Iran’s export of oil byproducts and petrochemical goods to Iraq have declined by 22% or $1.4 billion between March and October compared with the same period of last year, a board member of the Iranian Oil, Gas and Petrochemical Exporters Association said.
“The only way to compensate for the lost revenues is by exporting technical and engineering services to the neighboring country,” Hamid Hosseini was also quoted as saying by ISNA.
Iran exported $6 billion worth of commodities (natural gas, oil derivatives and petrochem commodities) to Iraq during the eight-month period of last year, whereas the figure has dwindled to $4.7 billion this year and it is predicted to fall further in the coming years, he added.
Hosseini said Iran’s total value of exports to Iraq reached $9 billion in 2021 and to generate the same revenue, we should take practical steps to cooperate in technical and engineering sectors.
According to the official, due to the rising domestic consumption of gasoline and other oil derivatives, fuel exports to Arab states are about to reach zero and pinning hopes on such goods is not a wise policy, hence new items should be added to the export basket.
“The National Iranian Oil Company exported close to 15 million liters of gasoline to Iraq per day between 2018 and 2019, and earned about $3 billion in revenues by selling oil derivatives to the neighbor during the period,” he said.
“All those figures are declining rapidly and Iranian firms are losing the Iraqi market to their Emirati, Turkish and Saudi rivals despite the fact that they have proved their mettle in executing major projects, such as construction of dams and hydropower stations, as well as thermal and combined-cycle power plants, at competitive prices.”
Iraq has been importing electricity and natural gas from Iran over the past decade.
Hosseini noted that natural gas exports to Iraq will also be halted in winter unless domestic consumption drops.
“Iran already has high capacity in many sectors such as power cables, pipes and fittings and up-to-date technologies that can be exported to Iraq,” he said.
Strong Potential
According to Hamidreza Salehi, a member of the Iran Chamber of Commerce, Industries, Mines and Agriculture's Exports Commission, Iran’s electricity sector has strong potential to grab a significant share of Iraq’s power market, but Iranian enterprises have not made their mark in the field.
Access to cutting-edge knowhow is not sufficient to win development projects in Iraq, Afghanistan and Pakistan, as foreign relations play a more important role, he added.
The ICCIMA official said old strategies and ineffective diplomacy have failed and a new approach should be adopted to enable Tehran to have a say not only in Iraq, but also in other regional states planning to develop their power sectors.
Salehi said Iran is about to lose ground in Iraq’s electricity market to Emirati, Turkish and Saudi firms that are negotiating deals worth $40 billion to develop Iraq’s aging power infrastructure.
Saudi Arabia and Iraq signed an executive deal last week on the 435-km power transmission line (1,000 megawatts|) that will extend from Arar in northern Saudi Arabia to Yusufiya near Baghdad.
“Iran and Iraq signed a memorandum of understanding in 2018 to boost energy collaboration and renovate the Arab country’s power infrastructure. However, little has happened since then and the MoU is apparently shelved,” he said.
Salehi regretted that Iran, which played a key role in improving Iraqi security and economy, is easily overlooked when it comes to major contracts.
He added that Iran has not even been able to elevate the MoU to “a real contract” after four years while others (Turkish, Egyptian and Saudi firms) are in talks with the Iraqis for lucrative long-term contracts.
“During the visit of Iraqi Prime Minister Mustafa al-Kadhimi to Tehran in 2019, neither a contract was signed and nor did the authorities discuss the MoU. When he [al-Kadhimi] went to Turkey, negotiations to develop the Iraqi power sector topped the agenda,” the ICCIMA official said.
Robust Collaboration
Positively impacting Iraq’s economy is as important as helping ensure security in the region, because robust economic collaboration is key to long-term mutual interest.
Over 65% of energy in Iran are produced by private companies, which can also play a key role in helping Iraq meet its growing electricity needs.
Iraq is the main importer of Iranian electricity for more than a decade.
The Arab neighbor needs 23,000 plus megawatts of electricity, but decades of instability and fighting have destroyed its power infrastructure. It has a power deficit of 7,000 MW.
Daily power generation capacity in Iran is 70,000 MW and its average annual export is 1,500 MW dispatched to Iraq, Pakistan and Afghanistan.
Iran also exports 15 million cubic meters of gas per day to Baghdad from Naftshahr in Kermanshah Province through a pipeline diverging from the Sixth Iran Gas Trunkline.
According to Homayoun Haeri, a deputy energy minister, power export from Iran to neighboring countries generated $600 million in 2021.
"The state-run Iran Power Generation, Distribution and Transmission Company [Tavanir] cannot raise power exports unless infrastructures are developed," he said.
