Iraq To Pay Long-Standing $2.7b Energy Debt To Iran

A senior Iraqi official has confirmed that his country has acquired a sanctions waiver from the US to pay $2.7 billion of its debt for gas and electricity to Iran.

Speaking to Reuters, the official who spoke on condition of anonymity because he was not authorized to speak to the media, said Iraqi Foreign Minister Fuad Hussein was given the clearance during a meeting with US Secretary of State Antony Blinken on the sidelines of the Riyadh Conference on Thursday.

The Iraqi foreign ministry source said that the funds will be transferred through the Commercial Bank of Iraq and confirmed that the money will be used for Iranian pilgrims' expenses and foodstuffs imported by Iran.

Iranian officials have claimed that the money in Iraqi banks could be as much as $10 billion or more. Yahya Al-e Eshaq, the head of the Iran-Iraq chamber of commerce, was quoted as saying by the local media Saturday that the Iraqi debt is between $7 to $8 billion but only $2.7b has been released and that part of the funds has been earmarked for pilgrims and another portion has been used to purchase basic goods.

According to the semi-official Iranian Students News Agency (ISNA), Al-e Eshaq also told the media that the payment of the funds to Iran will have a positive impact on Iranian markets, including the foreign exchange and basic goods markets, probably stabilizing them.

Iraq which is heavily dependent on gas and electricity imports from Iran has been in arrears in its payments to Iran since the US government under President Donald Trump imposed banking sanctions on Tehran in 2018, that can target third countries for transferring dollars to Iran.

In late May, a source with direct knowledge of secret talks between Tehran and Washington on the release of Tehran's frozen assets in Iraq and South Korea had told Iran International that the negotiations could result in a deal soon but the implementation of the deal could take time.

South Korea also holds $7 billion of Iran's funds, which it owes for importing Iranian oil prior to full US sanctions imposed in May 2019.

Iran is expected to show more flexibility on issues related to its nuclear program in exchange for the release of its funds in Iraq, and free hostages, presumably US citizens ,but probably also other western hostages with dual nationality, in exchange for its assets in South Korea, the source said.

After 18 months of talks to revive the JCPOA came to a halt in September, the Biden administration has been saying it is no longer focused on the issue and has listed a few conditions Iran must meet, nicknamed by the media as JCPOA Plus.

Iraqi Foreign Ministry spokesperson Ahmed Al-Sahhaf said in a brief statement that Hussein had made progress "regarding financial dues between Iraq and Iran during his discussion with his American counterpart in Riyadh" when asked about the funds.

With Reporting by Reuters