Iraq to trade crude oil for Iranian gas to resolve power debt: PM

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Iraq will begin trading crude oil for Iranian gas to end the recurring issue of payment delays to Tehran due to the need for US approval, Iraqi Prime Minister Mohammed Shia al-Sudani said in a televised speech on Tuesday.

Sudani said Iran had cut its gas exports to Iraq by more than 50 percent as of July 1 after Baghdad failed to secure US approval to disburse owed funds, but Tehran had now agreed to resume gas exports in exchange for crude oil.

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Iraq imports electricity and gas from Iran that in total make up between a third and 40 percent of its power supply, especially crucial in the sweltering summer months when temperatures can top 50 Celsius (122 Fahrenheit) and power consumption peaks.

Iraq, however, has had trouble paying for those imports.

It owes Iran around 11 billion euros in outstanding debts, Sudani said, which it struggles to pay due to US sanctions that only allow Iran to access funds to buy non-sanctioned goods, such as food and medicine.

Even those procedures are complicated, and “contribute to unwanted delays in making the payments, and subsequently the funds are not paid to the Iranians,” Farhad Alaaldin, foreign affairs adviser to the prime minister, told Reuters.

By trading Iraqi crude for Iranian gas, Sudani said, Iraq would avoid the rolling power cuts that have become the norm in summer until it can complete gas capture and extraction projects that would see the country become self-sufficient.

“We can’t for the next two or three years come to citizens every summer and tell them: ‘They stopped the gas, they started the gas’,” he said.

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