U.S. Likely to Continue Iran Sanctions Waivers for Iraq
WASHINGTON (Dispatches) - Iraq won’t be left hanging amid Washington’s sanctions on Iran, which supplies almost half of its electricity, experts familiar with U.S. policy say.
The President Donald Trump administration in November granted Iraq a 45-day waiver to continue its energy purchases — and at the risk of setting off more instability in the country, the U.S. is now expected to continue allowing transactions with Iran under yet-to-be-decided conditions.
But the sanctions provide a new urgency to accomplish something Baghdad and Washington have been pursuing for some time: reducing the war-weary country’s economic reliance on Tehran.
“I think that the U.S. is going to try to find a workaround for Iraq,” Richard Nephew, who served as the State Department’s lead sanctions expert for negotiations with Iran from 2013 to 2014, told CNBC. “The U.S. government knows that Iraq is a key country in the competition starting between the United States and Iran.”
And after billions spent on years of war and occupation, Washington has a real interest in Iraq’s success, he added, “not least of which is as a bulwark against Iran.” A determination will be made to extend Iraq’s waiver, a state department official told CNBC, though a decision has yet to be reached.
Iran is Iraq’s third-largest trading partner, with an estimated $12 billion in cross-border trade per year, and the majority-Shia countries share strong cultural, religious and geographic ties. And despite being OPEC’s secondlargest producer of oil, Iraq is dependent on Iranian natural gas plants for up to 45 percent of its electricity — a setup now facing potential jeopardy amid U.S. sanctions.
Without continued sanctions exemptions, Iraq could lose around a third of its power overnight, energy analysts say. Already burdened by failing infrastructure, pockets of ISIS activity and poor public service provision, the scenario makes Iraq a “ticking time bomb,” according to Michael Stephens, a regional expert at the Royal United Services Institute in London. Over the summer, Iraq failed to pay its electricity bill to Iran on time. This prompted Tehran to cut the power off and triggered widespread protests in the country’s south, particularly in poverty-stricken Basra, where government buildings and the consulates of Iran and the U.S. were attacked. While millions of Iraqis maintain a loyalty to Iran — particularly for its role in supporting the Shia militias that played a pivotal role in the defeat of ISIS — many still describe its clout in the country as detrimental to stability and economic development.