The US has renewed a waiver to allow Iraq to continue importing natural gas and electricity from Iran for 120 days, as the country struggles to meet its growing demand for electricity.
This new waiver shows President Joe Biden’s permissive approach towards Iraq and less hardline stance on punishing sanctions against Iran.
The previous waiver, issued by his predecessor Donald Trump in early January, was only for 90 days.
"This waiver ensures that Iraq is able to meet its short-term energy needs while it takes steps to reduce its dependence on Iranian energy imports," a spokesperson for the US embassy in Baghdad told The National on Wednesday.
Iraq has been under pressure to develop its vast gas and oil resources and strike deals to improve its ailing electricity sector in order to wean itself off Iranian energy since late 2018.
This was when Mr Trump withdrew Washington from the 2015 nuclear deal with Iran and reimposed sanctions.
Since then, Washington has repeatedly extended the waiver to Baghdad for periods between 45 to 120 days, depending on relations between the two countries.
These have been strained over attacks by Iran-backed Iraqi Shiite militia on US assets in Iraq.
Iraq has been scrambling to develop its natural gas resources and electricity sector.
Last year, it signed multi-billion dollar agreements with multinational energy services companies such as the US's GE and Germany's Siemens to improve its power infrastructure, damaged by decades of war, sanctions and corruption.
On Monday, the Opec member inked a preliminary agreement with France's Total that includes projects to develop an oilfield, capture and process gas, build large energy infrastructure and generate solar energy.
Total is said to be investing more than $7 billion.
Iraq is also in talks with Gulf states and Jordan to import electricity, but these discussions have not yet led to permanent deals.
The new waiver comes as the US and Iraq prepare to hold their first round of strategic dialogue under Mr Biden's administration on April 7. The previous meeting was last June.
Talks will focus on security, counterterrorism, economics and energy, political issues, and educational and cultural co-operation.