Iran's President Hassan Rouhani
Iran's President Hassan Rouhani Reuters

Iran on Monday announced that it has started a $2.5 billion project to build a natural gas combined cycle power plant in Iraq, marking the largest such engineering services deal for the Islamic regime, and an important shift as Iran's influence grows in Iraq even as America's fails.

The project, which will build the plant in Rumaila in the southern Basra province, was announced by Abbas Aliabadi, head of the Iran Power Plant Projects Management Company (MAPNA), as reported by the state-run PressTV and semi-official Fars News Agency.

MAPNA sealed the contract for the deal one-and-a-half years ago but just now started executing the agreement. It would appear the lifting of sanctions and the general improvement in Iran's financial picture due to the Iran nuclear deal signed earlier this month led to the development.

The new plant will have a 3,000 megawatt capacity - Iraq's current national grid has a total 8,500 megawatt capacity. The contract was signed with the Iraqi-Jordanian Shamara Holding Group.

"This power plant will start operation in about 16 months and will be able to produce 18 billion kilowatt-hours per year," Aliabadi said. "This project, which is financed and managed by the private sector and is guaranteed by the Iraqi government, will augment Iraq's power generation capacity by 20%."

As noted by Aliabadi, the first unit of the plant is to join the Iraqi national grid in early 2017, and the entire plant will be operational in four years.

Iran gaining upper hand in Iraq?

As part of the deal, Iraq's government has promised to buy the electricity from the plant for 15 to 17 years, while Iran has promised to finance the construction project.

The growing governmental cooperation between Iran and Iraq comes even as the US has expressed concern over the leading role Iran has been playing in training and directing Shi'ite militias and governmental forces in the fight against Islamic State (ISIS).

The latest project comes after MAPNA launched a small 500 megawatt power plant in the southern Iraqi city of Najaf last November.

Just this Saturday Alireza Gharibi, Managing Director of the Iranian Gas Engineering and Development Company, said the last section of a gas pipeline to Baghdad is being tested to start exporting gas via the pipe. The gas will reach the Najaf plant as well as several others.

Iran exports 1,300 megawatts of electricity to Iraq every day, in an annual trade valued at $1 billion according to Fars. Iran is also exporting electricity to Lebanon, Syria, Turkey and Pakistan.

Regarding Iran's windfall of billions of dollars of sanctions relief in the nuclear deal, US President Barack Obama admitted last Friday that the economic aspect of the deal allows Iran to expand its terrorism - Iran is the leading state sponsor of terrorism.

It was revealed last Thursday in a Senate hearing that in classified sections of the deal the US agreed to let Iran test its own covert nuclear facilities where nuclear detonation tests have occurred, a move Israel criticizes as meaning there will in effect be no inspections.