An Iranian company is the main beneficiary of a power plant poised to supply a Shell-backed gas project in Iraq, showing the pervasive presence of Tehran’s commercial interests in its neighbor and putting the British group at odds with the shifting geopolitical priorities of the West in the Middle East.
Basrah Gas Company, which is 44% owned by the London-listed energy major, will become a major consumer of energy from the Rumaila Independent Power Plant in southern Iraq when the gas company’s new facility starts operating in June.
The Rumaila plant is owned by Jordan-based Shamara Holding but was built by Tehran-based Mapna Group, which is entitled to 78% of revenues from electricity sales, according to documents seen by the Financial Times and by three people involved in the contracts.
The Shell joint venture, which has received funding from the World Bank, has been widely praised for its role in capturing gas previously burned in Iraqi oil fields and processing it for use in local energy generation, cooking or cooking. export. Iraqi state-owned South Gas owns 51% of the project and Japanese trading house Mitsubishi owns 5%.
Shell and Basrah Gas said they have no relationship with Mapna. There is no indication that Basrah Gas’s payments for power from the Rumaila plant, made through Iraq’s electricity ministry, will violate US or European sanctions against Iran.
However, Mapna’s role in the powerhouse reflects the extent to which companies close to the Iranian regime have integrated into the fabric of the Iraqi economy.
“Iran’s interests and influence are deeply rooted in the Iraqi state and its ministries,” said Renad Mansour, director of the Iraq Initiative at Chatham House. “Its long-term investments and networks ensure it remains the most influential foreign power.”
Iran’s reach is particularly rooted in the energy sector, where 20 years after the US-led invasion, chronic underinvestment and corruption have left Iraq heavily dependent on imported Iranian gas and electricity, which supply more one third of its energy needs.
This isn’t just a problem for Shell. Several international oil companies, including BP and ExxonMobil, operate oil fields in Iraq that draw energy from Iraq’s national grid.
Mapna’s construction of the Rumaila plant is perhaps the best example of Iran’s penetration of the sector. He also reflects how the West has wavered on its rules of engagement with Tehran over the past decade, complicating operations for foreign investors in Iraq.
When Mapna was selected to help build the Rumaila plant in 2015, Iran was close to signing a nuclear deal with Western powers and relations were improving. Three years later US President Donald Trump withdrew from the deal and reinstated the sanctions.
The contract to develop the 3,000-megawatt Rumaila plant was awarded to Shamara in 2014, backed by a power purchase agreement with Iraq’s electricity ministry. The company initially hoped to work with a US or European partner, but struggled to generate interest when ISIS fighters swept through parts of Iraq and Syria that summer, prompting Western investor interest to cool, according to a person familiar with the early stages of the project.
At the same time, two years of negotiations between Western powers and Iran on a nuclear deal had opened up the possibility of a renewed engagement with Iranian companies, the person said.
Mapna was ultimately awarded a $2.05 billion contract to build and supply key technology for the Rumaila plant, backed by a payment guarantee from the Iraqi government signed on July 9, 2015, days before the nuclear deal West with Iran.
Mapna, an energy and infrastructure group founded in 1993, is one of Iran’s most successful companies and the investment in Rumaila was backed by the Iranian regime. The plant has received support from the Iran Export Guarantee Fund in the form of a $300 million political risk insurance policy and is featured on Mapna’s website as the company’s “largest international energy project”.
The Shell joint venture agreed to take power from the Rumaila plant in 2019, signing a $35 million contract to build an 18km power line to a liquid natural gas (NGL) plant it was building nearby, according to documents shared with the FT by Unearthed, a Greenpeace-backed investigative journalism group.
The Basrah NGL plant is expected to start operating in June and will draw up to 70 MW of power from Rumaila, which could increase to 200 MW with the expansion of the NGL plant.
The Rumaila plant produces up to 1,500 MW of energy as of 2020. The Ministry of Electricity is the sole energy supplier in Iraq, which means that it effectively acts as an intermediary at the Rumaila plant, paying Shamara and Mapna for the energy produced and selling it to customers such as Basrah Gas.
Shamara collects 22% of the revenue, with the rest going to Mapna as reimbursement for its work on the project, according to the documents and the three people involved in the contracts. Shamara declined to comment.
Shell stressed that it has “no relationship with Mapna or any Iranian entity”, adding that it could not comment on “the infrastructure, the flow of funds or their commercial agreements with third party suppliers or energy buyers” of the electricity ministry.
He also defended his stake in the Basrah Gas joint venture, saying it was “founded as part of the solution to increase Iraq’s energy self-sufficiency and reduce dependence on gas imports.”
Mapna, South Gas Company and Iraq’s electricity ministry did not respond to requests for comment. Mitsubishi referred the questions to Basrah Gas.
Basrah Gas said it had only paid the electricity ministry for power and had no relationship with Mapna and no contracts with Shamara other than the 2019 deal to build the power line. “BGC’s integrity due diligence on Shamara Holding did not highlight any concerns related to sanctions or trade compliance laws,” it said.
But Mapna’s role in the project is controversial. A former adviser to the prime minister and another person familiar with the matter said that Iraq, under pressure from the United States, had frozen the Iraqi account in which Mapna receives funds since 2021. As a result, Mapna has delayed the completion of the plant, which is planned to generate 3,000 MW when completed.
The United States has been concerned about, among other issues, the role Hassan Daneifar, a former Iranian ambassador to Baghdad and a former member of the country’s Revolutionary Guards, played in lobbying Baghdad on MAPNA’s behalf, the people said. Daneifar could not be reached for comment.
“The United States and Iraq are working together to modernize Iraq’s financial system, fight corruption and prevent manipulation of the financial system,” the US State Department said in response to questions about Mapna. He added that the United States has focused on “improving Iraq’s energy security” by supporting the country to advance gas capture projects to reduce emissions and generate power, build regional interconnections and modernize electricity infrastructure.
Transfers to Mapna’s account aren’t the only energy-related payments between Iraq and Iran that have run into problems. The waiver of US sanctions allows Iraq to import gas and electricity directly from Iran, but payments from Baghdad can only be used by Tehran to finance food or medicine purchases or other authorized international transfers. This arcane deal helps Iraq meet domestic energy demand, but means its payments to Iran are often delayed, prompting Tehran to occasionally cut off supplies.
“The sanctions have created a Paragraph 22 for Iraq,” said Yesar Al-Maleki, a Gulf analyst at the Middle East Economic Survey. “Washington understands that [Iranian gas and power imports] they are crucial to the country’s political and social stability and continue to allow import waivers. But limitations on the transfer of payments to Iran mean they are piling up in Iraq.”
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