Iraq owes Iran $11bn for gas imports, says Iranian ambassador

Iraq owes Iran $11 billion for gas, according to Mohammad Al Sadegh, Tehran’s ambassador in Baghdad.

Iraq has struggled to pay Iran for gas, which is used in thermal power stations to generate between 30 and 40 per cent of the country’s electricity.

Iraq’s payments for imports from Iran lapsed during the war against ISIS, when high defence spending coincided with a crash in oil prices.

Later, when oil prices collapsed during the coronavirus pandemic, Tehran began gas exports to Iraq through a pipeline completed in 2017.

On several occasions, Iran cut gas exports to Iraq because of non-payment and demand peaks in Iran.

Iraq has also struggled to pay Iran because of US sanctions, which ban dollar payments with Tehran.

But Mr Al Sadegh’s revelation could surprise many observers, given Iraq’s record oil revenue in 2022, which topped $115 billion.

Iraq has been facing an energy crisis for years because of political instability, a lack of investment in energy infrastructure

The US has urged Iraq to cut imports from Iran by capturing gas that is burnt off during the oil extraction process

and a subsidy system that means electricity is nearly free for Iraqis, undercutting the government’s ability to cover the cost of production.

This has resulted in power shortages, leading to cuts and public protests, particularly during summer.

The country is also rich in oil and natural gas reserves, but has struggled to capture gas associated with oil production, instead burning off vast amounts.

This is despite pledges by the government to end the practice.

Iraq burns about 0.5 per cent of global gas supply daily, according to the World Bank. It is one of the highest rates in the world.

The US has pressured Iraq to reduce its dependence on Iranian gas imports and seek alternatives, including solar energy, but also capturing gas that would be burnt off.

Iraq’s Ministry of Oil said last year that it hoped 90 per cent of flaring would be halted by 2024, but industry analysts say this is optimistic.

A project under the Basra Gas Company consortium of Shell, Mitsubishi and Iraq’s South Gas Company aims to complete the capture of about 40 million cubic metres of gas a day this year, up from about 30 million cubic metres a day.

Iraq imports about 35 million cubic metres of gas a day from Iran.