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Top Energy Stories

Saudi Foreign Minister Prince Faisal bin Farhan was in Baghdad this week. In a meeting Thursday with Prime Minister Mustafa al-Kadhimi, he extended an invitation to visit Riyadh after a trip scheduled for last month was postponed due to Saudi King Salman's poor health. Energy is at the top of the agenda. During Kadhimi's recent trip to Washington, Iraq signed a memorandum of understanding (MoU) with U.S. firm Honeywell to provide equipment for the Ratawi gas-processing hub in Basra. But it remains an open question as to how the project will be financed. One option is to bundle the gas hub with a broader development deal for the Ratawi oil field — potentially involving Saudi Aramco and ACWA Power — with revenue from upstream development serving to finance the other infrastructure. During his meeting with Kadhimi, Farhan reportedly said that Saudi Arabia is "looking forward to putting into action the agreements concluded between the two sides, to achieve the shared interests of both countries," according to a statement from the Iraqi Prime Minister's Office.

As usual, OPEC compliance is an issue. Ever since the OPEC-plus coalition struck an agreement in late April to drastically reduce production and support global prices, Iraq has cut its output steeply — but has still produced in excess of its quota. To make up for it, Iraq pledged to reduce by an additional 400,000 bpd in August, though such cuts present both technical and financial difficulties. According to the statement from Kadhimi's office, he and Farhan discussed "achieving balance in oil production in a way that reduces the economic burden on Iraq."

Electricity is also on the Iraq-Saudi agenda. Back in September 2019, under former Electricity Minister Luay al-Khatteeb, Iraq signed an agreement with the Gulf Cooperation Council Interconnection Authority (GCCIA) to include Iraq in a 400 kilovolt "supergrid" connecting Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman. The project aims to give Iraq a greater range of options for electricity imports and reduce the country's energy dependence on Iran — a key condition for the U.S. to continue granting sanctions waivers to Iraq. The U.S. State Department said in July that it had "renewed" its "full support" for the plan. Kadhimi also voiced his support in an interview with Mina al-Oraibi of the National: "The joint electricity project was delayed due to past mismanagement in Iraq, due to corruption and political interference," Kadhimi said. However, "today, there is a serious commitment to make this project a reality."

"Corruption and political interference" — by whom? Kadhimi's comments apparently alluded to allegations brought against Khatteeb, who is being investigated by the Integrity Commission for corruption. But those charges have been met with widespread skepticism among both energy experts familiar with Khatteeb's performance in office and analysts who know how Iraq's corrupt actors can compromise anti-corruption bodies — and weaponize them against corruption-fighters. Khatteeb would seem to be a prime target for such an attack. As one of only a few technocratic ministers in the previous Cabinet, he came into office without loyalty to any party and therefore has little political cover. Since leaving office, he has advocated for the kind of tariff reform that has historically failed because of the influence wielded by entrenched interests, such as politically affiliated diesel generator businesses, which profit from the status quo.

National News

Kadhimi blames Iraq's political structures for the country's pervasive corruption. In his interview with Oraibi, he traced today's problems back to political quota systems drawn along sectarian lines beginning with the U.S. occupation in 2003. "It is a big lie to say that a national balance was created by [codifying] sectarian divisions," Kadhimi said. "Rather, these are political divisions that led to the weakening of the state and corrupting its institutions." As part of his reform program, Kadhimi said, "We are working at securing state entities, and at fighting the individuals inside these entities who are not patriotic." Kadhimi vowed again to investigate and prosecute the killings of activists who were outspoken against politically connected paramilitary groups. But he tempered expectations of quick results, saying that "judicial timeframes are different from political ones."

Iraqis continue to mourn the victims of political assassinations. The Islamic month of Muharram, which began on Aug. 21, sees Shia Muslims commemorate the death of the Prophet Muhammad’s grandson, Hussein, who was killed in battle near Karbala in the year 680 A.D. This year, some Iraqis feel resonance between their mourning of Hussein and their grief over the killing of more than 600 protesters since mass demonstrations began last October. At Imam Hussein's shrine in Karbala, according to AFP, pilgrims have recently carried posters of murdered protesters, calling out, "We saw how they assassinate honorable people!"

Accountability is all too rare in Iraq — an unfortunate legacy in which foreign occupiers have also played a big role. According to an investigation by Ian Cobain for Middle East Eye, the UK’s Ministry of Defense has processed so many complaints from Iraqis who were unlawfully detained and mistreated by British troops after the 2003 invasion that it is unable to say how many millions of pounds have been paid to settle the claims. The ministry says payments have been made in around 1,200 cases brought in the UK, and over 3,000 further claims have been made in Iraq. In September, British lawmakers will review a controversial piece of proposed legislation, the Overseas Operations Bill, which proposes “a presumption against prosecution” of British service personnel who commit crimes while serving overseas. Critics say it would effectively enable the military to whitewash crimes committed outside the UK.

Interview of the Week

Oil Minister Ihsan Ismaael took to the airwaves to defend Iraq's participation in OPEC-plus cuts. In two extended television interviews this week, on the state-run al-Iraqiya and the independent al-Sharqiya, Ismaael argued that the agreement to reduce oil production has actually increased revenues for Iraq.

Ismaael also acknowledged that Iraq has not met its targeted production cuts under this agreement in full. Asked if it is true he has been in touch with his Saudi counterpart on the issue, Ismaael said, "Yes, he actually calls me up every three days... to urge us toward compliance."

In both interviews, Ismaael warned viewers that Iraq cannot build a long-term economic strategy based solely on oil and gas resources. Renewable energy sources are increasingly important, he said, and the economic significance of oil will drop start to fall in about 2030. In Ismaael's words:

We should stop thinking that we are a rich country because we have a lot of oil. We are a rich country and we will remain so until 2030. After that, God knows what will happen.

Ismaael also discussed plans for a joint venture with Chevron to exploit oil and gas resources in Dhi Qar, unveiled during his recent trip to the U.S. in a delegation led by Kadhimi. The venture is likely to be called the Dhi Qar Energy Company, Ismaael said, and the contract could span 25 to 35 years.

The difference between this contract and previous contracts, what is it? It's that in the past, the goal of the contracts was to strengthen the national income, by exporting as much oil as possible and bringing in as much revenue as possible. The recent crisis has shown the downside of that... the number of unemployed is going to get worse year after year, because the economy has gone in the direction of a rentier economy, with limited capital investment. The Chevron contract is a fresh start. It's a totally different kind of thing.

The scope of the deal isn't just for upstream development, Ismaael said, but also for refining and petrochemicals. By covering more of the value chain, the project promises to create more jobs, employing some 6,000 people by 2025. But that timeline is far from certain: Ismaael also emphasized that the project, which has only been codified in a memorandum of understanding, is still in its planning stages.

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