US extends Iraq's sanctions exception relating to Iran for four more months

Shafaq News / The United States announced a four-month extension of Iraq's exception period from sanctions related to dealing with Iran, allowing Baghdad to continue importing energy from the Islamic Republic.

A senior official from the U.S. State Department, requesting anonymity, explained that this extension permits Iraq to use its own funds to pay for imported electricity from Iran, which will be deposited into restricted Iranian accounts within Iraq.

The official emphasized that Iran could only utilize these funds for humanitarian needs. Due to U.S. sanctions imposed on Iran, Baghdad cannot directly pay Tehran for its imports of Iranian gas. He clarified that Iraq's outstanding debts to Tehran for previous gas imports amount to approximately $10 billion.

To compel Baghdad to settle its outstanding debts, Tehran regularly suspends its gas supplies to Iraq, crucial for operating electricity generation stations. Iranian gas supplies cover one-third of Iraq's electricity generation station requirements.

Additionally, the exception allows for a portion of funds from Iranian gas to be transferred to Oman. This marks the 21st time Washington has extended this sanctions exception since 2018.

Despite Iraq being an oil-rich country, it heavily relies on Iran for energy, importing a third of its consumption needs of gas and electricity due to its dilapidated infrastructure. This dependency arises because Iraq is incapable of achieving self-sufficiency to meet the needs of its 40 million population.

Presently, Iraq produces 16,000 megawatts of electricity, significantly less than its estimated requirement of 24,000 megawatts, which can spike to 30,000 during summer. With its population projected to double by 2050, as per the United Nations, energy consumption is expected to rise, amplifying Iraq's energy needs.

The previous U.S. administration under President Donald Trump withdrew from the nuclear agreement with Iran and reinstated sanctions on the Islamic Republic in late 2018. Consequently, many countries and global companies refrain from dealing with the Iranian government or its enterprises, fearing potential repercussions of sanctions.