U.S. Sanctions on Iran Derail Crucial Iraq-Turkmenistan Gas Deal

ERBIL (Kurdistan24) – A critical energy agreement designed to supply Iraq with much-needed natural gas from Turkmenistan has been indefinitely stalled, caught in the geopolitical crossfire of United States sanctions against Iran, according to several energy and parliamentary sources.

The deal, which promised to deliver gas sufficient to generate over two thousand megawatts of electricity for Iraq’s beleaguered power grid, now awaits an unlikely approval from the U.S. Treasury Department, as the only viable transit route for the gas runs directly through Iranian territory, a key factor that has brought negotiations to a grinding halt.

The ambitious plan, which has been the subject of negotiations for several years, is now mired in a diplomatic and logistical impasse.

According to a source from the Oil and Gas Committee in the Iraqi Parliament who spoke exclusively to Kurdistan24, the primary obstacle to implementing the agreement is the United States. The geographical reality is that a direct pipeline from Turkmenistan to Iraq is unfeasible due to the long distance and prohibitive costs.

The only practical pathway involves leveraging the existing pipeline infrastructure of Iran, which shares a northern border with Turkmenistan and a southern border with Iraq. This transit arrangement, however, would inevitably provide a strategic and economic benefit to Tehran, a prospect Washington is determined to prevent.

"Iran and Turkmenistan share a border to the north. If the gas is imported to Iraq, it must pass through Tehran's territory, which would benefit that country," the parliamentary source explained. "Therefore, as part of its maximum pressure campaign on Iran, the U.S. does not want Tehran to benefit from anything."

The source further revealed that while American officials initially displayed a degree of flexibility regarding the contract, their position hardened once the specific details of the transit mechanism became clear, leading them to actively obstruct the progress of the negotiations and the implementation of the deal.

To circumvent the logistical challenges of building a new pipeline, Iraqi officials proposed an intricate "gas swap" arrangement. According to the source from the parliamentary committee, the Iraqi Minister of Electricity presented this proposal during a visit to Turkmenistan.

"The proposal is that because the distance between Iraq and Turkmenistan is long and they are not neighbors, transporting gas by pipeline is very costly," the source detailed. "Therefore, Turkmenistan would give gas to Iran, and then Iran, from its cities bordering Iraq like Abadan, would send the gas to Baghdad."

In this scenario, Tehran would retain a portion of the gas as a transit fee. "Tehran would also take its share of the gas that Iraq buys. That is why the U.S. does not want Iran to benefit from this matter, and the negotiations have stopped," the source concluded.

According to the terms of the agreement, Baghdad was set to receive 20 million cubic meters of Turkmen gas per day through this swap mechanism. Energy sources have indicated that Tehran’s desired transit fee is 20% of the transiting gas, a figure to which Baghdad reportedly has no objection, highlighting that the deadlock is externally imposed rather than a point of contention between the regional partners.

Shahriyar Shekhlar, an expert in economics and energy, provided Kurdistan24 with a detailed analysis of the agreement's history and its potential impact.

"The negotiations between Iraq and Turkmenistan on the purchase of natural gas date back to 2023," he stated. "At that time, a preliminary agreement was made to purchase approximately nine billion cubic meters of natural gas annually via Iran. This agreement has been negotiated in 2024 and 2025 as well, and I believe the content of the contract has been changed."

While the deal would provide a significant boost to Iraq's power generation, Shekhlar cautioned that it is not a panacea for the country's profound electricity deficit.

"This amount of gas is only enough for four thousand to 5.5 thousand megawatt-hours of electricity," he noted. "This is while Iraq currently needs more than 48 thousand megawatts of electricity. According to the Iraqi Prime Minister, Sudani, in a seminar, there is an electricity shortage of about 20 thousand megawatts."

Furthermore, he clarified that this new supply would primarily serve as a substitute for some of the 50 million cubic meters of natural gas Iraq currently imports from Iran daily, rather than a substantial addition to its total energy supply.

The stalled deal also casts a harsh light on Iraq's long-standing inability to develop its own vast natural gas resources, particularly the immense quantities of gas that are flared off from its own oil fields.

Shekhlar pointed to systemic issues within Iraq's energy sector as the root cause of this failure. "Iraq, in general, is weak in formulating and implementing strategic plans in the energy sector," he said. "This is due to the way this sector has been managed by successive governments since 2003."

He identified the politicization of the energy sector as a major contributing factor to its dysfunction. "In my opinion, the distribution of ministries among political parties and the lack of unity among the institutions that formulate energy policies and strategies are a major part of the problem. Subsequently, poor management plays a significant role in this issue."

From a financial perspective, the expert warned that the Turkmen gas deal, if ever implemented, would come at a high cost for the Iraqi people.

The necessity of a swap arrangement through Iran, combined with Turkmenistan's pricing, would make the imported gas significantly more expensive than domestically produced alternatives. "Certainly, the cost of buying gas from abroad, compared to producing it domestically in Iraq, will be higher.

Also, buying it from Turkmenistan and transporting it via a swap will increase the expense," Shekhlar clarified. "Turkmenistan sells its natural gas at a price higher than the market rate, and that is besides the swap fee, which adds between 10 to 15% to the price."

He estimated that the purchase price would be "no less than 300 US dollars per 1000 cubic meters," concluding that it would be "an expensive price and can raise the cost of electricity production in Iraq."

Ultimately, Iraq finds itself in a precarious position, caught between its desperate and immediate need for energy to power its cities and industries, and the unyielding geopolitical realities of U.S. foreign policy.

The stalled Turkmenistan gas deal has become a symbol of this larger dilemma, a potential solution held hostage by international sanctions, while simultaneously exposing the deep-seated internal failures that prevent Iraq from achieving energy independence by harnessing the resources beneath its own soil.