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

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.

Iraq will begin trading crude oil for Iranian gas to end the recurring issue of payment delays to Tehran due to the need for U.S. approval, Iraqi Prime Minister Mohammed Shia Sudani said on Tuesday.

Sudani said Iran had cut its gas exports to Iraq by more than 50% as of July 1 after Baghdad failed to secure U.S. approval to disburse owed funds, but Tehran had now agreed to resume gas exports in exchange for crude oil. The deal was reached during talks with an Iranian delegation that was in Baghdad since Saturday, Sudani said in a televised speech.

Iraq imports electricity and gas from Iran that in total make up between a third and 40% 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 U.S. 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.

The United States has pushed Iraq, OPEC second-largest producer, to cut its reliance on Iranian gas. Iraq spends roughly $4 billion per year on imports of Iranian gas and power while at the same time burning massive quantities of natural gas as a byproduct of its hydrocarbons sector.

It has taken steps to change course. On Monday Iraq signed a massive deal with French oil major TotalEnergies that includes plans to capture gas from oilfields in the southern Basra region. And in June, Iraq invited foreign companies to bid for contracts to explore and develop natural gas reserves in 11 new blocks.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)