BAGHDAD (Realist English). Iraq’s Prime Minister Mohammed Shia Al-Sudani has pledged to end the country’s $4 billion dependence on Iranian gas imports by 2028, unveiling a strategy to harness domestic resources and diversify the economy of OPEC’s second-largest oil producer.
Decades of corruption, underinvestment and poor management have crippled Iraq’s electricity grid. Although gas imports from Iran supply nearly a third of national power generation, blackouts remain routine, forcing households and businesses to rely on costly, polluting private generators.
“We developed a clear vision to address this structural imbalance that affects our ability to generate and provide electricity to citizens,” Al-Sudani told CNBC in Baghdad.
He said Iraq had signed new agreements with TotalEnergies, as well as Chinese and Emirati companies, to capture and process gas that is currently flared during oil production — waste worth between $4 billion and $5 billion annually.
“For the first time in Iraq’s history, there is a clear plan and daily action to resolve this issue, with a deadline of early 2028 for zero gas flaring,” Al-Sudani said.
Balancing powers: Washington, Beijing and Riyadh
Baghdad is pursuing a “multi-pronged” approach, maintaining relations with both the United States and Iran while expanding ties with China and Gulf partners to attract investment in infrastructure and energy.
“Our economy and our relations have never been one-sided,” Al-Sudani said. “We have agreements in principle with Chevron, ExxonMobil, Halliburton and SLB (Schlumberger), and Qatari investments now exceed $5 billion.”
He noted that Saudi and Emirati investors are active across several sectors, including a Masdar renewable energy project that will generate 1,000 megawatts of power.
The U.S. remains Iraq’s key defense partner, with around 2,500 troops still stationed in the country — a figure expected to decrease in the coming months.
Iran’s influence and new sanctions
Despite Iraq’s bid for diversification, Tehran’s shadow remains deep. Iran continues to wield political and financial influence in Baghdad, which has long been one of its few regional allies.
New European sanctions on Iran — reimposed in August under the 2015 nuclear deal’s “snapback” mechanism — could pressure Iraq’s economy, potentially pushing Tehran to seek sanctions evasion through Iraqi banks. Earlier this year, the U.S. Treasury banned several Iraqi lenders from dollar transactions over money laundering concerns.
Al-Sudani, who rose to power after the 2019 “October Revolution” protests against corruption and Iranian interference, said his government had taken tangible steps to rebuild trust and reform institutions.
“We have begun reforming regulatory bodies responsible for combating corruption and established mechanisms to promote transparency and procedural integrity,” he said.
He highlighted recent banking and financial reforms that have “strengthened the presence of investment companies,” citing the inauguration of a Pharmaceutical Manufacturing City developed with U.S. and British firms.
“This environment has encouraged companies to bring expertise and technology to build the pharmaceutical industry Iraq needs,” Al-Sudani said.
The IMF, however, continues to warn that corruption remains a major obstacle to growth.
Political stability and youth employment
Iraqis will head to the polls on November 11 for parliamentary elections — the seventh since the 2003 U.S.-led invasion. The vote comes amid widespread youth unemployment and frustration with slow reform.
“This election marks one of the benchmarks in the country’s history,” Al-Sudani said, describing it as proof that Iraq’s democratic process “remains intact.”
About 60% of Iraq’s 46 million citizens are under 30, a demographic that could decide whether the election revitalizes or disillusions the political system.
Al-Sudani said unemployment had fallen by more than 2%, and his government was “encouraging the private sector to absorb more job seekers” while investing in digital and technology-driven industries.
“We have established a National Center for Digital Transformation, a Cybersecurity Center, and a High Committee for Artificial Intelligence to design a national strategy for youth employment,” he said.
Al-Sudani concluded that Iraq’s current phase is defined by “clear stability, tangible economic reforms, and growing optimism among citizens for a better future.”
