Rising military tensions in the Persian Gulf are casting a heavy shadow over Iraq's economy, raising concerns about the fate of oil exports and maritime trade.
The recent targeting and burning of two foreign tankers carrying Iraqi oil within Iraq's territorial waters marks a significant escalation, signaling that a closure of the Strait of Hormuz is now a tangible threat. Such a scenario would halt Iraq's oil exports to global markets, dealing a severe blow to an economy that relies on oil revenues as its main source of funding for both operational and investment budgets.
With the main maritime route for its oil exports disrupted, Iraq is now looking to the central bank's reserves to cushion the shock of lost oil revenues and to ensure the payment of government employees' salaries.
"The other impact Iraq fears is the economic fallout from the closure of the Strait of Hormuz. This will affect Iraq just as it will other countries, but it will hit Iraq harder, because Iraq relies mainly, almost 90 percent of its resources, on oil sales. So the economic impact on Iraq will be significant. The consequences are both political and economic," said Hamza Mustafa, an Iraqi journalist.
The Iraqi government has few alternatives for exporting oil through other routes. The Ceyhan pipeline, which carries Iraqi oil through Turkey, remains shut, leaving the Gulf, now a conflict zone, as the only outlet. Recently, Iraqi officials have begun discussing the need to boost non-oil revenues to mitigate the economic impact of the ongoing conflict.
"We are doing everything in our power to keep this war away from our country, because Iraq cannot withstand more conflict. Our country has reached a critical economic stage in recent years, both before and after the previous regime. We have learned many lessons. As parliament, we will push for decisions that serve our citizens and our country," said Saqr Al-Muhammadawi, a member of Iraq's parliament.
According to a statement by Alireza Tangsiri, commander of the Iranian Navy, the Strait of Hormuz has not yet been militarily blocked and is merely under control. The strait "is only closed to the tankers and ships belonging to our enemies, to those who are attacking us and their allies. Others are free to pass," he said.
Gulf tensions raise fears for Iraqi's oil-funded economy
China's first 500-kV cross-border alternating-current power interconnection project entered service Monday, creating the highest voltage grid tie between the two countries and advancing Belt and Road energy cooperation.
The project raises two-way power transfer capacity between the two countries from 50,000 kW to 1.5 million kW, enabling the annual transmission of about 3 billion kWh of clean electricity, roughly 30 times the capacity of previous lines, according to China Southern Power Grid.
As the largest cross-border grid project and the highest-voltage power link between China and Laos, it connects southwest China's Yunnan Province with Oudomxay and Luang Namtha provinces in northern Laos.
Cross-border electricity trading began as the project entered operation. About 4.81 million kWh of power from clean energy bases in northern Laos was transmitted to Yunnan through the new line, marking a more regular and institutionalized phase of power connectivity between the two countries.
It is also the first time an overseas new energy project has participated in China's electricity market, the company said. The power involved in the transaction came from a large mountain photovoltaic project in Laos, one of the core supporting power sources for the interconnection line.
"This project is the cross-border power grid project with the highest voltage level between China and Laos. Leveraging the China-Laos power grid interconnection and the power markets in southern China, surplus hydropower from Laos can be transmitted to China during the rainy season, while China can supply supplemental power to northern Laos during the dry season. This project represents yet another landmark achievement between China and Laos in deepening power cooperation and jointly advancing the high-quality development of the Belt and Road Initiative," said Li Jingru, general manager of Electricite du Laos Transmission Company Limited (EDL-T), a joint venture of China Southern Power Grid and Lao state-run Electricite du Laos.
The solar project has an average annual power generation capacity of about 1.65 billion kWh. In 2026, it is expected to transmit about 1.1 billion kWh of solar power across the border, supporting energy complementarity between the two countries.
"In the future, efforts will be made to further promote normalized cross-border electricity trading, meet the trading needs such as electricity transmission from Laos to China's Yunnan, from China's Yunnan to Laos, and from Laos to China's Guangdong, and facilitate the optimal allocation of energy resources in the Lancang-Mekong region," said Li Minhong, marketing director of China Southern Power Grid.
Construction of the interconnection project began in late February last year. Spanning a total length of 177.5 km, the transmission line includes a 145-km Chinese section and a 32.5-km Lao section.
New China-Laos power link expands transfer capacity 30-fold, boosts electricity trading
