The US has granted Iraq a 90-day Iran sanctions waiver to allow it to continue to import electricity from Tehran, the US Department of State told reporters on Friday.
Iraq’s power sector is in disrepair and does not generate enough electricity to meet domestic demand. US sanctions that went into effect last month threaten to cut the country off from its chief supplier, Iran.
The US initially granted Iraq a 45-day waiver to allow it to buy electricity and gas from Iran while arranging for new suppliers.
Iraq now can continue to pay for electricity imports for another 90 days, the State Department’s public affairs office said.
However, it is barred from paying for gas imports, or it could face “secondary sanctions” — penalties for doing business with a sanctioned entity, Iran.
US President Donald Trump restored tough sanctions after withdrawing from Tehran’s nuclear accord with world powers in May.
US sanctions targeting the country’s energy and finance sectors went into effect early last month, ramping up pressure on Iran’s economy.
The US is encouraging Iraq to break its dependence on Iran, and develop its own gas and power generation sectors. Earlier this month, US Secretary of Energy Rick Perry visited Iraq with a trade delegation from the US Chamber of Commerce to promote US investment in Iraq’s energy sector.
“I’m here to tell you that America and its business community stand ready to assist you,” Perry said.
Iraqi Minister of Oil Thamer Ghadhban has made it a priority to capture natural gas instead of flaring it off as a byproduct of crude oil production.
However, experts said that Iraq would need at least a year to wean itself off Iranian energy imports or risk worsening power outages.
Electricity demand peaked at 24 gigawatts this year, while domestic production was fixed at 16 gigawatts, leading to lengthy and unpredictable blackouts in the hottest months of summer.
The outages were one of the triggers to the unrest that shook Basra, Iraq’s main oil city, from July until September.
Iraq has a contract to import 1.2 gigawatts of electricity from Iran, Texas-based intelligence company Stratfor said.
Iraq imports food and other goods from Iran, and the two countries keep close political ties. Trade between the two countries is expected to reach US$8.5 billion this year.
The US granted eight other countries — Taiwan, China, Greece, India, Italy, Turkey, South Korea and Japan — six-month sanctions waivers to give them time to eliminate energy imports from Iran.
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