A worker operates at a control room during the inauguration of Sadr City power station in Baghdad's Sadr city April 24, 2011.
A worker operates at a control room during the inauguration of Sadr City power station in Baghdad's Sadr city April 24, 2011.
Kareem Raheem / Reuters

Saudi Arabia’s execution of Shia cleric Sheikh Nimr al-Nimr and the Iranians’ subsequent trashing of the Saudi embassy in Tehran has produced a flood of articles on the military and sectarian dimensions of the Iran–Saudi Arabia conflict. Some have even gone as far as to proclaim a new Cold War between Iran and Saudi Arabia. One of the most salient features of the original Cold War, of course, was the economic boon that came to both countries in the form of competing foreign aid from Moscow and Washington. This element of the Cold War is back in style, although it is now Riyadh and Tehran’s neighbors that are the beneficiaries.

A neighbor of particular interest for Iran is Iraq. Tehran has financially backed Iraqi energy projects—namely the construction of large-scale power plants in the nation’s predominantly Shia south as a way to pull Baghdad into Tehran’s orbit by way of Iraq’s beleaguered electricity sector. This strategy makes Iraq more susceptible to Iranian influence, while allowing Tehran to avoid costly entanglements through military intervention. Indeed, Iranian power plant construction in this context is best viewed as economic component of Iran’s long-term project to build a Shiite sphere of influence that spans from Iraq and Syria to the Mediterranean as a bulwark against the Sunni superpower, Saudi Arabia. The development of these plants by private Iranian companies will have long-term consequences for Iraq. More broadly speaking, the projects are a sign that the Cold War in the Middle East is not going anywhere. 


Iraq’s once prosperous electricity sector was damaged significantly by coalition airstrikes in the Gulf and Iraq wars. From an output of 10,000 megawatts at its prime in 1990, the sector’s production capacity was reduced to 2,500 megawatts by 1991. As a result, Iraq has faced constant and crippling energy shortages, despite efforts to rebuild the energy sector; even during the worst years of the 2005–06 Sunni insurgency, citizens expressed more dissatisfaction with Iraq’s lack of air conditioning than its lack of security.

Although Iraq’s electricity supply problem has been felt throughout the country for years, these days, the problems are getting far worse in Sunni areas. According to the most recent Iraq Ministry of Electricity’s annual report, there are approximately 66 power plants throughout the country (excluding areas controlled by the KRG), and while their power generation power has improved since 1991, they still only provide up to 7,700 megawatts of electricity. 

Josh Reeder

But in the large Sunni swaths of the country that the Islamic State (also known as ISIS) controls, new power projects have been suspended. There are still approximately seven power plants in these areas, capable of generating between 1,200 to 1,700 megawatts of power. Peak demand in the region requires anywhere from 18,700 to 22,000 MW, leaving a deficit of 11–14,000 MW of power that the region needs in order to be considered stable.

Meanwhile, areas controlled by the Kurdistan Regional Government (KRG) have seen massive foreign investment, which has resulted in around-the-clock access to power. The relative stability of Iraq’s Kurdish areas has encouraged infrastructure investment as part of the KRG’s nation building project in an otherwise volatile region.

Iraqis work at al-Quds power plant in northern Baghdad November 9, 2008.
Iraqis work at al-Quds power plant in northern Baghdad November 9, 2008. 
Thaier al-Sudani / Reuters

In Shia areas, approximately 45 power plants supplying between 6,000 and 6,500 megawatts under the oversight of Iraq’s Central Government. To be sure, that is still about 13,500 MW below target, so private Iranian companies have stepped in with new power plants and further plans to establish a free trade zone that can serve as both a conduit for Iranian exports and a location for planned renewable energy projects and steel factories.

The longer ISIS remains in power, the more Iraq will see uneven energy development. That bodes ill for a country that is already tensely divided along sectarian lines. In fact, decisions being made now already promise a dangerous future. This past June, the private Iranian construction firm MAPNA signed a $2.5 billion deal (Tehran’s largest contract in the country to date) for the construction of a 3,000 MW facility in Basrah. When it comes online in 2017, it will boost the nation’s overall power generating capacity by 20 percent. Tehran is fully financing the project’s construction. In a sign of further dependence on Iran, Iraq entered into an agreement to import Iranian natural gas to run the Basrah plant. According to Hamid-Reza Araghi, Managing Director of the National Iranian Gas Company, Iranian gas exports to Basrah will require the construction of a pipeline estimated to cost $2.3 billion.

This is not the first time that Iraq has called upon Iran to help meet its energy needs. Tehran’s energy firms currently provide 1,000 to 1,400 megawatts of energy to the eastern Iraqi province of Wasit. MAPNA has also constructed power plants in Baghdad, Najaf, and al-Mansuriya, with each plant scheduled to receive Iranian gas through pipelines that will also be constructed by the Islamic Republic. Not surprisingly, these construction projects that are confined to Shia areas, leaving Sunni areas figuratively—and in some cases, literally—in the dark.

For now, the Iraqi Central Government simply lacks the physical power to push into ISIS-held areas, let alone pursue construction projects within these cities and towns. Kurdish areas are taking care of their own energy needs, further drawing Iraq’s energy future along sectarian lines. If Baghdad never manages to build up infrastructure in Sunni areas, it will never win Sunni hearts, even if it wins back their territory. That will leave the region open to radical appeals for a long time to come. 

A general view shows the new Sadr City power station in Baghdad's Sadr city April 24, 2011.
A general view shows the new Sadr City power station in Baghdad's Sadr city April 24, 2011.
Kareem Raheem / Reuters

Beyond the problems in Iraq, Iran and Saudi Arabia’s competition in the region is helping create a period of grave uncertainty. It makes strategic sense for Tehran to introduce an economic component of this broader war against Riyadh by investing in Shia-dominant areas in Iraq—just as Saudi Arabia has shored up influence in the region and opened the floodgates on its own oil. In all of this, it is certain that they aren’t paying much attention to Iraq’s long-term stability or the region’s. The construction of new power plants may thus be welcome news for the residents of southern Iraq, but it does not bode well for the future overall. Iran’s growing influence in the nation and the sclerotic politics of Iraq’s central government has deepened the sectarian divides that already harm the region. Unless Tehran, Baghdad, and Riyadh work together on a comprehensive plan to expunge ISIS from the region, bring Kurdish regions back into the fold, and make sure that all groups are treated equally, it is less likely than ever that the pieces of Iraq will ever be put back together.

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  • GREG EVERETT is an energy analyst and corporate lawyer at the Houston office of Latham & Watkins LLP. @greg_everett
  • N. JORDAN JAMESON is a doctoral candidate at the University of Maryland, College Park School of Engineering. @NJordanJameson
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