1. Home
2. World
3. Washington Suspends Iranian Electricity Imports to Iraq: What Are the Consequences?

A significant blow to Iran came on March 8, when the United States decided not to renew the waiver that allowed Iraq to import electricity from Iran, despite sanctions imposed on Tehran. Since 2018, Baghdad had benefited from this exemption, which covered nearly a third of its energy needs, despite the country’s considerable oil potential, which has been undermined by decades of conflict.

This decision is part of the Trump administration's “maximum pressure” policy, meant to compel Iran to relinquish its nuclear ambitions, ballistic missile program and support for militias in the region. According to the US Embassy in Baghdad, the move “ensures that Iran will not receive any economic or financial relief.” The Iranian Ministry of Foreign Affairs has “condemned” the measure, calling it “totally illegal.”

Electricity: One of Iran's Last Leverages

The main goal of this decision is “to bring an extremely weakened Iran to the negotiating table, with no leverage in hand,” says Fouad Zmokhol, Dean of the Faculty of Management and Business at Saint Joseph University (USJ) and President of the International Movement of Lebanese Business Leaders (Midel). In an interview with This is Beirut, he views this as “additional American pressure after the dismantling of Tehran's allies, namely Hamas, Hezbollah and the Syrian regime, along with increased economic and financial pressure through the escalation of sanctions.” “Electricity was still one of the last levers available to Tehran,” Zmokhol argues.

“Iraq, which heavily relies on Iran for its gas and electricity, could face an energy crisis in the short term,” says Nassib Ghobril, Chief Economist at Byblos Bank, who was also interviewed by This is Beirut. “Baghdad will likely need to seek new suppliers,” he adds, though he notes that “this decision could be suspended if a nuclear agreement is reached between the United States and Iran.”

Under this waiver, Washington had allowed Iran access to billions of dollars held in frozen accounts in Iraq. These funds were intended for strictly humanitarian purposes. Ghobril explains that “Iraq's foreign currency reserves, totaling nearly $85 billion, are held at the Federal Reserve in New York under strict US supervision. Washington had required Iraq to establish an electronic platform to track who is purchasing dollars and curb the flow to Iran.” As a result, Tehran will lose its foreign currency inflows, and Iraq will need to find alternative suppliers.

A Regime Under Pressure

In this context, Zmokhol emphasizes that Iran is “already paying an enormous price with power outages and the devaluation of its local currency.” Several scenarios are possible, including “an escalation of internal social and political tensions leading to the overthrow of the current regime, or Iran's acceptance of an unfavorable agreement,” explains Zmokhol.

However, the latter option seems unlikely. Supreme Leader Ali Khamenei condemned the “intimidation” policy of the United States after President Donald Trump threatened to take “military” action against Iran if it did not negotiate its nuclear program. On Monday, Tehran reiterated its refusal to negotiate “under pressure and intimidation.” It also stated that the Iranian nuclear program “cannot be destroyed” by a military strike and warned that an Israeli attack on Iran would trigger a “widespread outbreak” of violence in the Middle East.

Simultaneously, and on a broader scale, the standoff continues between the West and its regional allies on one side, and Iran, Russia and China on the other. The three countries, united by a shared goal of countering what they view as American hegemony, have conducted similar military exercises in the region in recent years.