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Iraq seeks exemption from upcoming US sanctions against Iran: officials

Baghdad — Iraq has been pressing the US administration officials for an exemption in the upcoming resumption of the sanctions regime against Iran, US and Iraqi officials close to the talks have told S&P Global Platts.

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Iraq would be harmed both economically and socially if it were forced to immediately stop trading with Iran on November 4, because of the amount of power -- and gas for power -- it imports from Iran, accounting for a third of power generation, Iraqi officials have argued.

Dozens of people were injured and at least five were killed in summer protests in southern Iraq over a lack of electricity, water and jobs. The protests threatened oil fields as well as the government of Prime Minister Haider al-Abadi.

US officials have expressed concern that the payments made to Iran for natural gas and electricity imports are being made to or through sanctioned entities. They want Iraq to also show it is making efforts to wean itself off Iran by increasing self sufficiency in the gas and power sectors.

Iranian gas that is being fed to power plants in Iraq, as well as direct power lines from Iran, account for more than a third of the electricity distributed in Iraq, a senior Iraqi Electricity Ministry official said.

The official estimates that is nearly 5,000 MW of power generation from Iranian gas-fired power plants and 1,000 MW of direct power supply.

Iraqi officials were in Washington, D.C, and New York in September to request a waiver. It met with officials from the Treasury and State departments, as well as the National Security Council, the officials said.

Imports from Iran have increased over the past decade as sanctions eased.

A gas pipeline now averaging 1.25 billion scf/d of gas to Diyala and Baghdad province began operations last year, and a gas pipeline to the new, Iranian-built Rumaila power plant in Basra began earlier this year and is now carrying 250 million scf/d, the Electricity Ministry official said.

Disputes over late payments for power supplies via the multiple power lines from Iran came during the summer, partially triggering protests and highlighting Iraq's vulnerability.

Iraq is proposing a long-lead time plan to increase the production of Iraqi gas and power generation, and thus wean itself off of Iran.

The US has been keen on more immediate action, officials said. This includes concluding a multi-billion power plant upgrade and expansion being proposed by G.E.; a multi-billion dollar oil, gas and infrastructure project under talks with ExxonMobil; and a smaller but significant five-year deal utilizing Houston-based Orion Gas Processors' equipment to capture flared gas at the Nahr Bin Umar field.

Much of this hinges on the makeup of the next Iraqi government, which has yet to be determined after May elections, and its political proximity to Iran, and whether US officials feel Iraq is doing enough to both wind down its trade with Iran and do so with American companies.

-- Staff Reports, newsdesk@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com