Iran exports about 1,500 megawatts of electricity and 30 million cubic meters of gas to Iraq every day, the money for which is deposited in the Trade Bank of Iraq, a spokesman of the Iranian Oil, Gas and Petrochemical Products Exporters' Union said.
Due to the US sanctions on Iran’s banking sector that have largely disrupted overseas payments, Iran cannot withdraw that money, but can use it to purchase goods from Iraq, Hamid Hosseini was reported as saying by ILNA.
Iraq’s total outstanding bills regarding gas and electricity import has surpassed $2 billion.
In November 2018 the United States imposed its toughest sanctions on Iran, prohibiting and penalizing business with Iranian energy, shipping, and financial services sectors.
As per agreements between the two neighbors, Iraq was to pay its bills in USD or euro. However, due to the new US restrictions it offered to pay in dinar.
“The Iraqi government deposits the money in dinar in an account in the name of Central Bank of Iraq. But due to US sanctions, there is no way to transfer the money to Iran,” Hosseini concurred.
Last December, Energy Minister Reza Ardakanian said Iran had signed a three-year agreement with Iraq to sell energy.
Iraqi Electricity Minister Luay al-Khateeb: The only available option we have is the Iranian gas fuel and Iranian electricity supplies to bridge the power deficit in Iraq
Iraq’s dependency on Iranian energy is not new, it is the best and only option for the Arab nation. According to Iraqi Electricity Minister Luay al-Khateeb, “the only available option we have is the Iranian gas fuel and Iranian electricity supplies to bridge the power deficit in Iraq; as their prices, volume and logistics are competitive with other suppliers, regionally and internationally.”
The Iraqi minister said that electricity production in his country has reached 20,000 megawatts, but additional energy is needed, as power demand is expected to rise to 27,000 MW by the end of the year.
Iraq is the biggest importer of Iranian electricity for more than a decade. Decades of war, civil strife and terror attacks have destroyed its power infrastructure. Iraq has a power deficit of 7,000 MW.
Its energy sector in Iraq has been for years the subject of strong criticism because of corruption, inefficiency and political wrangling.
120-Day Waiver
According to S&P Global Platts, the US extended Iraq's sanctions waiver for 120 days to import Iranian electricity on Thursday, as the Trump administration seeks to boost new Iraqi Prime Minister Mustafa al-Kadhimi and provide some stability to the politically fractured nation.
"In support of the new government the United States will move forward with a 120-day electricity waiver as a display of our desire to help provide the right conditions for success," the US State Department said in a statement, after secretary of state, Mike Pompeo, spoke with Kadhimi by phone.
Iraq's parliament early Thursday granted a vote of confidence to Kadhimi's cabinet and most of his chosen ministers, resolving a political crisis that had seen the previous two nominees for prime minister withdraw their candidacies.
The US, which has sought to pressure Tehran by imposing sanctions on its energy exports, has granted Iraq a series of waivers enabling it to maintain electricity imports from its neighbor.
But the length of the waivers had been shortened, as the US has pressured Iraq to reduce its dependency on Iranian energy supplies. The last waiver, for 30 days, had been granted on April 26.
Iraq is heavily reliant on Iran for electricity and gas supplies due to a lack of infrastructure, and the coming summer months are critical, given the heat and demand for air conditioning.
