Electricity in Iraq… Between trillions spent, corrupt contracts, and a lost national vision

Electricity in Iraq… Between trillions spent, corrupt contracts, and a lost national vision

7-31-2026

Researcher: Shatha Khalil
The electricity crisis in Iraq is no longer merely a recurring service problem that arises with rising temperatures; it has become a key indicator of the efficiency with which the state manages its economic resources. Since 2003, successive Iraqi governments have spent hundreds of billions of dollars on this sector, yet the result remains daily power outages, millions of citizens’ reliance on private generators, and the continued importation of gas and electricity. This paradox raises a fundamental question: how can a country that is one of the world’s largest oil producers be unable to provide a stable electricity supply?

The electricity sector has become a clear example of the gap between spending and achievement. The problem is no longer related to a lack of funding, but rather to how public funds are managed, the nature of investment priorities, the absence of long-term planning, and the impact of administrative corruption and inefficient contracts on the trajectory of this vital sector.

In recent months, the issue has resurfaced following a public dispute between the current Minister of Electricity and a former minister, and the subsequent dismissal of senior ministry officials on suspicion of corruption. These developments have reignited a question that has persisted for the past two decades: Where did the enormous sums allocated to the electricity sector go, and why haven’t they translated into improvements in production and infrastructure?

Economically, electricity spending can be divided into two main categories: operating and investment spending. Operating spending includes fuel purchases, gas imports, salaries, maintenance, and purchasing electricity from investors or neighboring countries. This spending is necessary to keep the system running, but it does not increase the country’s production capacity. Investment spending, on the other hand, is directed towards building new power plants, developing transmission and distribution networks, utilizing associated gas, and introducing modern technologies. This creates productive assets that last for decades and reduce future operating costs.

The fundamental problem is that, for many years, the bulk of Iraqi spending has been directed toward covering operational expenses and addressing immediate crises, while long-term investment has not received the priority the sector needs. As a result, Iraq remains trapped in a vicious cycle, allocating billions more each year to maintain a system already suffering from structural bottlenecks, without achieving any real transformation in production or efficiency.

One of the most glaring paradoxes is that Iraq continues to flare large quantities of associated gas produced during oil extraction, while simultaneously spending billions of dollars importing gas to fuel its power plants. This reflects a clear economic and investment imbalance, as investing in this gas domestically could have reduced the import bill, provided fuel for power plants, and strengthened national energy security.

The impact of corruption in exacerbating the crisis cannot be ignored. For years, the sector has been plagued by accusations of stalled contracts, unfinished projects, and power plants failing to meet their stated production capacities, coupled with weak oversight of project implementation. When poor planning is combined with corruption, the result is a continuous drain on public funds without any commensurate economic return.

In contrast, the experiences of other countries, such as China, demonstrate how the electricity sector can become an engine of economic growth. China has treated energy as a strategic investment, linking the expansion of electricity production to its industrial and technological plans, and investing in diversifying energy sources, modernizing transmission networks, developing renewable energy, and fostering innovation. The goal has not been simply to provide electricity, but to make it a tool for increasing production, attracting investment, and enhancing the competitiveness of the economy.

In Iraq, the electricity sector is still often managed with a crisis management mindset, rather than a focus on developing the sector. Instead of transitioning to self-sufficiency in fuel and energy, the need persists for temporary solutions linked to imports and operational expenses, leaving energy security vulnerable to external political and economic fluctuations.

Reforming this sector requires less increased spending and more a fundamental shift in resource management philosophy. This begins with investing in associated gas, directing the majority of spending towards capital projects, modernizing transmission and distribution networks, enhancing transparency and oversight, and developing a long-term national energy strategy, independent of frequent government changes.

In the modern economy, the value of electricity is not measured solely by the number of hours of supply, but also by its ability to stimulate economic growth. Every additional megawatt means a new factory, further investment, a job opportunity, lower production costs, and an improved business environment. Therefore, electricity is not just a public service, but a fundamental pillar of sustainable economic development.

Iraq’s future will not be determined by the amount of money allocated to the electricity sector, but rather by its ability to transform these funds into sustainable productive assets. Shifting from crisis financing to capacity building, and from operational spending to strategic investment, is the true path to achieving energy security, fostering economic growth, and investing oil wealth in a way that serves national development, instead of allowing electricity to remain the epitome of Iraq’s greatest economic paradox in modern Iraq.

Economic Studies Unit – North America Office,
Links Center for Research and Strategic Studies

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