Iran says Iraq owes it $11 billion in payments for gas exports, according to Mohammad Al Sadegh, Iran’s ambassador to Iraq, who spoke with Iraqi media on Saturday.
Iraq has long struggled to pay Iran for imported gas, which is used in thermal power stations to generate between 30 and 40 per cent of the country’s electricity needs.
Iraq’s payments for gas imports from Iran faltered during the war against ISIS, when high defence costs occurred alongside a crash in oil prices.
Later, when oil prices collapsed during the Covid-19 pandemic. Tehran began gas exports to Iraq after the completion of a pipeline in 2017.
On several occasions, Iran cut gas exports to Iraq because of non-payment and demand peaks in Iran.
Iraq has also struggled to pay Iran because of US sanctions, which ban dollar payments with Tehran.
But Mr Al Sadegh’s revelation could surprise many observers given Iraq’s record oil revenues in 2022, which topped $115 billion.
Iraq has been facing a severe energy crisis for years due to political instability, a lack of investment in energy infrastructure and a generous subsidy system that means the cost of electricity is virtually free for Iraqis, further undercutting the ability of the government to cover the cost of production.
This has resulted in massive power shortages, leading to widespread cuts and regular protests, particularly during summer.
The country is also rich in oil and natural gas reserves, but has struggled to capture gas associated with oil production, instead burning off or “flaring” vast amounts.
This is despite long-standing pledges by the government to end the wasteful practice.
Iraq burns about 0.5 per cent of global gas supply daily, according to the World Bank — one of the highest rates of flaring in the world.
The US has pressured Iraq to reduce its dependence on Iranian gas imports and seek alternative energy sources, including solar energy, but also capturing gas that would otherwise be flared.
Iraq’s Ministry of Oil said last year that it hoped 90 per cent of flaring would be halted by 2024, but experts say this is overly optimistic.
A continuing gas project in the south of the company under the Basra Gas Company consortium of Shell, Mitsubishi and Iraq’s South Gas Company aims to complete the capture of about 40 million cubic metres of gas a day this year, up from a current capture of around 30 million cubic metres a day.
Iraq imports around 35 million cubic metres of gas a day from Iran.