Iraq, US clash over Iran energy imports: Paper

Iran is the sole foreign supplier to Iraq where energy production and grid capabilities have lagged since the US invasion of 2003 and blackouts in cities are common even with the current purchases.

Iraq heavily relies on Iranian gas to generate electricity but US officials say purchases must end now because gas falls under the American sanctions.

The electricity shortfall is especially acute in the sweltering summers, which led to violent protests in Basra in September and turned into a national crisis.

Iraq’s electricity demand is expected to surge again this summer and any cuts in Iranian supplies are set to spark more protests, destabilizing the Arab country.

Gas imports from Iran generate as much as 45 percent of Iraq's 14,000 megawatts of electricity consumed daily. Iran transmits another 1,200 megawatts directly, making itself an indispensable energy source for its Arab neighbor.

According to the New York Times, the Trump administration has told Iraq’s leaders that they have until late March to end electricity purchases.

Officials in Baghdad say there is no easy substitute because it would take three years or more to adequately build up Iraq’s energy infrastructure, the paper said.

The US gave a 45-day waiver on electricity to Iraq and extended it by 90 days in December after it reimposed sanctions on Iran in May.

Iraqi officials said the American demand acknowledges neither Iraq’s energy needs nor the complex relations between Baghdad and Tehran.

Iraq’s former prime minister Haider al-Abadi told the New York Times that Baghdad was in a precarious situation with the United States because the Americans have failed to “look at the geopolitics of Iraq.”

“We happen to be neighbors of Iran; the US is not. We happen to have the longest border with Iran; the US does not. And we don’t have that powerful an economy,” he said.

“The defiance by Iraqi leaders underscores the lack of support among many nations for the sanctions and the American goal of crippling Iran’s government,” the paper wrote.

It cited analysts as saying that they do not expect China and India to stop their purchases of Iranian oil either even after the 180-day waivers expire.

Last month, Britain, France and Germany announced a mechanism to allow countries to do business with Iran without falling foul of US sanctions.

According to the Times, the Trump administration is pressuring Iraqi officials to connect their grid to Saudi Arabia, Jordan or Kuwait and sign contracts with foreign companies for natural gas capture during crude oil production.

Last October, the Trump administration warned Iraqi officials to forgo a $15 billion power generation deal with Germany’s Siemens and award it to General Electric instead.

According to Bloomberg News, senior US officials warned Abadi at the time that signing the deal with Siemens would seriously jeopardize Iraq’s relations with the United States.

Iraqi officials ended up signing nonbinding agreements with both companies but the product would equal only a fraction of the imports from Iran, and it would take at least two years to come online.

On Friday, Iraqi Minister of Electricity Luay al-Khatib visited Tehran where he signed initial accords on power production, exports and technology transfers.

Iran’s state-run electricity firm Tavanir agreed to extend its direct electricity exports to Iraq, despite an outstanding Iraqi debt of $2 billion.

Iran’s Energy Minister Reza Ardekanian said Iraq’s debts have been scheduled and repayments have started.

Earlier this month, the two neighbors signed an agreement on a payment mechanism which is to facilitate the settlement of Baghdad’s debts to Tehran.

The deal allows Iranian traders to open accounts with Iraqi banks to carry out their transactions, Iran’s Central Bank Governor Abdolnaser Hemmati said in Baghdad.  

In addition to natural gas and electricity, Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, and air conditioners.