Energy Diplomacy: A Means to Promote Stability and Cooperation between Iraq and the United States
Energy Diplomacy: A Means to Promote Stability and Cooperation between Iraq and the United States
7-1-2025
Overview: Iraq’s Energy Potential Amid Structural Challenges
Iraq has one of the richest oil and gas reserves in the world, but decades of political unrest, insecurity, and a lack of investment have hindered the effective exploitation of this wealth. With the changing global energy landscape, Iraq has embarked on projects to capture and process associated gas with the aim of reducing flaring, generating power domestically, and achieving energy self-sufficiency.
Despite some progress, political interference, corruption, and bureaucracy continue to hamper project implementation schedules and undermine investor confidence. Delays in energy projects remain symptoms of a deeper governance crisis that undermines economic performance and political legitimacy.
Key Projects and Gradual Progress: Signs of Action
One of the most prominent initiatives is the Gas Growth Integrated Project (GGIP), led by France’s TotalEnergies in partnership with Basra Oil Company and QatarEnergy. This massive, multi-component project, valued at approximately $10 billion, aims to develop the Ratawi gas plant to process 600 million standard cubic feet per day (mmscfd) of associated gas from several oil fields in southern Iraq. Construction of the project’s first facility began in January 2025, which will process 50 mmscfd of gas previously flared and used for local power generation.
Chinese companies have also secured some GGIP construction contracts, and Beijing is also involved in other major projects, such as the Halfaya Gas Processing Plant, which began operating in June 2024, reflecting China’s growing influence in Iraq’s energy sector.
Basra Gas Company, a joint venture between Iraq’s South Gas Company, Shell, and Mitsubishi, remains one of the country’s largest gas processing projects, processing associated gas from three of Iraq’s largest fields: Rumaila, West Qurna 1, and Zubair.
Challenges: Fragile Energy Security and Political Risks
Despite these projects, Iraq’s energy security remains vulnerable. In May 2025, Iraq lost approximately 4,000 megawatts of electricity due to reduced Iranian gas supplies and the expiration of US waivers for importing electricity from Iran. This event highlighted the excessive and dangerous dependence on imports and exposed the fragility of the national electricity grid.
This event should serve as a wake-up call for Baghdad, urging it to diversify its energy sources, accelerate domestic gas production, and modernize the electricity grid. However, achieving this requires a level of institutional coordination and political will that remains elusive in light of ongoing interference by political factions, a lack of accountability, and regional unrest.
The Political Economy of Energy
Corruption and bureaucracy remain major weaknesses in Iraq’s energy sector. Investors face approval delays, regulatory ambiguity, and opportunistic behavior by political elites and militias. Complex decision-making processes—which often require the approval of competing ministries and security agencies—further slow implementation.
These internal factors are further complicated by external geopolitical tensions, as Iraq remains caught between American and Iranian interests, both of which seek to enhance their influence over Iraq’s security and energy resources.
The Security Dimension: Strategic but Fragile Partnerships
Strengthening energy cooperation between Iraq and the United States requires a secure and stable investment environment. To attract American investors, Iraq must demonstrate political and security stability by curbing militia activity and resolving internal conflicts.
Since 2014, US forces have been present in Iraq at the invitation of the government, as part of the international coalition against ISIS. Following ISIS’s territorial defeat in 2017, Washington has focused on advising and supporting Iraqi forces. However, the escalating threat from Iranian-backed militias—especially if clashes between Iran and Israel resume—could undermine both security and foreign investment.
Economic and Political Impact: At an economic crossroads
, Iraq faces a fateful opportunity. If projects like GGIP succeed, they will contribute to:
Reduce gas flaring
Increase local electricity production
Reducing dependence on imports
Job creation and technology transfer
But without reforming the governance structure and combating corruption, these benefits will remain limited, vulnerable to exploitation by elites, and may exacerbate regional inequalities.
Politically, success in energy development could enhance the legitimacy of the central government and provide an alternative to militia dominance. Conversely, failure to manage internal challenges or external conflicts could lead to broader unrest and undermine the trust of citizens and institutions.
Conclusion: Between Potential and Reality
Iraq’s energy wealth represents an exceptional opportunity, but it is also a heavy burden. While projects like the GGIP offer a glimpse into the potential for economic regeneration, they remain fraught with political and security fragility.
Real progress requires more than just infrastructure; it requires good governance, transparent policies, and regional diplomacy that respects Iraq’s national interest above all else.
The next two or three years will be critical, as Iraq must choose between continued stagnation or strategic transformation.
Economic Studies Unit / North America Office /
Rawabet Center for Research and Strategic Studies
rawabetcenter.com
