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Tehran — Iran and Iraq have agreed to settle Iraq's energy debt to Iran through a barter deal, under which Baghdad would supply Tehran with needed medicine and staples, Iranian state news agency IRNA reported Oct. 13.

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Iraqi payments for Iranian gas and electricity is paid into Iranian accounts in Iraqi banks. However, due to the sanctions, those funds are frozen and Iran is unable to access them.

The settlement sidesteps US sanctions against financial payments to Iran for its gas and electricity, said Abdolnaser Hemmati, central bank governor, as quoted by IRNA.

Iran has "considerable financial resources" in Iraq's banks, said Hemmati, who held discussions with Iraqi officials on Oct. 12 during his second visit to Iraq over the past four months. Iran would also withdraw money from these banks based on its needs, using it for such sectors as industry, mines, agriculture and healthcare.

"Since these goods are among the country's essential requirements, they will be exempted from the unfair and unilateral sanctions," Hemmati said.

Iran's gas and electricity exports to Iraq are estimated at $4 billion annually, out of total exports of $12 billion. Early this year, Iranian oil minister Bijan Zanganeh said Iraq's debt to Iran amounted to $2 billion.

Iraq reportedly buys 1,200 MWh/d of electricity from Iran, with local media previously reporting that $400 million was due Iran for its power exports to Iraq. In May, meanwhile, an Iranian official told IRNA that gas exports to Iraq has peaked to 32 million cu m/d.

Iran's national currency, the rial, has been taking a steady dive over the last few months, losing value against the dollar. In the face of the US' zero oil sales campaign, Iran's oil trade has slumped drastically and its oil income has likewise shrunk. The central bank has been trying to slow the fall by injecting dollars in the market.