Iraq $1.6b in arrears on Iran gas payments, urges US to let release funds

Iraq is $1.6 billion in arrears on its payments for imports of Iranian gas, its acting electricity minister has said, urging Washington to allow cash payments despite its sanctions on Tehran.

Despite its immense oil and gas reserves, Iraq remains dependent on imports to meet its energy needs, and neighbouring Iran currently supplies a third of its gas and electricity under a tightly controlled waiver from US sanctions.

The restrictions, imposed when Washington reimplemented sanctions on Tehran after President Donald Trump abandoned a nuclear deal with Iran in 2018, require Iraq to pay for its energy imports from Iran in kind, not in cash.

The restrictions then require Iran to use the gas money to fund imports of farm and drug products, which must be approved by US officials on a case-by-case basis.

In an interview with state television late Wednesday, acting electricity minister Adel Karim said Iraqi arrears on payments to Iran now totalled $1.69 billion.

"These funds remain in the Trade Bank of Iraq and have not been paid to the Iranian government," Karim said.

"With the funds, [Iran] is supposed to buy food products or drugs. This requires lengthy vetting by US government or other bodies before the purchases can go ahead.

"Given the US government has allowed us to import the gas, it should also allow us to release the funds," he said.

Iran "needs to make very large investments in renovating its infrastructure in the gas sector".

Frustrated by Iraq's failure to pay its debts, Iran has already on several occasions cut its gas and electricity deliveries to Iraq, further aggravating the chronic outages that plague the Iraqi grid.

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The Iraqi official said Iranian interruptions in deliveries to Iraq were sometimes due to the shortfalls in its own domestic supply.

"When they need gas, they cut our supplies," Karim said.

He also noted the contract with Iran contained no penalty clauses for failure to honour agreed deliveries. "I imagine this contract was drawn up rather hastily," he added.

An Iraqi delegation was due in Tehran to discuss the issue "in the coming days", Karim said.