Iran to maintain gas, power sales to Iraq despite unsettled bills

Tehran — Iran will continue exporting gas and electricity to Iraq even as Baghdad owes Tehran at least a $1 billion in gas bills, according to local media reports.

Iran is also hoping to expand its export options to Iraq and diversify to other regional countries as well, President Hassan Rouhani said Sunday.

Iran's crude oil exports have fallen sharply in the past six months, after the US withdrew from the Iran nuclear deal and imposed sanctions targeting its oil and gas sector in November.

"Our plan for exports of electricity, and connecting our electricity to Iraq, and also gas ... will continue and in this regard we are ready to facilitate very good connections [conduits] not only between the two countries, but in the future with other countries in the region," Rouhani said in a televised briefing Saturday.

Rouhani was joined by the visiting Iraqi Prime Minister, Adel Abdul-Mahdi, who was accompanied by a ministerial and business delegation in Tehran for a two-day visit.

Energy relations between Iraq and Iran have come under increasing pressure from the US government, which has forced OPEC's second-largest producer to end a crude supply deal with its neighbor Iran.

The US is pressuring Iraq to turn away from Iran, promoting US businesses in deals that will help Iraq wean itself off Iranian gas and power supplies. But Iraq remains heavily reliant on Iran.

ENERGY DIPLOMACY

Iraq owes around $1 billion in gas bills to Iran, oil minister Bijan Zanganeh said Sunday after a meeting with his Iraqi counterpart Thamir Ghadhban, state-run news agency IRNA reported.

In February, Zanganeh said Iran's gas sales to Iraq were worth more than $200 million a month.

Iran's ambitious plans to sell its energy regionally are limited by US sanctions. Washington issues periodic waivers for Iraq.

The US in March extended Iraq's waiver for another 90 days for the country to work out payment mechanisms for Iranian electricity and gas supplies that do not violate sanctions.

Cutting the supplies would be devastating for Iraq's economy and could lead to further instability for the country, in light of regular summer power protests.

Iraq's power minister Luay al-Khateeb said Iraq would only need Iran's power supply for the next three years.

The two sides are working on a three-year cooperation agreement for more electricity exports.

"The contract for one-year extension of electricity exports to Iraq has been signed. ... Iran is capable of exporting 1,500 MW of electricity to Iraq," Iran's power minister Reza Ardakanian said, cited by Pavan.

"The three-year agreement covers a variety of activities including renovation of Iraq's power plants, establishment of joint companies for reparation and cutting power waste ... which is very huge in Iraq right now," he said.

Iraq recently paid $1 billion worth of Dinars to Iran's central bank to settle its overdue energy debts, state television reported Sunday.

"Given the gas and electricity exports to Iraq and the exports by the private sector, right now our exports to Iraq value $12 billion," Abdolnaser Hemmati, chief of Iran's central bank, told state television.

Iran's international banking relations are another target of US sanctions.

Imports from Iran account for nearly 30% of Iraq's daily 14,000 MW electricity consumption. Around 1.25 Bcf/d of gas is imported by pipeline, feeding three power plants in Diyala and Baghdad provinces.

Another 350 Mcf/d is sent by pipeline to a power plant in Basra. Iraq also sources 1,000 MW of electricity from Iran directly via transmission lines.

-- Aresu Eqbali, newsdesk@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com