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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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A Controversial New Power Grid Divides The Middle East


More details have emerged on the Iraq-Jordan electricity power grid that is fast becoming a highly controversial project due to Iraq’s persistent political game-playing with both the U.S. and Iran. According to comments last week from the director general of Jordan’s National Electric Power Company (NEPCO), Amjad Rawashdeh, preparations are now underway for the tender for the construction the Jordan-Iraq electricity power grid, anticipated to be floated at the beginning of 2021.  In the first stage, the focus of the grid will be on expanding the capacity of Jordan’s Al Risha plant that will allow for the provision of 150 megawatts of electricity to Iraq for an initial period of three years, although it is renewable with the agreement of both countries. In parallel with this, work will begin on the second phase projects that includes building out the electrical exchange capabilities between the two and the establishment of a joint Arab electricity market. In the meantime, Iraq’s Electricity Minister, Majid Mahdi Hantoush, announced that not only is Iraq currently working on connecting its grid with Jordan’s electricity networks through a 300-kilometre-line – a project that will be finished within two years -  but also plans have been finalised for the completion of Iraq’s electricity connection with Egypt within the next three years. 

To the uninitiated in Middle Eastern hydrocarbons-centred-geopolitical shenanigans these announcements might all seem like relatively unimportant statements relating to improving power connectivity across the region but in the context of the power plays between the two power blocs currently battling it out – the U.S./Israel/UAE/Bahrain/Kuwait bloc on one side, and the Iran/Iraq/China/Russia bloc on the other side -  these comments are laden with hidden meaning and obfuscated intentions. To begin with, this electricity initiative between Jordan and Iraq appeared largely out of nowhere in less than a month after Israel and the UAE normalised relations and Bahrain did the same. The Jordan-Iraq announcement also happened to coincide with a statement made shortly before from  Washington that it had just granted Iraq one of the shortest-ever waivers (45 days) in its continuing to import electricity from Iran (both directly from the grid and indirectly via gas supplies that are used in power plants). 

Related: Oil Extends Losses As Demand Fears Resurface

This short waiver was a very clear signal from the U.S. that Iraq is teetering on the brink of outright sanctions being imposed on it from Washington over its continued flouting of the U.S.’s ‘rules of engagement with Iran’. The U.S.’s anger over Iraq’s broad and deep relationship with Iran was evident back in April when it granted the shortest waiver ever given to Iraq for the importation of Iranian electricity and gas (just 30 days) and, at the same press conference as the short waiver was announced, U.S. State Department spokeswoman Morgan Ortagus also announced new sanctions against 20 Iran- and Iraq-based entities. These entities were cited as continuing to exploit Iraq’s dependence on Iran as an electricity and gas source by smuggling Iranian petroleum through the Iraqi port of Umm Qasr and money laundering through Iraqi front companies, among other sanctions-busting activities.  It had been thought by Washington at the time of the April short waiver that Iraq might take the message and start to scale back its relationship with Iran, beginning with pushing ahead on projects that would reduce its dependence on its neighbour for electricity and gas. This optimism on Washington’s part was bolstered by its knowledge that Iraq’s then-new Prime Minister, Mustafa al-Kadhimi, was due to visit the U.S. in August to plead for money from the U.S. In a show of conciliation just before al-Kadhimi’s visit, five heavyweight U.S. companies – Chevron, General Electric (GE), Honeywell International, Baker Hughes, and Stellar Energy - signed agreements with the Iraqi government for deals aimed at boosting Iraq’s energy independence from Iran, worth at least US$8 billion. Among the most noteworthy of these, was that Chevron was to examine the potential for exploration work in the long-sidelined Nassiriya oilfield, estimated to hold about 4.4 billion barrels of crude. At the same time, GE signed two new agreements with the Iraqi Ministry of Electricity valued at over US$1.2 billion to undertake maintenance programs across key power plants in the country and to bolster its transmission network. Honeywell also said that it was negotiating a deal with Iraq that would involve the development of the Ratawi oil field, the construction of a gas processing hub, and new electricity generation facility. 

Despite all of these inducements – and threats – from the U.S. Iraq then turned around and signed the longest-ever deal with Iran for it to continue to supply it with electricity and gas (two years, minimum), ensuring Iraq’s dependence on Iran for between 30 and 40 percent of its electricity, depending on the season, over that period. As sources in Washington close to the then-Trump Presidential Administration spoken to by OilPrice.com at the time put it: “We’ve been down this road before with Pakistan – [with] the government pretending to help in the fight against AQ [Al-Qaeda] but at the same time the ISI [Inter-Services Intelligence] offering all the help it could to [Osama] bin Laden and we’re not playing that game again.” Related: China And Iran Start Drilling In This Super Giant Gas Field

Consequently, according to the sources in Washington spoken to by OilPrice.com last week, the announcement of the new Jordan-Iraq electricity initiative was greeted with a split jury. The Iran-Iraq ‘doves’ would like to believe that this new initiative between Iraq and Jordan is a genuine attempt by Iraq to wean itself off Iranian electricity supplies. After all, over time, the initiative would mean Jordan supplying Iraq with 1,000 gigawatt (GW) hours per year in the first phase of the project (after the completion of the electricity linkage project), and a gradual increase in capacity after that. The doves also believe that corollary plans of a pipeline connecting Jordan with Iraq will serve to bring Iraq closer into the U.S. sphere of influence. Specifically, the first phase of the project includes the installation of a 700-km pipeline with a capacity of 2.25 million barrels within the Iraqi territories. The second phase includes the installation of a 900-km pipeline in Jordan between Haditha and Aqaba, with a capacity of one million barrels.

The Iran-Iraq ‘hawks’ in Washington, though, believe that darker motives are afoot and that this Iraq-sponsored push to build a regional energy grid across the Middle East – beginning with the Jordan project - is not an effort to reduce Baghdad’s dependence on Iran but in reality to expand Tehran’s regional influence further. “Prior to the meetings between al-Kadhimi and various senior officials in Washington in August, there were various comments from White House officials along the lines of ‘we’re very pleased to see Iraq pushing for a regional energy network - including links across the GCC states [Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates] – as this will reduce Iraq’s dependence on Iran and help bring Iraq into the U.S. sphere of influence, currently centred around Saudi Arabia’,” a senior Iranian oil and gas industry exclusively told OilPrice.com. “But they’ve got it the wrong way around: it’s Iran that’s pushing Iraq into this to bring the same states, including Saudi, out of the U.S. sphere of influence,” he said. 

In this context, just a month or so before al-Kadhimi’s visit to Washington, Iran’s Energy Minister, Reza Ardakanian, clearly stated that Iran and Iraq’s power grids have become fully synchronised to provide electricity to both countries by dint of the new Amarah-Karkheh 400-KV transmission line stretching over 73 kilometres, which also ‘paves the way for increasing energy exports to Iraq in the near future, from the current 1,361 megawatts per day now.’ He added that Iranian and Iraqi dispatching centres were now fully connected in Baghdad, the power grids were seamlessly interlinked, and that Iran had signed a three-year co-operation agreement with Iraq ‘to help the country’s power industry in different aspects’. 

At the same time, it was announced by the Iranian Electrical Power Equipment Manufacturing and Provision Company that Iran’s electricity exports to other neighbouring countries in the previous Iranian calendar year (ended on 19 March 2020) reached over 8 billion kilowatt-hours (kWh), a mean average increase of 27.6 per cent year-on-year. So far, the countries receiving power from Iran’s grid are: Armenia, Azerbaijan, Pakistan, Afghanistan, and the Nakhchivan Autonomous Republic, plus, of course, Iraq (which saw an increase of 34.6 percent from the preceding year). This network does not include the parallel network connections that Iran is consolidating in terms both of direct electricity and gas exchanges, which further includes Turkmenistan and Turkey. Finally, the Iraq-Jordan pipeline would also allow Iran an alternate export line to the historically vulnerable Strait of Hormuz route, to add to the current plans for the Guriyeh-Jask pipeline and plans to roll out a pipeline to Syria as well. It will also provide another ‘cover’ route for Iranian oil disguised as Iraqi oil, which can then be shipped easily both West and East. 

By Simon Watkins for Oilprice.com


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  • Mamdouh Salameh on December 23 2020 said:
    The crux of the matter is loosening Iraq’s dependence on electricity exports from Iran. While both Jordan and Iraq will benefit from the construction of the Jordan-Iraq electricity power grid, it isn’t going to wean Iraq from dependence on Iranian electricity exports. Moreover, an oil pipeline connecting Iraq with the Jordanian port of Aqaba on the Gulf of Aqaba is of great economic benefit to both countries but of paramount strategic importance for Iraq enabling it to diversify its crude export points and also bypass the Strait of Hormuz should it ever be blocked.

    Still. Iraq will never be weaned from its growing dependence on Iran for the simple reason that Iran will never let it happen. Iran was one of two winners of the United States’ invasion of Iraq in 2003. The other is China.

    Iran is neither going to relinquish the fruits of its political victory nor is it going to stop selling its crude oil disguised as Iraqi crude. This is, in a way, no different from Israel refusing to withdraw from occupied Arab territories it won in the 1967 war or the United States refusing to return Mexican territories which Mexico was forced to cede to the United States in the aftermath of the Mexican-American War,1846-48. This amounts to half the areas of the United States and includes the states of California, Mexico, Nevada, Utah, most of Arizona, about half of New Mexico, about a quarter of Colorado, a small section of Wyoming and also the occupied state of Texas.

    By deepening its connections with Iraq at all levels, Iran also aims to achieve the ultimate strategic prize of forcing the ejection of US military presence from Iraq.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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