Issue/Subject

On July 11, 2023, Prime Minister Mr. Mohammed Shia’ Al-Sudani announced that his government had reached a new approach to energy exchange with Iran, involving the swap of gas for crude oil. Iraq imports electricity and gas from Iran to operate its power plants, which collectively account for about 33% to 40% of its energy supply. This move aims to circumvent US sanctions on Iran’s energy sector, which has caused significant financial accumulations for Iraq due to its inability to fulfill its financial commitments to Iran. As a result, Iran reduced its gas supplies to Iraq by over 50% starting from July 1, 2023, after Baghdad failed to secure US approval for the payments it owed at a crucial time of need. The energy system collapsed due to its heavy reliance on Iranian gas.

This agreement could have represented a strategic solution to overcome US sanctions without requiring exceptions or permissions from the US. Iraq has often obtained exceptions from time to time to settle financial obligations or import energy and fuel from Iran, despite the stringent US sanctions on various sectors including energy and banking.

It’s worth noting that Iran had previously renewed an agreement to supply Iraq with fuel for another five years. This was announced during the recent visit of the Iranian Energy Minister in mid-April to Iraq, leading a high-level delegation for consultations with Iraqi officials. Such agreements are not unprecedented; the former Minister of Electricity, Luay Al-Khatteeb, had signed an agreement with Iran for energy exchange and expertise transfer to develop Iraq’s energy sector.

Read more: Issue_Barter_EN