Payment Deal With Iraq in Final Phase

EghtesadOnline: Head of the International Department of the Central Bank of Iran said constructive talks were held with Iraqi officials during his tour to the Arab country, which could result in unfreezing millions of dollars of Iranian money.

News ID: ۷۵۰۴۹۷

22 July 2020

Hamid Qanbari said the outcome of the talks would be finalized during Iraqi Prime Minister Mustafa al-Kadhimi ongoing talks in Tehran.

Heading a high-ranking delegation, Kadhimi arrived in Tehran on Tuesday. The trip comes on the heels of a visit by Iranian Foreign Minister Mohammad Javad Zarif to Baghdad.

In the meeting in the Iraqi capital past agreements with the neighboring state during the visit last month of Abdolnasser Hemmati, the CBI governor, were reviewed.

“It is expected that foreign currency worth billions of dollars will be injected into Iran’s currency market and help address forex demand,” he was quoted as saying by the CBI’s public relations office.

In his tour in June, Hemmati had met with his Iraqi counterpart Ali Mohsen Ismael Al-Alaq in Baghdad to invoke past agreements and expedite settlement of Iraqi arrears using a trading mechanism designed to supply basic goods to Iran.

“We had signed deals during the previous visits. It was agreed that we use our resources in Iraq for buying basic goods that are not subject to [US] sanctions,” Hemmati said, referring to deals between the two neighbors in February 2019.

The agreement signed by the central bank governors called for setting up a special monetary channel to facilitate bilateral payments.

The US imposed tough new sanctions on Iran in 2018 but has granted Iraq several temporary waivers to keep purchasing electricity and gas from Iran.

Main Importer

Iraq is the biggest importer of electricity from Iran. It needs more than 23,000 MW (per day) to meet growing domestic demand.

Years of war, civil strife, terror attacks and the failed US invasion of the Arab country in 2003 almost destroyed its power infrastructure, creating a whopping 7,000 MW daily deficit.

Besides importing electricity, Iraqi power plants also depend on Iranian natural gas to generate power. A shortage in previous summers fueled unrest in some provinces.

Iran has exported close to 65 billion kilowatt hours of electricity to Iraq since 2005 worth $6.2 billion, of which $5.9 billion has been paid.

The first electricity export contract between the two sides was signed in 2005 and has been renewed on yearly-basis. The agreement was extended for two years (2020 and 2021) during a meeting of the Iraqi Minister of Electricity Majid Mahdi Hantoush and Iran’s Energy Minister Reza Ardakanian in June in Baghdad.

Iran’s export to Iraq reached $9 billion in the last fiscal year (March 2019-2020). The country also exported 5 million tons of goods worth 1.45 billion rials in the first quarter of the current year.