Iraq will Trade Crude Oil for Iranian Gas to Pay off its Power Debt: PM
According to Iraqi Prime Minister Mohammed Shia Sudani, the country will start exchanging crude oil for Iranian gas to put an end to the ongoing problem of payment delays to Tehran caused by the requirement for U.S. approval.
Sudani claimed that Iran agreed to resume gas exports in exchange for crude oil after Baghdad failed to obtain U.S. approval to release owed funds on July 1. Before that date, Iran had reduced gas exports to Iraq by more than 50%.
According to Sudani, the agreement was reached during discussions with an Iranian delegation that had been in Baghdad since Saturday.
Between a third and 40% of Iraq’s energy needs are met by imports from Iran, which is especially important during the hot summer months when temperatures can soar to 50 Celsius (122 Fahrenheit) and energy consumption is at its highest.
These imports have proven difficult for Iraq to pay for. According to Sudani, due to U.S. sanctions, which only permit Iran to access money to purchase non-sanctioned goods like food and medicine, it owes Iran about 11 billion euros ($12.1 billion) in unpaid debts and struggles to make payments.
Even those procedures, according to Farhad Alaaldin, the prime minister’s adviser on foreign affairs, “contribute to unwanted delays in making the payments, and as a result, the funds are not paid to the Iranians”, according to news sources.
According to Sudani, Iraq would avoid rolling power outages every summer by exchanging its crude for Iranian gas while also working to finish gas extraction and capture projects that would help the nation become self-sufficient.
“They stopped the gas, they started the gas,” he said, “but we can’t come to the citizens every summer for the next two or three years.”
A spokesperson for the State Department declined to comment on the alleged barter agreement between Iraq and Iran and did not address whether such a deal might violate American sanctions.
I am not convinced that a pure barter arrangement, such as the one described by Sudani, is satisfactory for Iran given Iran’s need for hard currency, he said. I am not convinced of this.
A barter agreement is unlikely to prevent Iran from continuing to seek hard currency from Iraq, according to Henry Rome, an analyst with the Washington Institute for Near East Policy.
I am not convinced that a pure barter arrangement, such as the one described by Sudani, is satisfactory for Iran given Iran’s need for hard currency, he said. I am not convinced of this. “Even if this agreement is put into effect, it would probably not stop Iran from pursuing the billions of dollars still held in Iraqi accounts,” says the report.
Iraq, the second-largest producer in OPEC, has been pressured by the US to reduce its reliance on Iranian gas.
Iraq imports Iranian gas and power for about $4 billion a year, and as a byproduct of its hydrocarbons industry, it burns enormous amounts of natural gas.
It has made efforts to alter course. Iraq and French oil giant Total Energies signed a significant agreement on Monday that includes plans to extract gas from oilfields in the southern Basra region.