large quantity of natural gas to run two new Iraqi electricity generating plants.
Blackouts are still common in Iraq and are a major liability for the elected government, which is trying desperately to boost the electrical supply.
The spokesman for Iraq’s Electricity Ministry, Mussab al-Mudaris, said the plan calls for a five-year contract under which Iran would pipe 25 million cubic meters per day to two power plants being built just outside Baghdad.
One of the power plants is being built by Iran and the other is under construction by South Korea’s Hyundai conglomerate.
Mudaris said the gas supply would start by the end of 2012 when a new pipeline and the plants are all completed.
Mudaris said the proposal still must be voted on by the cabinet and then the parliament.
Some commentators wrote that the deal was likely to be spiked by US sanctions, but that is incorrect. US sanctions don’t come into play in the deal so long as Iraq does not pay for the portion of the pipeline located inside Iran. US sanctions are triggered by investments in Iran’s oil and gas industry, but have nothing to do with buying Iranian oil and gas.
However, Iran and Iraq have many agreements on economic cooperation that have never materialized. For example, the two countries signed agreements seven years ago to bring Iraqi crude to Iran’s Abadan refinery and to send refined products back to Iraq. Nothing has happened, however, although the pipelines required are just short spurs of a few miles each. An agreement on a railroad link is among others gathering dust.
The one area where cooperation has developed has been in electricity, where Iran’s Energy Ministry and Iraq’s Electricity Ministry seemed to have developed a functioning relationship. Iran has also made a priority of pushing natural gas exports by pipeline. That gives some basis for expecting that the latest deal will not be confined to paper.
Iran currently has a major gas pipeline export link to Turkey and small gas pipeline exports to Armenia and Azerbaijan. Iran imports gas from Turkmenistan for the far northeast.
Iraq generates about 7,000 megawatts of electricity daily, half of what it needs, and imports about 2,000, half from Iran.
