Will the lights go out in Iraq?
When taking a stroll around the neighborhoods of Baghdad, one can sense popular discontent at the deteriorating state of electrical power in Iraq. During the past few summers, the authorities watched demonstrations during which protesters would carry out symbolic funerals for electricity.
The central electricity ministry not only failed to address the crisis, its daily power supply rates have decreased since last summer.The central electricity ministry not only failed to address the crisis, its daily power supply rates have decreased since last summer. The streets of Baghdad are increasingly decorated by the overlapping and entangled generator wires in its neighborhoods.
The government tried to patch up the problem by giving free fuel to generator owners in an attempt to mitigate this popular discontent. This subsidy only opened the way for people to set up gigantic generators in their front yards and distribute power to neighboring houses through improvised electric grids.
The energy crisis in Iraq predates the US occupation. Previously, the country was producing about 4,300 megawatts. All the provinces – except Baghdad – suffered from scarce energy supplies. The former regime was supplementing the capital’s electricity by taking supplies from other provinces. But the rate of production declined to 300 megawatts as a result of the damage inflicted by the Second Gulf War on Iraq’s infrastructure, power and oil installations.
After the war, the department of planning and studies in the federal Ministry of Electricity began to modernize old plans that were devised by foreign companies to increase power production. The production capacity was supposed to increase by 13,000 megawatts and to supply the whole country. The ministry began to hastily sign contracts with executing parties based on these plans.
According to documents that the oil and energy committee in the Iraqi parliament gave to Al-Akhbar, even the mechanism of concluding these contracts violated government contract regulations.
There were two kinds of projects that began to be implemented in 2007. The first consisted of installing generators and building new steam and gas plants. The most prominent company that provided equipment was Hyundai. It was supposed to build 12 plants in nine locations all over the country. There was also SIEMENS and a number of other companies. The second method consisted of restoring all the old steam and gas plants found all over Iraq.
The federal government in Baghdad gave assurances that the production capacity will reach 19,476 megawatts at the end of this year even though national consumption is no more than 16,100 megawatts.
The electricity ministry was even more optimistic at the time, claiming that production capacity will reach 23,640 megawatts by 2015.
There was widespread disappointment when actual production this year did not exceed 7,000 megawatts, bearing in mind that a 1,000 megawatts are imported from Iran and Kurdistan produces close to 1,500 megawatts. This means that the actual production of the federal electricity ministry did not exceed 4,500 megawatts.
Parliamentary oil and energy committee member, Farhad al-Atroushi, explained that there are many reasons why electric power production did not reach self-sufficiency rates.
The production capacity of the plants declined after the alleged maintenance operations by the ministry.A Democratic Patriotic Alliance of Kurdistan MP, Atroushi explained that “the contracts signed by the federal electricity ministry to build and establish new plants were not implemented due to stalling and delays by the parties implementing these projects.”
According to Atroushi, what made these delays worse is the ministry and cabinet’s lenience in holding these parties accountable. Atroushi said that the electricity ministry requested money allocations to restore a number of old energy producing plants to raise the level of production. However, the production capacity of the plants declined after the alleged maintenance operations by the ministry.
This discouraging record in the energy sector in addition to fear of popular protests prompted the parliament in February of this year to discuss a report. The report entails the reasons for this failure and the solutions suggested to overcome them.
The report called for promptly “hosting” the electricity minister in parliament. Its conclusion read: “The electricity minister tried to jump over the crises and misled the Iraqi people with a lot of promises by swindling the Iraqi government.”
The report reached these conclusions by looking at “the conflicting statements that officials made in the electricity ministry and the prime minister’s office more than once.”
According to reports by international organizations, Iraq ranks among the worst countries on the corruption index. The reason is the rise in financial revenues from the increase in the country’s oil exports, at a time when governmental institutions and laws are unable to absorb these enormous revenues. Within this context, it is possible to understand the environment within which the Iraqi electricity ministry operates.
It has become a well-known fact locally that the electricity ministry is one of the worst ministries in terms of being a drain on public money that is wasted without achieving tangible results.
Iraq abounds with stories about “illusory contracts.” The most noticeable is the one told by the parliamentarian integrity committee member and the state of law coalition MP Ammar al-Shalabi.
He said that the electricity ministry signed a $10 million contract to import equipment for its power-generating plant. Official Iraqi parties who went to the Dubai port to receive the shipment were surprised that the equipment was nothing but plastic toys. This means, Iraq paid millions of dollars for a shipment of plastics.
According to reports by international organizations, Iraq ranks among the worst countries on the corruption index.The electricity ministry got money from three sources in the past few years. The US contributed to supporting this sector financially through the Development Fund for Iraq (DFI) which was established after the US invasion of the country. The second source came from grants and donations by foreign countries and international institutions to push the energy sector in Iraq forward. The third and main source is the financial appropriations allocated for the electricity ministry by the central government since 2003.
The ministry has spent close to $40 billion, half of which is operational and the other half investments. This number, however, is not the final amount for the sum total of the money spent in Iraq on the energy sector.
According to the finance minister, Rafi al-Issawi, Iraqis’ expenditures on their own generators and subscribing to neighborhood generators have reached $80 billion. This means that electrical energy has cost the country – government and people – $120 billion. The total expenditure on electricity is ten times the overall Bahraini expenditure budget and way more than the budgets of Kuwait and the United Arab Emirates combined. These sums spent, according to market numbers, are enough to buy General Electric’s market stocks in 2 years.
The electricity ministry’s spokesperson, Mosaab al-Modares, tried to justify the delays in developing the energy sector in the country by arguing that “manufacturing electricity is a complicated matter. Advancing this sector needs contracts with specialized companies that have a long history of producing energy and building transportation networks and distributing it.”
He emphasized that his ministry needs the support of other ministries such as the oil ministry, the internal ministry and the water resources ministry. He asks: “What is the point of building a power generating plant by the electricity ministry if the fuel is not provided for it?”
He also talked about building houses in an in improvisational way. Many neighborhoods built after 2003 on lands characterized as “agricultural,” are not provided with government electricity. This led residents of these areas to circumvent the system, thus burdening it beyond its capacity.
The most interesting point that Modares made is that Iraq is still under UN Chapter VII which limits the country to one bank - the Trade Bank of Iraq - that has the power to grant bank guarantees to investing companies through the credit paying method. This places limits on Iraq’s ability to sign contracts with foreign investing companies. The bank at times tried to evade its commitments to provide these guarantees, according to the electricity ministry.
- When it comes to increasing the price of oil, who will make the first move?
- Lebanon's consumers see no changes: Price of a 'service' taxi ride remains unchanged in spite of fuel price falling
- Does this spell the end for the tax haven dream? Crisis looms for the GCC as the rich Gulf could be in financial jeopardy
- Saudi Oil Chief spills! Shoots down conspiracy theories on oil prices
- Oil prices: the honeymoon is over