Iran has withheld gas supply to Iraq since the beginning of July, reducing supplies by around 50%. Iraq relies on imports of electricity and gas from Iran, which constitute between 30% to 40% of its energy supply to operate power plants. Iraq has been experiencing a continuous electricity crisis, and Iran’s termination of gas exports has led to the suspension of gas distribution in Mansouriyah, Baghdad, Sadr City, and other areas.
The reason behind Iran’s move to block gas supply to Iraq is the latter’s delay in payments to Tehran due to US sanctions. Fearing protests in the country due to electricity cuts, the Iraqi government struck a deal with Iran. The deal involves swapping Iraqi crude oil for Iranian gas, avoiding financial transfers and evading US sanctions.
To alleviate pressure on Iraq from Iran, the US Secretary of State Antony Blinken granted Iraq a 120-day exemption, allowing Iraq to pay Iran’s gas dues into accounts in non-Iraqi banks. This means that the money will not be spent without American permission, as Washington allows financial transfers to Iran for the purchase of humanitarian goods such as food and medicine.
However, the US decision, although justified by US officials as an attempt to ease Iran’s pressure on the Iraqi government and shift financial pressure to other countries, carries other implications. The banks to which Iraq will transfer the money are Omani banks. The US decision might give Iran an opportunity to access some funds, easing some of its economic crisis.
[by Huda Raouf in Independent Arabia]
Compiled and translated by Faizul Haque