Turkey announced on Wednesday it will increase water supplies to Iraq after Iran said it would shut off vital exports to its downstream neighbour.
"An approximate 7 billion cubic metres will be cut towards the western and northern borders of Iraq on the order of the Supreme Leader, and the allocation of $8 billion to ministries of energy and agriculture to control the water movement," assistant to Iran's agriculture minister, Ali Murad Akbari said.
Iraq has faced months of concerns about the decline in water levels in the Tigris River caused by Iranian and Turkish dams upstream.
Iraqi parliament speaker Mohammed Al Halbousi reached an agreement with Turkish President Recep Tayyip Erdogan on Wednesday that will see Ankara ramp up exports of water to ensure supply to the whole of Iraq, especially the drought hit southern city of Basra.
The agreement comes a day after Mr Al Halbousi travelled to Ankara to negotiate the deal.
Turkey's Ilisu Dam – first proposed in the 1950s as a major hydroelectric project – has sparked an outcry in Iraq and concern internationally as the water level in the Tigris dropped dramatically this year after Ankara began filling the reservoir.
Photos of people walking across the Tigris, a never previously recorded phenomenon, went viral on social media and made headlines across the world.
Turkish Foreign Minister Mevlut Cavusoglu is due in Baghdad on Thursday to continue talks and is expected to raise the issue of government formation.
Iran has justified its move by announcing that the quantities of water will be used in three major projects across the country.
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Mr Akbari said the implementation of the project will have significant impact on increasing the suitability of agricultural production in Iran.
"Water scarcity is one of the serious threats facing the country," he said.
But Moussa Tabatabai, Tehran's deputy ambassador to Iraq, denied the reports.
"Iran cannot cut that amount of border water from Iraq without an agreement with the authorities in this regard," he said on Wednesday, according to the Iranian news agency Fares.
In June, Iraq's semi autonomous Kurdistan Region announced in a statement that Iran has "cut the water flow of a cross-border river of Little Zab," which is one of the five major tributaries of the Tigris river.
Kurdish authorities said that Iran has built three large dams on the Karkh and Karoon rivers that used to flow out of Iran into Iraq, but which have now disappeared.
Nearly two-thirds of Iraq's surface water originates outside its borders, leaving it vulnerable to the actions of its neighbours, particularly Turkey. The headwaters of Iraq's two main rivers the Tigris and the Euphrates originate in the eastern Turkish highlands.
Water shortages in Iraq have added to the public's dissatisfaction over economic issues such as high unemployment and lack of public services that has fueled mass protests in the south.
It has also triggered Baghdad to ban rice planting, driving farmers to leave their land.