Iraq gets sanc­tions break to stay lit

Coun­try al­lowed to buy Ira­nian elec­tric­ity, win­ning ex­emp­tion de­spite U.S. mea­sures

The Daily Star (Lebanon) - - REGION -

BAGHDAD: Iraq has won an ex­emp­tion al­low­ing it to buy Ira­nian elec­tric­ity de­spite U.S. sanc­tions, as the coun­try plagued by chronic power short­ages walks a tightrope be­tween ri­vals Amer­ica and Tehran.

With U.S. mea­sures im­posed Mon­day tak­ing aim at Iran’s bank­ing and en­ergy in­dus­tries, there were con­cerns Iraq – which heav­ily re­lies on its east­ern neigh­bor for elec­tric­ity and con­sumer goods – would be caught in the cross­fire.

But Baghdad has man­aged to se­cure an ex­cep­tion.

“We granted Iraq a waiver to al­low it to con­tinue to pay for its elec­tric­ity im­ports from Iran,” Brian Hook, the State Depart­ment’s Iran rep­re­sen­ta­tive Iran, an­nounced Wed­nes­day. Iraq would be ex­pected to show the U.S. how it would wean it­self off Ira­nian gas, a wellinformed source told AFP.

“The U.S. gave us 45 days to give them a plan on how we will grad­u­ally stop us­ing Ira­nian gas and oil,” the source said.

“We told them it may take us up to four years to ei­ther be­come self­suf­fi­cient or find an­other al­ter­na­tive,” they added.

The ex­emp­tion came af­ter talks be­tween Iraqi and U.S. of­fi­cials, in­clud­ing from the White House and Trea­sury, the source said.

Iraqi govern­ment rep­re­sen­ta­tives have shuf­fled be­tween Amer­i­can and Ira­nian of­fi­cials for months in a bid to in­su­late their frag­ile econ­omy from es­ca­lat­ing ten­sions.

This week, Prime Min­is­ter Adel Ab­del-Mahdi said Baghdad was in talks with both sides to pro­tect its in­ter­ests. “Iraq is not a part of the sanc­tions regime. It talks to ev­ery­one, and does not want to get in­volved in a con­flict that it’s not a part of,” he told re­porters Tues­day.

Baghdad has a strong re­la­tion­ship with the United States, co­or­di­nat­ing on se­cu­rity, pol­i­tics, and gov­er­nance.

But its econ­omy is pro­foundly in­ter­twined with that of Iran.

Gut­ted by the in­ter­na­tional em­bargo of the 1990s and the U.S.led in­va­sion of 2003, Iraq’s in­dus­tries pro­duce lit­tle.

In­stead, mar­kets in Iraq are flooded with Ira­nian goods – from canned food and yo­ghurt to car­pets and cars.

Th­ese non-hy­dro­car­bon im­ports amounted to some $6 bil­lion in 2017, mak­ing neigh­bor­ing Iran the sec­ond-largest source of im­ported goods in Iraq.

Per­haps most con­se­quen­tial for Iraq’s 39 mil­lion peo­ple is their de­pen­dency on Iran for elec­tric­ity.

Chronic cuts, which of­ten leave homes pow­er­less for up to 20 hours a day, were a key driv­ing fac­tor be­hind weeks of mas­sive protests in Iraq this sum­mer.

To cope with short­ages, Baghdad pipes in nat­u­ral gas from Tehran for its plants and also di­rectly buys 1,300 megawatts of Ira­nian-gen­er­ated elec­tric­ity.

That re­liance is un­com­fort­able for the U.S., whose quest to di­min­ish Tehran’s in­flu­ence prompted it to reim­pose sanc­tions on Ira­nian fi­nan­cial in­sti­tu­tions, ship­ping lines, en­ergy, and pe­tro­leum prod­ucts Mon­day.

Eight coun­tries would be tem­po­rar­ily al­lowed to im­port Ira­nian crude oil.

Iraq’s spe­cial ex­emp­tion ap­pears to have come with a con­di­tion that it lay out how it would stop us­ing Ira­nian elec­tric­ity, said Nus­saibah Younes, a se­nior ad­viser for the Euro­pean In­sti­tute of Peace.

“In or­der to get this ex­emp­tion, the Iraqis had given some sort of roadmap idea,” Younes told AFP.

One way would be cap­tur­ing the gas set alight when Iraq ex­tracts oil, which, ac­cord­ing to the World Bank, rep­re­sents an an­nual loss of about $2.5 bil­lion – enough to fill the gap in Iraq’s gas-based power gen­er­a­tion.

Amer­i­can firms may help fill the vac­uum left by Iran.

In Jan­uary, Iraq signed a mem­o­ran­dum of un­der­stand­ing with U.S. en­ergy com­pany Orion on gas ex­ploits at a south­ern oil field.

And in Oc­to­ber, Iraq signed a memo with the U.S.’ Gen­eral Elec­tric to re­vamp the elec­tric­ity sec­tor, af­ter sign­ing a sim­i­lar agree­ment with Ger­many’s Siemens.

The source told AFP that GE was among sev­eral U.S. com­pa­nies pro­posed to Baghdad dur­ing ne­go­ti­a­tions with the U.S.

But Iraq has had to si­mul­ta­ne­ously re­as­sure Iran, in part by grant­ing it an out­let to cir­cum­vent U.S. sanc­tions.

“The fo­cus for the Ira­ni­ans is in­for­mal sanc­tions-bust­ing ac­tiv­ity in Iraq, in­clud­ing ac­cess­ing hard cur­rency through Iraqi ex­changes and through smug­gling op­er­a­tions,” Younes said.

Baghdad, she ex­pected, would likely “turn a blind eye.”

Iraq has si­mul­ta­ne­ously been grant­ing Ira­nian of­fi­cials more time for face-to-face meet­ings – in­clud­ing its am­bas­sador in Baghdad, Araj Mas­jadi.

He met with new Fi­nance Min­is­ter Fuad Hus­sein and Elec­tric­ity Min­is­ter Luay al-Kha­teeb Wed­nes­day, pledg­ing close co­op­er­a­tion on the power sec­tor in the fu­ture.

For Mas­jadi, the meet­ings ap­peared to be a re­minder of Tehran’s en­trenched role in Iraq.

“We need Iraq the way Iraq needs us,” Mas­jadi said. –

Iran was the sec­ond-largest source of im­ported goods in Iraq in 2017.

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