US grants Iraq 90 day Iran sanctions waiver

Analysts said they expect Washington to continue to grant Baghdad sanctions waivers to allow it to continue receiving resources from Iran until it can resolve its energy deficit.
Friday 21/12/2018
A worker walks through the Majnoon oilfield in Basra, 420km south-east of Baghdad, October 6, 2013. (Reuters)
Workaround. A worker walks through the Majnoon oilfield in Basra, 420km south-east of Baghdad, October 6, 2013. (Reuters)

WASHINGTON – The United States granted Iraq a 90-day sanctions extension to allow it to continue to import electricity from Iran, the US State Department announced.

Washington previously granted Iraq a 45-day waiver to allow it to continue buying electricity and gas from Iran, which expired December 20. The United States has given Baghdad an additional 90 days to arrange new energy supplies.

However, US officials reportedly affirmed that Iraq must not pay Iran in US dollars or euros, with talks ongoing on solving the issue.

US sanctions on Iran went into effect in November after Washington unilaterally withdrew from the Iran nuclear deal, citing factors, including Tehran’s hostile actions in the region. The White House described the sanctions as “the toughest sanctions regime ever imposed” on Tehran, as it targets both Iran and any country that trades with it.

Iraq is heavily reliant on Iranian gas to as fuel for power stations, importing approximately 1.5 billion standard cubic feet per day via pipelines.

Despite the extension, experts said it will take Baghdad at least a year to arrange a new supplier. Iraqi Prime Minister Adel Abdul-Mahdi met with US Energy Secretary Rick Perry in Baghdad in December to discuss future steps. Perry was accompanied by a delegation of more than 50 business people, who met with Iraq’s oil and electricity officials.

Baghdad reached an agreement with US energy giant General Electric and German conglomerate Siemens in November to install liquefied natural gas-operated mobile power units in southern oil fields, Iraqi state media said.

Analysts said they expect Washington to continue to grant Baghdad sanctions waivers to allow it to continue receiving resources from Iran until it can resolve its energy deficit.

Iraq’s electricity demand peaked at 24 gigawatts in 2018 but domestic production is fixed at 16 gigawatts, leaving Iraq reliant on energy imports from Iran.

Iraq’s energy sector is major disrepair, causing unexpected blackouts across Iraq last summer. The power outages were among factors behind unrest in the country.

“I think that the US is going to try to find a workaround for Iraq,” Richard Nephew, who served as the US State Department’s lead sanctions expert for negotiations with Iran in 2013-14, told CNBC. “The US government knows that Iraq is a key country in the competition starting between the United States and Iran.”