Iraq Agrees to Settle Iran Debt

Iran and Iraq reached an agreement to settle the Arab country's energy debt to Iran, Energy Minister Reza Ardakanian said in Tehran on Wednesday
Outlining the outcome of his visit to Baghdad a day earlier, the minister said the Iraqis had agreed to open a euro-based account to deposit Iran's earnings.
In his one-day visit Ardakanian conferred with energy and banking officials. Unpaid debt owed to the National Iranian Gas Company and the Power Generation, Distribution and Transmission Company (Tavanir) is to be deposited in the account, IRNA reported. 
An estimated 20 million cubic meters of gas is exported to the Arab neighbor every day (worth at least $200 million per month). However, Baghdad has not settled the debts for more than a year.
On Dec. 27 Iraq’s Electricity Ministry said Iran plans to cut its gas shipments to Iraq due to long outstanding debts. News outlets in Tehran said Iran would resume the gas export in full after Ardakanian's visit.  

$6 Billion Debt 

Earlier in the week, the NIGC said Iraq owed more than $6 billion. Debts includes $2 billion in arrears and $1 billion in contract violations. Apart from that $3 billion is blocked and inaccessible in the Trade Bank of Iraq.
Ardakanian said the Iraqis have so far settled €700 million of arrears, which is to be deposited into the new account.   
The agreement was built on previous accords between the governors of central banks of Iran and Iraq earlier in October. 
The agreement signed by the central bank governors of the two countries calls for creating a special monetary channel to facilitate bilateral payments. As per the deal, the Iraqi arrears will be used to import basic goods into Iran. 

Special Bank Account

The provisions of the deal stipulate that Baghdad pay for the gas and electricity import by depositing the money into a special bank account in Iraq. Iran cannot withdraw its own money, but can use it to buy humanitarian goods. 
Most of the Iranian earnings from gas and electricity export are blocked in banks in Iraq and some other capitals. The US imposed tough new sanctions on Iran in 2018 but has granted Iraq several temporary waivers to continue buying electricity and gas from Iran. 
"Funds in this account can be used for basic needs, including medicine," Ardakanian said. He added that the Tehran government’s debts to private contractors can be reimbursed through this account.  
The US economic siege, at least on paper, exempts trade in humanitarian goods, like food and medicine.
Iraq's economy relies almost exclusively on oil revenue paid in dollars, which leaves Baghdad extremely vulnerable to any punitive measures the US could take in response to a violation.
Iraq is the biggest importer of electricity from Iran. It needs more than 23,000 MW (per day) to meet growing domestic demand. Besides importing electricity from Iran, Iraqi power plants also depend on Iranian natural gas to generate power. 
Iran has exported close to 65 billion kilowatt hours of electricity to Iraq since 2005 worth more than $6.2 billion. 
The first electricity export contract between the two sides was signed in 2005 and has been renewed ever since.