John A. Calabrese: a senior fellow at the Middle East Institute (MEI) and book review editor for The Middle East Journal.
Electricity is now central to Iraq’s effort to reclaim energy sovereignty, as Baghdad faces the dual challenge of meeting rapidly rising domestic demand while reducing dependence on imported Iranian gas and converting flared associated gas into power. These objectives are not merely technical or economic; they also intersect with Iraq’s international climate obligations, sanctions exposure, and credibility with foreign investors. In this context, electricity provision is the principal bottleneck to energy independence, emissions reduction, and fiscal sustainability.
Confronted with these constraints, Iraq’s electricity sector is entering a fragile transition. Efficiency upgrades, gas-capture initiatives, regional interconnections, and renewed international engagement are beginning — unevenly — to address the structural drivers of the power crisis. While progress remains limited, these efforts reflect a pragmatic sequencing shaped by Iraq’s political constraints. However, sustaining momentum will depend on Iraqi political and regulatory follow-through in a sector where reform has historically triggered social backlash and instability.
Climate Stress, Electricity Demand, and Political Constraint
Iraq is emerging as one of the Middle East’s fastest-growing centers of electricity demand, a growth that now drives both political and fiscal constraint. Between 2000 and 2024, national electricity demand tripled[1] due to population growth, urbanization, and rising living standards, with cooling now dominating summer peak demand.[2] This directly ties electricity reliability to Iraq’s ability to convert domestic gas into power and reduce dependence on imports during stressed periods.
Extreme heat and water scarcity have transformed electricity demand growth into a structural vulnerability. Extreme heat and water scarcity now amplify demand while simultaneously degrading supply, reducing thermal plant efficiency precisely when cooling needs peak. In June 2022, temperatures exceeding 51 °C triggered a nationwide grid failure, plunging millions in Basra, Dhi Qar, and Maysan into darkness.[3]
By mid-2024, the state had begun adapting behaviorally, if not structurally. Public-sector working hours were shortened to curb peak demand, while oil companies introduced “Purple Flag Days” to halt operations during extreme heat.[4] These stopgap measures signal that climate stress is no longer peripheral but a defining constraint on Iraq’s electricity system.
Despite these adaptations, electricity failures remain highly salient politically. Electricity shortages in Iraq are never merely technical failures; they are political events. Reliability has become a key metric by which citizens judge state competence. Power outages, particularly during the punishing summers in central and southern Iraq, have fueled protests.[5] Electricity demand growth thus amplifies instability, translating climatic stress into social unrest and political pressure, especially in provinces with weak state presence or uneven electricity distribution.
These pressures collide with a distorted political economy, where electricity tariffs are far below cost, covering only about 10% of operating expenses. Each additional unit sold increases fiscal losses, eroding incentives to improve service or expand capacity.[6] This dynamic directly undermines energy independence by penalizing domestic generation while implicitly subsidizing external supply arrangements, intensifying the political stakes created by outages and protests.
Severe grid inefficiencies exacerbate the problem. Iraq’s transmission and distribution network has only half the capacity required, and system losses are among the highest globally, with nearly 60% of generated electricity lost or unmetered.²¹ These fiscal and technical distortions reinforce the political and operational challenges of reform.
Successive governments have favored visible capacity additions over institutional change. Adding megawatts is politically legible and immediately tangible; raising tariffs, enforcing collections, and reducing technical and commercial losses is diffuse, slow, and risky. The result is a system that expands in scale without becoming sustainable, socializing losses while privatizing reliability through diesel generators and informal supply.
Electricity demand growth under climate stress, compounded by fiscal distortions and grid inefficiencies, has become the central binding constraint on reform. It deepens reliance on imported fuel during peak periods, raises the political cost of outages, and constrains institutional change. Measures promising “more power without higher prices” gain traction not because they correct distortions, but because they align rising demand with political survival. This explains both the sequencing of recent interventions and their limited transformative impact.
Gas Abundance, Flaring, and External Dependence
Iraq’s power shortages are striking given its hydrocarbon wealth. Their persistence reflects a governance failure: domestic gas that could supply electricity is instead flared, creating lost opportunities for import substitution, self-inflicted emissions, and barriers to meeting international climate commitments. Although nearly all electricity generation relies on oil and natural gas, domestic gas development has lagged, leaving vast quantities of associated gas flared rather than captured for power generation.[7]
This deficiency has forced heavy reliance on Iranian gas, increasingly a strategic liability. Two pipelines supply Iranian gas to Iraqi power plants, but flows have been repeatedly disrupted due to unpaid bills and sanctions-related constraints. In 2023, Iran halved supplies, cutting roughly 15% of Iraq’s generation capacity.[8] This past December, 4,000–4,500 MW were removed from the grid.[9] Such disruptions expose the fragility of Iraq’s electricity system to external political and financial shocks beyond Baghdad’s control.
This mutual dependence stems more from mismanagement than design.[10] Iranian gas exports to Iraq fell sharply in 2025 after the U.S. rescinded a long-standing sanctions waiver, dropping about 40% between April and August as Baghdad sought alternative supplies.[11] Energy security therefore requires diversification beyond simply replacing Iranian imports.
Fragile Signs of Progress: Efficiency and Capacity
Against this bleak backdrop, recent developments suggest a cautious shift from pure crisis management toward targeted efficiency improvements, creating “hidden capacity” that expands supply without raising fuel use or subsidy burdens. These efforts not only increase output but also serve as politically palatable interventions, demonstrating visible progress without triggering backlash over tariffs or fuel costs.
Shanghai Electric’s Euphrates Combined Cycle Expansion Project adds 625 MW, increases efficiency by ~50%, and generates 5 billion kWh annually without extra fuel,[12] enabling the grid to meet peak summer demand more reliably and reducing reliance on costly imports. Meanwhile U.S.-based General Electric and Germany’s Siemens have modernized turbines, upgraded substations, and invested over $763 million in technical and workforce improvements, adding roughly 500 MW of capacity.[13] These investments combine technology transfer, training, and institutional learning, helping build long-term operational resilience and signaling a gradual professionalization of Iraq’s electricity sector. Collectively, these improvements reduce costs, emissions, and enhance resilience.
Diversification: LNG and Regional Interconnection
Efficiency gains alone cannot secure energy independence. To reduce reliance on imports and enhance supply resilience, Iraq is pursuing LNG from Qatar and Oman, with two floating regasification terminals planned at Khor al-Zubair and a pipeline under construction to deliver gas to Basra power plants.[14] A 2023 proposal to route Turkmen gas through Iran failed to materialize due to U.S. sanctions, highlighting both Iraq’s desire to diversify supply and the geopolitical constraints that complicate achieving energy independence.[15]
Equally significant is Iraq’s push to integrate the national grid regionally. Baghdad is advancing a deliberately multi-directional interconnection strategy: linking to Türkiye in the north, Jordan in the west, and GCC states in the south, while gradually reducing — but not severing — dependence on Iran.
The GCC-Iraq interconnection project, expected to be operational in the first half of 2026, is nearing completion, with the first phase reportedly 93% finished.[16] Iraq has already begun importing electricity from Türkiye and Jordan, and Türkiye plans to double exports from 300 MW to 600 MW via expanded transmission lines.[17] These initiatives serve multiple objectives. Chief among them is the creation of redundancy, reducing the political leverage associated with any single supplier.
Crucially, interconnection provides insurance, not a substitute for domestic reform. Imported electricity eases short-term shortages but cannot offset grid losses, weak billing, or political constraints on tariff reform. Overreliance risks repeating dependency dynamics similar to Iranian gas, yet Iraq’s multi-directional approach signals a strategic shift: prioritizing optionality over alignment and building resilience through diversification, reflecting broader foreign policy hedging in a multipolar region.
International Partners: Competition and Convergence
Iraq’s electricity sector highlights a broader geopolitical dynamic, with competitive external powers inadvertently contributing to shared stability. U.S., European, and Chinese firms operate in parallel, often without coordination, yet collectively bolster electricity supply and reliability. GE, Siemens, and Shanghai Electric embody different operational models — project-focused, holistic, and efficiency-driven — but their activities converge on the goal of reducing blackouts, a core source of domestic instability.
This convergence illustrates a paradox of great-power competition. While Washington and Beijing are strategic rivals, their investments in Iraq’s power infrastructure create zones of pragmatic overlap. Reduced blackouts lower protest risk, sustain economic activity, and enhance regional stability — outcomes valued across competing powers. Yet this does not eliminate geopolitical rivalry. Nor does it guarantee coherence: fragmented external engagement risks overwhelming Iraqi planning capacity if not centrally coordinated.
The competitive yet convergent involvement of multiple foreign partners also underscores the sector’s potential as a platform for state-building. By maintaining openness to diverse investors, Baghdad can extract technology, capital, and operational expertise, while simultaneously signaling resilience and autonomy in regional energy politics.
Renewables: The Missed Multiplier
Despite recent solar commitments, renewables remain underleveraged relative to Iraq’s needs and potential. Their underutilization represents a missed opportunity to decouple peak demand from fuel imports. Solar energy is particularly well-suited to Iraq’s load profile. Its deployment would directly reduce pressure on gas-fired generation during summer peaks.
Renewable projects provide a rare opportunity to pilot transparent power procurement models. Utility-scale solar, managed under clear contracts and metering, can circumvent some of the entrenched informal practices that undermine grid reliability. Chinese solar firms, Gulf investors, and European developers all have incentives to expand Iraq’s solar footprint. Success would not only reduce emissions but also free gas for export or industrial use, enhance summer peak resilience, and signal a strategic commitment to energy transition.
Yet, most recent investments remain fossil-fuel centric, with gas-fired capacity dominating new installations to meet Iraq’s immediate supply needs and leverage existing infrastructure. While cleaner than oil or diesel, this trajectory risks locking the country into carbon-intensive systems as renewable costs decline. TotalEnergies’ GGIP in Basra, with QatarEnergy and BOC, incorporates solar power in Iraq’s first major integrated energy development, reducing emissions through gas capture and renewable integration.[18] The project supports Baghdad’s target of sourcing 12% of electricity from renewables by 2027, though achieving it will require regulatory acceleration and strong private-sector engagement.
The Binding Constraint: Iraqi Follow-Through
Despite incremental technical gains and renewed international engagement, the durability of progress in Iraq’s electricity sector hinges on a binding constraint that remains largely unresolved, namely the country’s limited capacity to implement politically costly reform. Iraq’s power crisis persists not because of a lack of plans, financing, or technical expertise, but because electricity provision has long been embedded in a political economy that prioritizes social pacification over cost recovery, performance, or sustainability.
Electricity tariffs cover only ~10% of costs, deepening fiscal losses and eroding incentives to improve service.[19] Metering failures and low payment rates exacerbate the problem.[20] These distortions help explain why successive governments have favored visible capacity additions over institutional reform. Adding megawatts is politically legible and immediately tangible; fixing tariffs, enforcing collection, and reducing technical and commercial losses is politically diffuse, slow, and risky. The result has been a system that expands in scale without becoming sustainable, socializing losses while privatizing reliability through private diesel generators.
Grid inefficiencies magnify this dynamic. Iraq’s transmission and distribution network has only about half the capacity required to meet current demand, and system losses are among the highest globally. Iraq’s power system suffers from some of the highest technical and commercial losses in the world, with estimates suggesting that roughly 30–50% of generated electricity is wasted in the transmission and distribution network, and total technical plus commercial losses reach about 50–60%.[21]
Reform advances consistently where it can be framed as loss reduction rather than burden sharing. This framing explains why gas capture and efficiency upgrades have progressed further than tariff or collection reform. These initiatives represent meaningful entry points, improving short-term energy security and reducing exposure to supply shocks. Yet without deeper institutional reform (i.e., tariff rationalization, metering, bill collection, and grid rehabilitation) their impact will be bounded. Technical fixes can stabilize the system, but they cannot by themselves transform it.
Conclusion
Iraq’s electricity sector is gradually moving from crisis toward cautious stabilization. Efficiency upgrades, regional interconnections, and targeted international engagement have improved reliability, reduced exposure to imported gas disruptions, and provided politically feasible gains. Yet these measures also highlight the sector’s central dilemma, namely that the easiest steps prioritize short-term security over long-term energy sovereignty. Achieving true independence will require converting flared domestic gas into power, rationalizing tariffs, installing meters, and rehabilitating the grid. Only by combining technical fixes with politically challenging institutional reforms can Iraq transform its electricity system into a financially viable, climate-compliant, and self-sufficient foundation for the future.
[1] International Energy Agency (IEA), Electricity Market Report: Middle East (Paris: IEA, latest edition),
[2] Harry H. Istepanian, Towards Sustainable Energy Efficiency in Iraq (Baghdad: Al-Bayan Center for Planning and Studies; Amman: Friedrich-Ebert-Stiftung, 2020), .
[3] IEA, National Climate Resilience Assessment for Iraq, January 2025, .
[4] Government of Iraq, Council of Ministers, announcements on adjusted public-sector working hours during extreme heat, June 2024, .
[5] Middle East Eye, “Iraq rocked by another summer of power cuts and protests amid punishing heat,” July 2024, ; and Shafaq News, “Electricity in the Coffin: Iraqis Protest Power Outages,” May 31, 2025, ;
[6] World Bank, Reforming Electricity Tariffs in Iraq: Pathways to Financial Sustainability (Washington, DC: World Bank, 2020).
[7] World Bank, Global Gas Flaring Tracker Report (Washington, DC: World Bank, latest edition).
[8] Bloomberg, “Iraq Power Grid Suffers Capacity Cut as Iran Gas Supply Slumps,” July 1, 2025.
[9] Middle East Eye, “Iraqis Left Without Power After Iran Halts Gas Exports,” December 2023.
[10] Clingendael Institute, “Misery Loves Company: Iraq and Iran’s Electricity and Gas Dependencies,” October 2023.
[11] Charles Kennedy, “Iran Gas Exports to Iraq Slump,” OilPrice.com, September 22, 2025.
[12] Shanghai Electric, “Shanghai Electric Powers Up Iraq’s Energy Future with Major 625MW Efficiency Upgrade,” press release, PR Newswire, 2024.
[13] Ken Silverstein, “Rebuilding After War—and Why Iraq Can’t Keep the Lights On,” Forbes, November 16, 2025.
[14] James Durso, “Iraq’s Path to Energy Security is Taking Shape,” OilPrice.com, April 24, 2025.
[15] Maha El Dahan and Muayad Hameed, “Iraq Fails to Win U.S. Approval to Import Turkmen Gas via Iran,” Reuters, September 19, 2025.
[16] “Iraq Enters New Phase in Regional Power Grid Integration, Says Electricity Ministry,” Iraqi News Agency (INA), October 25, 2025; “GCC Interconnection Authority, Iraq Finalise Plans for Major Electricity Link,” TradeArabia, December 13, 2025.
[17] “Iraq Signs Deal with Turkey to Increase Electricity Supplies,” Iraqi News, June 3, 2025.
[18] TotalEnergies, “Iraq: TotalEnergies Launches the Construction of the Final Two Major Projects of the GGIP,” press release, September 22, 2025.
[19] Iraq’s Electricity Shortage and the Paradox of Gas Flaring,” Baker Institute for Public Policy, Rice University, June 16, 2025.
[20] Ibid.
[21] World Bank, “Electric Power Transmission and Distribution Losses (% of Output) – Iraq,” The World Bank Group, December 28, 2025, ; and International Monetary Fund, Iraq: Selected Issues, IMF Staff Country Reports 2023, 076 (Washington, DC: International Monetary Fund, 2023), December 8, 2025,.
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