Reports: Trump Administration Supports GE Over Siemens in $15B Iraq Deal

Iraq signed a memorandum of understanding on October 15 to develop power plants in the country with General Electric (GE). The Financial Times on October 18 said the $15 billion deal was brokered after senior officials in the administration of U.S. President Donald Trump warned Iraq that relations with the U.S. would be threatened if Iraq signed an agreement with Munich, Germany-based Siemens instead of GE, which is headquartered in Boston, Massachusetts.

Siemens in 2016 said it had about 50,000 workers in the U.S. and reported 2016 revenue from its U.S. operations, including more than 60 manufacturing sites, at $23.7 billion. GE last year reported it has about 106,000 U.S. employees.

Bloomberg on October 18 said two Trump administration officials who asked not to be identified said senior U.S. officials warned Iraqi Prime Minister Haider Al-Abadi not to move forward with Siemens. Bloomberg reported the Trump administration suspected Iran was pushing Iraq to accept a deal with Siemens “as a way of undercutting ties with the U.S.,” as the U.S. prepares to impose new sanctions on Iran in November.

“This is part of very strong campaign of engagement in Iraqi government formation and a very targeted effort to support the Iraqi government and minimize Iranian influence,” Garrett Marquis, a National Security Council spokesman, told Bloomberg. “It’s part of our overall effort to evict the Iranians rather than to invite them in.”

The Financial Times (FT) reported that Trump administration officials told Iraqi officials that 7,000 Americans had been killed in the region since the 2003 U.S. invasion to oust former Iraqi President Saddam Hussein.

A GE spokesperson told POWER on October 19: “GE has a strong legacy of over 50 years of presence and contributions to Iraq, with nearly 300 people on the ground and more than half of the active power installed base. Iraq has urgent electricity requirements for 2019 and beyond, and GE’s world-class technology, deep domain expertise, and history in the market best positions us to help the Government of Iraq address these needs now and deliver fast, sustainable power to the Iraqi people.”

Siemens spokesman Philipp Encz told Bloomberg on Thursday, “We still believe we have put the most beneficial and comprehensive plan for the Iraqi people on the table, extending far beyond power infrastructure. We remain committed to our Iraqi roadmap and supporting the Iraqi people and re-powering the country.”

Siemens CEO Joe Kaeser met with Al-Abadi in Baghdad in September. Siemens issued a statement about that meeting, saying Kaeser and Al-Abadi discussed a plan for Siemens to install 11 GW of generation capacity in the country over a four-year period. The German newspaper Handelsblatt reported the contract was worth $15 billion. Adel Jeryan, Iraq’s deputy electricity minister, at the time confirmed GE also could land the contract, but told the Boston Globe that Siemens had a “high” chance to win the deal.

The FT, though, on Thursday said an adviser to Al-Abadi told Siemens two weeks ago to cease efforts to land the contract, saying the U.S. was pressuring Iraq about the deal. The FT, citing a person familiar with the incident, said the adviser said “The U.S. government is holding a gun to our head.”

Iraqi officials on October 14 said the country had signed an MOU with the U.S. to help build out Iraq’s energy infrastructure. Officials said it is part of a plan for the country to become more energy independent; Iraq imports much of its natural gas from Iran because Iraq does not have infrastructure to use its own reserves of gas, with 60% of the country’s production flared off.

Officials have said Iraq imports about 12 million cubic meters of natural gas each day from Iran. Some estimates say Iranian gas accounts for as much as 40% of Iraq’s power generation.

Bloomberg reported that Iraq’s MOU with the U.S. calls for work on expanding Iraq’s infrastructure to begin soon, increasing Iraq’s generation capacity by 2 to 3 GW by next summer. Iraqi officials said the agreement also calls for U.S. companies to help build transmission and distribution lines.

U.S. sanctions on Iran are expected to resume November 5. U.S. officials told Bloomberg they want the agreement with Iraq finalized by then. The officials also said the Trump administration has told Iraqi officials that continued imports of natural gas from Iran could face sanctions if the country does not work with the U.S. on energy projects.

GE’s power unit, similar to Siemens and other turbine manufacturers, has struggled in recent years due to a global drop in demand for large turbines. Former GE CEO John Flannery was ousted three weeks ago, with GE’s board citing weak performance in the GE Power business for a shortfall in free cash flow and earnings in 2018. The company’s stock price fell more than 50% during Flannery’s tenure, which lasted just 14 months.

—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).