Iraq to set up mechanism to buy Iranian gas, electricity

July 5, 2019

TEHRAN - Iraq is going to establish a trade mechanism to continue buying gas and electricity from Iran despite U.S. sanctions, AFP reported, citing senior Iraqi officials.

“The special purpose vehicle (SPV) would allow Iraq to pay for imported Iranian energy in Iraqi dinars, which Iran could use to exclusively buy basic goods,” Iraqi officials said.

As reported, the SPV was the result of months of talks between Iraqi, Iranian and U.S. officials.

"The Iraqi government will continue to pay Iran for gas by depositing money into a special bank account inside Iraq, in Iraqi dinars," one of the officials told AFP.

A U.S. official also told AFP that Washington was aware of the mechanism's creation.

In mid-June, AFP reported that the United States granted Iraq another 90-day waiver to continue with vital energy imports from neighboring Iran despite re-imposed sanctions.

Iranian energy imports are vital to Iraq, one of the world's hottest countries, which faces chronic blackouts that often leave homes without power for up to 20 hours a day.

Iraq pipes in up to 28 million cubic meters of Iranian gas a day for power generation and also directly imports up to 1,300 megawatts of Iranian electricity.

That dependence is uncomfortable for Washington, which sees Tehran as its top regional foe.

Trump reimposed unilateral sanctions on Iran's energy and finance sectors in November following a decision to abandon a landmark 2015 nuclear deal between major powers and Tehran.

He gave Iraq an initial 45-day waiver to continue buying electricity and natural gas from Tehran, and in December Washington granted Baghdad a 90-day extension.