US sanctions on Iran’s banking sector have interrupted overseas payments but Energy Minister Reza Ardakanian has said that the problem is solved and the Iraqis are paying their bills, ISNA reported.
Last November the United States imposed its toughest sanctions on Iran, prohibiting and penalizing business with Iranian energy, shipping, and financial services sectors, as well as other activities. The move followed President Donald Trump’s unilateral withdrawal last May from Iran’s landmark nuclear deal with the six world powers.
The Trump administration granted limited waivers to eight countries including Iraq to continue imports from Iran. The waivers ended on May 1 and the US threatened those countries that if they continued interaction with Iran they too would be punished, Financial Tribune reported.
However, Iraq, which has long been one of the main customers of Iranian gas and electricity, announced that it could not cut gas imports from Iran as it is in dire need of keeping its power plants running.
Last week the US granted Iraq another 90-day sanctions waiver so it can continue to purchase gas.
As per agreements between the two sides, Iraq was to pay its bills in USD or euro; however, due to the new US restrictions it offered to pay in dinar.
After lengthy negotiations, Iraqi companies opened two bank accounts with the Central Bank of Iran so that in case they could not pay in the EU currency, they can use the Iraqi dinar.
In March, Iraq transferred an equivalent of $200 million into the CBI accounts.
Iraq’s total debt to Iran regarding gas and electricity purchase had reached $4 billion, over half of which has so far been cleared. The Arab country still owes $1.8 billion to Iran for energy imports.
Iraq is the biggest importer of Iranian electricity for more than a decade. The Arab neighbor needs at least 23,000 megawatts of electricity to meet domestic demand. Decades of war, civil strife and terror attacks have destroyed its power infrastructure. Iraq has a power deficit of 7,000 MW.
As summer approaches and the mercury rises to near 50 degrees Celsius, Iraqi demand for gas and electricity increases exponentially.
“Iraq is paying its debts according to existing contracts,” the minister was quoted as saying by ISNA.
Nevertheless, it is still not clear how the Iraqis are paying, in dollar, euro or dinar. “It does not matter how they pay, what is important is that they are paying.”