Iraq gets Iran gas waiver from US despite ramped up tensions

Without the Iranian gas, Iraq would lose supplies to run generators and blackouts would become more common

FILE - In this Dec. 13, 2009 file photo, Iraqi laborers work at the Rumaila oil refinery in Zubair near the city of Basra, Iraq. Iraq's Oil Ministry says Iraq has resumed exports from its oil fields around Kirkuk, one year after the city was seized by federal forces from the autonomous Kurdish administration in the north of the country. (AP Photo/Nabil al-Jurani, File)
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The United States has reportedly granted Iraq another sanctions waiver to continue importing crucial Iranian gas needed by Baghdad to stop massive blackouts across the country.

Although there has been no official confirmation, Iraq Oil and Gas Report stated that United States Secretary of State Mike Pompeo okayed the new waiver on Friday, just three days before the end of the previous 90-day period.

Iraq is heavily reliant on Iranian gas to keep the lights on at home due to a massive shortfall in electricity production compared to demand. With the long hot summer just starting, Baghdad fears that a loss of Iranian supplies could lead to instability. Although Iraq is looking to fix its damaged infrastructure, there are few fast options.

The news came shortly after Iraqi Prime Minister Adel Abdul Mahdi spoke with Mr Pompeo by phone and called for "calm" amid escalating tensions between Tehran and Washington.

The pair "exchanged views on developments in the region amid the current crisis between the United States and the Islamic Republic of Iran", according to a statement from Mr Abdul Mahdi's office.

A State Department statement said the pair had discussed tanker navigation in the Gulf – key for Iraqi oil exports through the southern city of Basra.

“The secretary shared our assessment that Iran was responsible for attacking two oil tankers in the Gulf of Oman. He reiterated the United States’ commitment to upholding freedom of navigation,” the State Department statement said.

The US granted waivers to several countries that relied heavily on Iranian oil and gas when it reimposed sanctions on Tehran last year. However, American officials made clear they were temporary and required states to look for alternative suppliers for their energy needs.

The UAE and Saudi Arabia have said they can increase production to offset any shortfall caused by the loss of Iranian oil on the global market.

Iraq is about the last recipient of the US waiver for Iranian gas because of the necessity of the supply in helping the country make up its electricity shortfall. Blackouts are not uncommon and last year deadly protests flared up across the country’s south over lack of electricity, water and jobs during the sweltering summer with temperatures topping 50°C.

Protesters try to storm and burn the governor's building during protests demanding better public services and jobs, Tuesday, Sept. 4, 2018, in Basra, 340 miles (550 kilometers) southeast of Baghdad, Iraq. Iraqi security forces fired tear gas and live ammunition on hundreds of protesters. (AP Photo/Nabil al-Jurani)

At its peak, the country’s demand outstrips production by a third, but that is expected to widen as the economy grows, the International Energy Agency said in April.

Seeking to fix the country’s electricity crisis, Iraq is in talks with several international power giants to fix the shattered infrastructure. After a four-year war with ISIS who overran much of the west in 2014, and took major cities including Mosul, Fallujah and Ramadi, as well as over a decade of conflict, instability and poor governance since 2003, Iraq has been left with very poor service provision.

Despite massive oil reserves, the country is unable to provide water and power nationwide. There is high unemployment and poverty, and a lack of schools, teachers, doctors and hospitals.

Late last year, Iraq agreed on a 5-year power “roadmap” with America’s General Electric and Germany’s Siemens that will see Baghdad spend $14 billion (Dh51.4bn) on plants, repairs and power lines. General Electric installed a 125-megawatt turbine at Al Quds power plant in Baghdad governorate last month, the company said.

Siemens championed taking “one of the first major steps towards actual implementation” of the master plan in April when it laid out projects, budgets and timelines. The April deal totals over $785 million (Dh2.9bn) and will see the company upgrade 40 gas turbines, build new substations and undertake a multimillion-dollar 500-megawatt power plant.