As I read the news article on the International News Feed, my heart was heavy with the knowledge that Iraq would be resorting to using oil to pay for its Iranian gas imports. While it is undeniable that Iran's gas is absolutely necessary for Iraq’s electricity generation, US sanctions on Iranian oil and gas have put Baghdad in a horrible position.
The payment system requires them to hold payments in a bank account, but Tehran can only use the funds to purchase food and medicine. With billions of dollars worth of arrears piling up, Iran has periodically cut off supply to Iraq, causing immense suffering throughout Iraq. This latest decision further highlights how years of conflict, international Sanctions, corruption, and dilapidated infrastructure have left Iraq's people desperate for relief.
Prime Minister Mohamed Shia Al-Sudani said in a statement that Baghdad and Tehran had signed an agreement Tuesday after several days of talks for “the import of Iranian Gas to fuel Iraqi power plants, in exchange for Iraqi crude oil.”
Though the statement noted the deal was meant to address the gas supply crisis, it seemed to leave unresolved issues such as US sanctions and payment complications.
Recent gas supply stoppages have only worsened the frequent power outages much of Iraq sees during the hot summer months when temperatures regularly reach 50 degrees Celsius (122 degrees Fahrenheit). That's why Al-Sudani felt he had no choice but to turn towards Iran--yet their proposal came with its own set of difficulties, given the stringent US sanctions on Iran and the complex methods necessary to make money transfers.
Al-Sudani declared a recent payment of around $1.9 billion had been made, and they could now guarantee "the gas will continue to flow."
Baghdad has been exploring other alternatives to reduce its dependence on Iranian gas, including the $27 billion agreement with TotalEnergy.
