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What is Iraq's mechanism to circumvent US sanctions and buy energy from Iran?
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Iraq has to pay an outstanding bill of about $ 2 billion for the purchase of gas and electricity earlier, according to Iranian Oil Minister, Bijan Namdar Zangana
Rudaw - Erbil
Iraq seeks to create a financial "outlet" that will allow it to continue to buy electricity and vital gas from Iran and circumvent US sanctions, reflecting a European mechanism that came into effect earlier.
This "special purpose mechanism" will allow Iraq to pay for imported Iranian energy in Iraqi dinars, which Iran can use to buy humanitarian goods exclusively, according to Iraqi officials.
This alternative solution will allow Baghdad to continue the import process and avoid popular protests caused by the lack of electric supplies without being sanctioned if it runs on a dangerous rope between its major allies, Tehran and Washington.
The agency "Agence France Presse" a senior Iraqi official, "not named," as saying that "
He added that "the Iraqi government will continue to pay Iran for gas by depositing funds in a special bank account inside Iraq with the Iraqi dinar."
"Iran will not be able to withdraw funds, but it will be able to use them to buy goods from outside Iraq," he said.
Iraq has to pay an outstanding bill of about $ 2 billion for a previous gas and electricity purchase, according to Iranian Oil Minister Bijan Namdar Zangana.
"The US embassy in Baghdad has refused to comment on the matter," AFP quoted an unnamed US official as saying.
To overcome the chronic shortage of energy resources, Iraq imports up to 28 million cubic meters of natural gas from Tehran to its factories and directly purchases about 1,400 megawatts of Iranian electricity.
This dependence is uncomfortable for the United States, which sought to curtail Tehran's influence and re-impose sanctions on Iranian financial institutions, shipping lines, the energy sector and oil products.
Washington re-imposed sanctions on Iran's energy sector in November after it pulled out of a nuclear deal signed between the superpowers and Tehran in 2018, but gave Iraq several temporary exemptions to continue buying Iranian energy until October.
The United States insists Iraq should stop its dependence on Iranian energy, but Baghdad says it could take up to four years to buy at least Iranian gas.
To do so, the central banks of Iraq and Iran agreed in February to establish a payment method to avoid US sanctions, the official IRNA news agency reported.
That means not dealing with US dollars, and buying only "humanitarian supplies" allowed by the United States, such as food and medicine.
This system will be similar to the recently launched "Enstics" mechanism by Britain, Germany and France to trade legally with Iran without prejudice to US sanctions. However, the system is fraught with political, financial and other complications.
The Iraqi economy relies almost entirely on oil revenues, which are paid in US dollars, making Baghdad highly vulnerable to any punitive measures the United States can take in response to any violation.
It remains unclear what exactly Iran can buy from Iraq, because trade exchange tends in the other direction.
[You must be registered and logged in to see this link.]
Iraq seeks to create a financial "outlet" that will allow it to continue to buy electricity and vital gas from Iran and circumvent US sanctions, reflecting a European mechanism that came into effect earlier.
This "special purpose mechanism" will allow Iraq to pay for imported Iranian energy in Iraqi dinars, which Iran can use to buy humanitarian goods exclusively, according to Iraqi officials.
This alternative solution will allow Baghdad to continue the import process and avoid popular protests caused by the lack of electric supplies without being sanctioned if it runs on a dangerous rope between its major allies, Tehran and Washington.
The agency "Agence France Presse" a senior Iraqi official, "not named," as saying that "
He added that "the Iraqi government will continue to pay Iran for gas by depositing funds in a special bank account inside Iraq with the Iraqi dinar."
"Iran will not be able to withdraw funds, but it will be able to use them to buy goods from outside Iraq," he said.
Iraq has to pay an outstanding bill of about $ 2 billion for a previous gas and electricity purchase, according to Iranian Oil Minister Bijan Namdar Zangana.
"The US embassy in Baghdad has refused to comment on the matter," AFP quoted an unnamed US official as saying.
To overcome the chronic shortage of energy resources, Iraq imports up to 28 million cubic meters of natural gas from Tehran to its factories and directly purchases about 1,400 megawatts of Iranian electricity.
This dependence is uncomfortable for the United States, which sought to curtail Tehran's influence and re-impose sanctions on Iranian financial institutions, shipping lines, the energy sector and oil products.
Washington re-imposed sanctions on Iran's energy sector in November after it pulled out of a nuclear deal signed between the superpowers and Tehran in 2018, but gave Iraq several temporary exemptions to continue buying Iranian energy until October.
The United States insists Iraq should stop its dependence on Iranian energy, but Baghdad says it could take up to four years to buy at least Iranian gas.
To do so, the central banks of Iraq and Iran agreed in February to establish a payment method to avoid US sanctions, the official IRNA news agency reported.
That means not dealing with US dollars, and buying only "humanitarian supplies" allowed by the United States, such as food and medicine.
This system will be similar to the recently launched "Enstics" mechanism by Britain, Germany and France to trade legally with Iran without prejudice to US sanctions. However, the system is fraught with political, financial and other complications.
The Iraqi economy relies almost entirely on oil revenues, which are paid in US dollars, making Baghdad highly vulnerable to any punitive measures the United States can take in response to any violation.
It remains unclear what exactly Iran can buy from Iraq, because trade exchange tends in the other direction.
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