The US has renewed a 120-day waiver that will allow Iraq to pay Iran for energy, the State Department confirmed on Tuesday.
“This action will allow Iraq to use its own funds to render payment for Iranian electricity imports into restricted Iranian accounts in Iraq,” a senior administration official said.
Iraq owes Iran several billion dollars in gas payments and the waiver is aimed at helping Baghdad pay its bills.
While Iran supplies Iraq with about a third of its energy needs, Baghdad cannot pay Tehran directly because of US sanctions.
The waiver signed by US Secretary of State Antony Blinken enables Baghdad – which is heavily reliant on Iran for electricity – to pay Tehran via non-Iraqi banks in third countries.
The money that is transferred into non-Iraqi banks can only be used for restricted services – not unlike the deal Washington and Tehran reached in September to release five jailed Americans in return for $6 billion in frozen Iranian funds to be transferred from South Korea to Qatar.
The funds were released under strict conditions, including that they only be used for humanitarian purposes.
“What this waiver is about is allowing Iraq to make these payments,” the official said. “And it's also about trying to move some of this money out of Iraq so that Iran doesn't have leverage.”
The US has been issuing Iraq energy waivers since 2018.