Resolving Financial Relations: Iraq and Iran Settle Gas Debt, 30 SEPT

 Resolving Financial Relations: Iraq and Iran Settle Gas Debt, 30 SEPT

New Approach to Settling Debts

The Iraqi Central Bank recently announced a significant shift in the financial relations between Iraq and Iran, marking a new chapter in their economic dealings. A new agreement has been reached between Baghdad and Tehran, addressing the longstanding issue of Iraq’s gas debt to Iran. The precise details of this novel approach remain undisclosed, but the announcement signals a resolution to the long-standing problem of Iraq’s debt to Iran.

Impact of US Sanctions

Given the decades of conflict and international sanctions, Iraq relies heavily on gas imports from Iran to meet about a third of its energy needs. However, US sanctions on Iranian oil and gas have imposed restrictions on how Baghdad can pay for these imports. As a result, direct cash transfers to Iran are not possible, and payments must be held in a bank account, from which Tehran can fund imports of food and medicines. This system has left Iraq heavily in arrears, leading Iran to respond by periodically cutting off the gas supply.

Calls for Unlocking Payments

In response to the ongoing issue, a coalition of pro-Iran factions in Iraq, known as the Coordination Framework, has urged the government to press the United States to unlock pending payments for gas imports. This coalition, which holds significant influence over Iraqi parliament, voiced its concerns over frequent power outages experienced across the country during the hot summer months, when temperatures often reach 50 degrees Celsius (122 degrees Fahrenheit).

Alternative Solutions

To reduce dependence on Iranian gas, Iraq has been exploring several alternatives, including imports from Gulf countries like Qatar and recovering flared gas from oil fields. The government is also considering bartering oil for gas with Iran, a move designed to alleviate the worsening electricity crisis in Iraq. This move does not violate U.S. sanctions on Tehran, which apply to financial transactions but not to barter deals. However, the arrangement has not been officially communicated to Washington.

The Barter Agreement

According to a senior political official close to the Iraqi government, the barter agreement would see Iraq send 250,000 barrels of crude oil to Iran daily. This arrangement could potentially mitigate the severe power shortages in Iraq caused by Iran cutting off the gas supply due to unpaid debts. In return, Iran would resume its gas exports to Iraq, thereby restoring the energy supply to previous levels.

Future Outlook

Despite the challenges, Iraq is committed to meeting its energy needs and reducing its reliance on Iranian gas. The government recently announced a massive 27 billion energy deal with a French energy giant, TotalEnergies, which is expected to boost local electricity production. This deal is seen as a significant step towards shifting Iraq away from needing Iranian gas imports. The Iraqi Prime Minister has expressed optimism that these projects will end the need for imports within two to three years upon completion.

https://bnn.network/world/iraq/resolving-financial-relations-iraq-and-iran-settle-gas-debt/