By Shatha Kalel
Iraq’s electricity sector is no longer merely a recurring public service crisis that intensifies during periods of extreme heat. It has become one of the clearest indicators of the state’s ability to manage its economic resources effectively. Since 2003, successive Iraqi governments have spent hundreds of billions of dollars on the electricity sector. Yet the outcome remains unchanged: daily power outages, millions of citizens relying on private generators, and continued dependence on imported electricity and natural gas. This paradox raises a fundamental question: How can one of the world’s largest oil-producing countries fail to provide a stable electricity supply?
The electricity sector has become a clear example of the gap between public expenditure and actual achievement. The challenge is no longer a shortage of financial resources; rather, it lies in the management of public funds, investment priorities, the absence of long-term strategic planning, and the impact of administrative corruption and inefficient contracts on this vital sector.
In recent months, the issue has returned to the forefront following a public dispute between the current Minister of Electricity and a former minister, accompanied by decisions to dismiss several senior ministry officials over corruption allegations. These developments have once again highlighted a question that has persisted for more than two decades: Where did the enormous sums allocated to the electricity sector go, and why have they not translated into meaningful improvements in electricity generation and supply?
From an economic perspective, electricity spending can be divided into two main categories: operating expenditure and capital investment.
Operating expenditure includes fuel purchases, imported natural gas, salaries, maintenance, and payments for electricity purchased from private investors or neighboring countries. While these expenditures are necessary to keep the electricity system functioning, they do not expand the country’s productive capacity.
Capital investment, by contrast, focuses on constructing new power plants, modernizing transmission and distribution networks, capturing and utilizing associated natural gas, and introducing advanced technologies. These investments create productive assets that can generate economic value for decades while reducing future operating costs.
The fundamental problem is that, in many years, the majority of Iraq’s electricity spending has been directed toward operating expenses and short-term crisis management, while long-term investment has not received the priority the sector requires. As a result, Iraq remains trapped in a vicious cycle: billions of dollars are allocated annually simply to maintain an electricity system already burdened by structural inefficiencies, without achieving meaningful improvements in productivity or operational efficiency.
One of the most striking contradictions is that Iraq continues to flare vast quantities of associated natural gas produced during oil extraction while simultaneously spending billions of dollars importing natural gas to fuel its power plants. This reflects a significant economic and investment failure, as utilizing domestically produced associated gas could substantially reduce import costs, secure fuel supplies for electricity generation, and strengthen the country’s energy security.
The role of corruption in deepening the crisis cannot be overlooked. Over the years, the sector has faced repeated allegations involving delayed contracts, incomplete infrastructure projects, power stations that failed to achieve their advertised production capacities, and weak oversight of project implementation. When poor planning is combined with corruption, the result is the continuous depletion of public resources without generating economic returns proportional to the scale of public investment.
In contrast, the experiences of countries such as China demonstrate how the electricity sector can become a powerful engine of economic growth. China has treated energy as a strategic investment, closely integrating electricity expansion with industrial and technological development strategies. It has invested heavily in diversifying energy sources, modernizing transmission infrastructure, expanding renewable energy, and promoting innovation. The objective has never been simply to provide electricity, but to use energy as a driver of industrial production, investment attraction, and national economic competitiveness.
In Iraq, however, the electricity sector continues to be managed largely through a crisis-management approach rather than a long-term development strategy. Instead of moving toward energy and fuel self-sufficiency, the country remains dependent on temporary solutions based on imports and increasing operating expenditures, leaving national energy security vulnerable to external political and economic shocks.
Reforming the electricity sector does not primarily require additional spending; rather, it requires a fundamental shift in the philosophy of resource management. This transformation should begin with investing in associated natural gas, directing a greater share of public expenditure toward capital investment projects, modernizing transmission and distribution networks, strengthening transparency and accountability, and developing a comprehensive national energy strategy extending over several decades, independent of changing governments.
In today’s economy, the value of electricity is not measured merely by the number of hours of power supply, but by its capacity to stimulate economic growth. Every additional megawatt of reliable electricity represents a new factory, additional private investment, new employment opportunities, lower production costs, and an improved business environment. Electricity is therefore not simply a public service; it is a fundamental pillar of sustainable economic development.
Ultimately, Iraq’s future will not be determined by the amount of money allocated to the electricity sector, but by its ability to transform those financial resources into lasting productive assets. Moving from financing recurring crises toward building productive capacity, and shifting from operating expenditure to strategic investment, represents the genuine path toward achieving energy security, accelerating economic growth, and utilizing Iraq’s oil wealth to advance national development—rather than allowing electricity to remain the country’s greatest economic paradox.
Economic Studies Unit – North America Office
Al-Rawabit Center for Research and Strategic Studies