Iraq Approves Massive Emergency Finance Bill to Pay Iran Gas Debt

The Iraqi parliament passed Wednesday an emergency finance bill to pay debts to Iran to ensure gas supplies and stop worsening power cuts.

The parliament, which has still not adopted its budget for 2022, approved the law relating to "food security and development" totaling 25 trillion Iraqi dinars, approximately over $17 billion.

Of that, $2.6 billion will be allocated to settling Iraq's gas and electricity debts, as well as for buying further energy supplies from abroad, and about $3.4 billion will be used to buy cereals, including large volumes of wheat supplies from both the domestic market and abroad.

Despite its immense oil and gas reserves, Iraq remains dependent on imports to meet energy needs, especially from neighboring Iran, which currently provides a third of Iraq's gas and electricity needs. 

Iran had demanded Iraq pay $1.6 billion it owes for gas imports by the start of June to guarantee further supplies, as it is cutting or reducing supplies regularly due to its own shortages. 

The debt to Iran, which has sharply reduced its gas exports in recent days, dates back to 2020, but payment was stalled amid sanctions against Iran by the United States, which means that Baghdad cannot pay directly for energy imports in cash.

On Tuesday, Iraqi Prime Minister Mustafa al-Kadhemi said that Iran has "promised to restore the needed supply of gas in the coming days.”

Electricity demand surges in Iraq as people seek to keep cool as the country enters the intense heat of the summer, when temperatures soar to over 50 degrees Celsius (122 Fahrenheit).