Iraq in constant contact with US over Iran gas debts

ERBIL, Kurdistan Region - Iraqi Prime Minister Mohammed Shia’ al-Sudani said on Tuesday that Baghdad  is in constant contact with US over $10 billion debt to Iran for gas imports.

“Work is continuing with the American side regarding the unpaid bills, which reduced to 9.25 billion” euros ($10 billion) Sudani told reporters in a press conference in Baghdad, adding that Iraq has transferred around 1.9 billion owed to Iran within the first seven months of his government.

Iraq’s electrical grid has been dependent on gas imports from Iran to run its power generation plants for years, with Baghdad remaining overly reliant on Tehran. US sanctions on Iran’s oil and gas prevent Iraq from paying back its power-related debt.

Iraq cannot directly pay cash to Iran. Instead, payments are deposited into a bank account and used by Tehran to fund the import of food and medicine.

Last month Iraq lost around 5000 megawatts of electricity after Iran completely stopped the supply of gas to the southern region of Iraq, in addition to slashing exports to Baghdad and central Iraq from 45 million cubic meters to 20 million cubic meters.

On July 11, Iraq and Iran signed an agreement that sees Baghdad paying for imported gas from Tehran using its crude oil.

Sudani said that a delegation from the Iraqi central bank and the Trade Bank of Iraq (TBI) traveled to Oman on Tuesday to “agree on a formula transferring the funds to the sultanate of Oman, in agreement with the US treasury.”

Last month, US State Department spokesperson Mathew Miller confirmed that Oman was willing to receive a portion of the Iraqi fund. Miller described it as an “important step” as they believed it was necessary to “get this money out of Iraq because it is a source of leverage that Iran uses against its neighbor.”

Iran confirmed that Iraq has paid off all its gas arrears to the Islamic Republic, but stressed that sometimes there are problems in transferring the money from the TBI to Tehran.

“Surely after completing gas projects, we will stop [gas] imports,” Sudani said.

Although it is one of the world’s largest oil-producing countries, Iraq is still dependent on Iran's oil to provide electricity despite plans by Iraqi Prime Minister to develop the country’s gas sector and achieve self-sufficiency within the next five years.

Iraq and French energy giant TotalEnergies on July 10 put pen to paper on a $27 billion contract to develop Iraq’s oil, gas, and renewable energies sectors, in a significant step towards achieving gas self-sufficiency.