Iran's Energy Ties With Iraq Unimpeded

EghtesadOnline: The unilateral US sanctions on Iran have not affected relations between Iraq and Iran, as trade ties in key sectors between the two neighbors continue as usual, Iraq's ambassador to Tehran said.

News ID: ۷۴۸۱۳۷

11 August 2019

“My government does not recognize the US sanctions because they are in violation of and against international law,” Mehr News Agency quoted Sa'ad Jawad Qandil as saying.

In June, the United States allowed Iraq to import Iranian gas for its power grid for three more months by extending its

The openly hostile Trump administration reimposed sanctions on Iran’s energy exports and key economic sectors last November, but granted limited waivers (ended in May) to several buyers to meet their pressing consumer needs, including Iraq, according to Financial Tribune.

It is about a year that the US has withdrawn from the nuclear deal signed between Iran and six world powers in 2015.

President Donald Trump then said he would impose tough economic sanctions on Tehran to force Iran's oil exports to zero. Despite the new sanctions, Iran continues to sell part of its crude oil,” Qandil noted.

Iraqi officials have often said that they need at least three years to find alternative sources to replace Iranian gas and power.

Iraq relies heavily on Iranian energy for power supply to its dilapidated power grid that is in dire need of post-war reconstruction.

Replacing Dollar

“Iran and Iraq have been negotiating to bypass the US sanctions and in doing so, the US dollar may be removed from bilateral trade. During the talks there have been suggestions that the Iraqi dinar replace the US dollar,” Qandil was quoted as saying.

Close to 4 gigawatts (roughly one-third of Iraqi consumption) comes directly/indirectly from Iran -- either in the form of electricity export or through natural gas as feedstock for its power stations.

Iraq is the biggest importer of electricity from Iran. It needs more than 23,000 MW to meet growing domestic demand. Years of war, civil strife, terror attacks and the US invasion in 2003 almost destroyed its power infrastructure creating a whopping 7,000 MW deficit.

Besides importing electricity from Iran, power plants in the neighboring country depend on Iran’s natural gas to generate power. The Arab country owes $1.8 billion to Iran for energy imports.

Iran reportedly exported $5 billion in gas and electricity to Iraq in the current year (started in March) to Iraq.

According to reports, Iraq is lining up a special purpose vehicle (SPV) of its own, mirroring a European trade mechanism Instex, to continue vital gas and electricity imports from Iran.

Under the new mechanism, the government in Baghdad will continue to pay Iran for gas by depositing money into a special bank account inside Iraq and in its own currency.

Iran’s private sector is also active in rebuilding Iraq infrastructure that has been destroyed due to years of fighting, US interference and attacks by the self-styled terror group known as the Islamic State.

Some of the projects undertaken by Iranian companies in Iraq include water supply, building dams and power plants and digging tunnels.