Washington Allows Iraq to Pay for Iranian Gas through 3rd Party

People fish at the Shatt al-Arab stream in the city of Basra, southern Iraq. (AFP)
People fish at the Shatt al-Arab stream in the city of Basra, southern Iraq. (AFP)
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Washington Allows Iraq to Pay for Iranian Gas through 3rd Party

People fish at the Shatt al-Arab stream in the city of Basra, southern Iraq. (AFP)
People fish at the Shatt al-Arab stream in the city of Basra, southern Iraq. (AFP)

The United States on Tuesday moved to let Iraq pay Iran for electricity via non-Iraqi banks, a US official said, a step Washington hopes may keep Tehran from forcing unpopular power cuts during the Iraqi summer, according to Reuters.

Secretary of State Antony Blinken signed a 120-day national security waiver allowing Iraq - heavily dependent on Iranian electricity - to deposit such payments into non-Iraqi banks in third countries instead of into restricted accounts in Iraq, said the official who spoke on condition of anonymity.

The US had granted previous governments since the government of Haider al-Abadi a period of 120 days to pay for its purchases from Iran, including gas, in US dollars. While Iraq continues to heavily depend on imported Iranian gas, Washington permitted Iraq to pay the Iranian debts under the governments of Adel Abdul Mahdi and Mustafa al-Kadhimi.

The summer temperature and the Iranian and American procedures have worsened the condition in Iraq. Iran halted its gas supply to Iraq in the peak of heat, meanwhile, Iraqis complained about the dual US-Iranian sanction on Iraq.

Iran had halted its gas supply to Iraq because the latter didn’t pay its debts. When Iraqi Prime Minister Mohammed Shia al-Sudani announced the oil in return for the gas policy, Iran resumed gas supply that was halted for technical and not financial reasons, according to an Iranian official.

The US decision serves the interest of Iraq and Iran as well. No official approval was announced but experts and observers said that the US is likely to provide new support to the government of Sudani.

In this context, a professor of Mass Communication at the Iraqi University, Dr. Fadel Al Badrani, said Sudani has probably taken US approval before trading oil for Iranian gas to maintain electricity.

It is a temporary step to avoid a crisis, proving the US support to the government of Sudani, according to Badrani.

He added that the US exemption to Iraq for 120 days represents the support to Baghdad to overcome the electricity crisis during summer, but the condition to transfer funds to non-Iraqi banks proves that Washington sticks to its firm stance toward Tehran.

Iraqi Electricity Minister Ziad Ali Fadel confirmed on Wednesday that the ministry has not received any official directive on allowing Iraq to pay dues for Iranian gas.

"The issue of the United States allowing Iraq to pay dues for Iranian gas for 120 days was published in the media only and we have not received anything official," Fadel told the Iraqi News Agency (INA).

"There are reserved amounts belonging to the Iranian side and they are paid either with money or through oil," he added.

"If the United States gives consent to the payment of dues, it is possible to spend part of it money and the other part fuel," the minister said.



Iraq Braces for Economic Fallout from Heavy Reliance on Iran amid Escalating Conflict

An Iraqi man bakes traditional bread at a bakery in Baghdad (EPA). 
An Iraqi man bakes traditional bread at a bakery in Baghdad (EPA). 
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Iraq Braces for Economic Fallout from Heavy Reliance on Iran amid Escalating Conflict

An Iraqi man bakes traditional bread at a bakery in Baghdad (EPA). 
An Iraqi man bakes traditional bread at a bakery in Baghdad (EPA). 

As tensions escalate between Iran and Israel, Iraq is nervously eyeing the potential fallout from a conflict that could have deep and lasting consequences for the country.

While Iraqi authorities and political parties maintain a publicly cautious and reserved stance, behind closed doors, concerns are mounting over what many see as Iraq’s overreliance on Iran in critical sectors such as energy and trade.

A political source speaking to Asharq Al-Awsat revealed that, although officials are holding back from public commentary, there is a growing consensus among political actors that Iraq could face significant disruption regardless of how the conflict unfolds. “There’s an unspoken recognition that many things will change after this war,” the source said.

Already, early signs of strain are surfacing. Iraq’s Ministry of Trade unveiled a new contingency plan this week to safeguard food security amid fears of disrupted supply chains.

Spokesperson Mohammed Hanoun stated the plan aims to “ensure continuity of essential supplies without significant price hikes,” through the buildup of strategic reserves and strengthened market oversight to prevent hoarding or price manipulation.

Security services, meanwhile, reported the arrest of 660 individuals accused of exploiting regional instability. More visibly, daily life is beginning to feel the pressure: consumer activity is slowing, prices of some goods are creeping up, and travel logistics have grown more complex.

With Baghdad International Airport temporarily closed, Basra has become the only functional air entry point. According to sources, the cost of returning to Iraq by land via Jordan has soared from $70 to $250 per passenger.

Experts warn that Iraq’s economic fragility and its deep entanglement with Iran leave it acutely vulnerable. Dr. Siham Youssef, a professor of international economics, explained that Iraq’s heavy dependence on oil exports - comprising over 90% of state revenue - offers little cushion in times of geopolitical upheaval.

While global oil prices have risen by 8% to 12%, Youssef cautioned that any benefit could be wiped out by rising transportation costs, insurance premiums, or damage to infrastructure.

Compounding the issue is Iraq’s reliance on Iranian gas for electricity production. If the conflict interrupts Iranian gas flows, Iraq may face severe power shortages, rising costs, and mounting pressure on an already stretched budget.

Shipping risks are also increasing, with Iraq’s ports located dangerously close to potential conflict zones. Youssef noted that international shipping and insurance firms may soon classify Iraqi ports as “high-risk,” leading to surging logistics costs. Additionally, the closure of Iraqi airspace threatens not only civil aviation but also the loss of overflight revenues.