Cancellation of Iraq's Exemption from Sanctions; Baghdad Seeks Alternatives for Iranian Gas

Some Iraqi officials, following the cancellation of their country's exemptions from U.S. sanctions for purchasing electricity from Iran, have announced they are exploring options to replace Iran with other countries for gas purchases. The United States, as part of its 'maximum pressure' campaign against the Islamic Republic, revoked Iraq's special exemption for buying electricity from Iran; an exemption that had allowed Iraq to trade electricity without issues despite U.S. sanctions against Iran for the past seven years. This decision by Washington, announced on Saturday, March 9, has elicited reactions in both Tehran and Baghdad. Iranian officials initially called this U.S. decision 'illegal.' Abbas Araghchi, Iran's Foreign Minister, described the action as targeting the innocent people of Iraq and depriving them of access to essential services like electricity, especially on the brink of summer. Meanwhile, inside Iran, electricity production has fallen to levels far below domestic needs, and throughout winter, nearly all regions of the country, including the capital, have faced widespread blackouts. The government's move to publish scheduled power cut tables indicates that this situation is likely to continue into the upcoming spring and summer. On the other hand, Iraqi officials are already seeking to replace Iran with other countries to meet their energy needs. Iran and Iraq's energy trade has primarily been in the gas sector. On Tuesday, March 20, just two days after the announcement of the new U.S. decision, the director of South Gas Company in Iraq confirmed in an interview with Reuters that Baghdad is considering Qatar and Oman as potential alternatives to Iran for gas supply. So far, Baghdad has been importing up to 50 million cubic meters of gas daily from Iran based on a five-year contract renewed last year with Tehran. According to Iraqi officials, the country has been paying between four to five billion dollars annually for imported gas from Iran. The Iraqi Minister of Electricity stated that the potential removal of gas imports from Iran would lead to a reduction of more than 30% in daily electricity production in the country, which currently stands at 27,000 megawatts. Hamza Abdul-Baqi, head of the Iraqi state gas company, indicated that Baghdad will lease a floating liquefied natural gas terminal to counter the potential impacts of cutting gas imports from Iran. This Iraqi official emphasized that the lease agreement for this floating terminal will be signed in the coming weeks with a company based in the United Arab Emirates, and it is expected that this floating platform will be ready to receive and transfer gas from Qatar and Oman in about three months. According to Hamza Abdul-Baqi, this terminal will be located at the Khor al-Zubair port and will transfer gas to a point near Basra, Iraq's most important oil port in the south, via a 45-kilometer pipeline under construction. This terminal and pipeline are expected to replace at least 14 million cubic meters of gas daily, which is less than one-third of the current gas imports from Iran. The extensive U.S. sanctions against Iran have been imposed due to Tehran's nuclear program and the Islamic Republic's support for militia groups in the region.