US secondary sanctions since 2018, Iraq benefits from renewed exemptions from the US at irregular intervals to allow payment of its gas bills to Iran through an account hosted at the Trade Bank of Iraq (TBI), the amounts of which are dedicated to Iran’s import of agro-food and pharmaceutical products.

Delays in Iraqi payments due to these administrative burdens frequently push Tehran to stop its supplies. Although the Ministry of Electricity had reconfirmed on July 10 that it had paid all the amounts due to the account at the TBI, certain complications due to “the absence of approval from the United States for the transfer of funds to the ‘Iran’, according to Prime Minister al-Sudani, would delay payments.

With temperatures expected to exceed 50°C in southern Iraq next week, this agreement would therefore allow Baghdad some continuity in the payment of its import needs, thus avoiding frequent cuts from Tehran. During his public address, the Prime Minister also underlined that the national gas projects launched, in particular the fifth round of licensing (briefs of 06/30) and the TotalEnergies megaproject (see Zoom of the day) will ensure Iraq’s gas autonomy in the medium term.

The Iraqi company Samawa Industries has announced that it has reached an agreement with the Chinese company Sinoma for the construction of a cement plant in the governorate of Muthanna, in the south of Iraq. The amount of the contract concluded between Samawa and Sinoma is $200 million.

The plant, which will be operational from 2025, has an annual capacity of 2 million tonnes. This project is the first in Iraq for the Chinese company, which already has several references in Saudi Arabia, Egypt, the United Arab Emirates and South America.

The Muthanna cement plant will be one of the largest facilities in the country in terms of production capacity – behind those of Lafarge with a capacity of 2.2m tonnes (Kerbala) and 2.4m tonnes (Bazian) .

Source Embassy of France in Iraq