Former U.S. Officials: Gas Swap Between Iraq and Iran Violates Sanctions

Three former U.S. officials commented on the proposal for an exchange of Iranian gas for Iraqi oil, previously announced by Iraqi Prime Minister Mohammed Shia' Al-Sudani, stating that this matter is likely to be 'violative' of U.S. sanctions against the Islamic Republic unless the United States grants 'exemptions' to allow it. According to Reuters, experts believe that barter transactions are likely to violate U.S. sanctions against Tehran unless the U.S. provides 'licenses' to Iraq to receive Iranian natural gas in exchange for its crude oil, thereby giving Baghdad a solution to repay its debts. Previously, the Islamic Republic had reduced gas exports to Iraq by half, but since the U.S. has not confirmed the repayment of Iraq's gas debt to the Islamic Republic, Iran and Iraq agreed to resume gas exports in exchange for oil, but this 'barter deal' still requires 'U.S. approval.' Although details of this barter deal have not been released, experts argue that this transaction contradicts U.S. sanctions and state that the existing exemption, which is only granted for 'electricity imports,' does not cover broader barter agreements. According to the report, the U.S. Treasury Department's definition of 'transaction' is broad enough to include barter exchanges, leading to a 'potential violation of sanctions.' While analysts believe there is always room for 'political expediencies,' they assert that from a 'legal perspective,' a barter contract would certainly 'violate' U.S. sanctions. Additionally, it has been reported that Iraq, although heavily reliant on imported gas from Iran for one-third of its energy needs, faces limitations in its ability to 'repay debts' to Tehran due to U.S. sanctions on Iranian oil and gas. Reminiscent of the 'oil-for-food' situation during the late Saddam era, Iraq cannot directly pay the Islamic Republic's claims, which are held in a bank account in Iraq's Trade Bank, to be used by the Islamic Republic 'only' for importing 'food and medicine.' Richard Goldberg from the Foundation for Defense of Democracies stated that conducting this type of barter transaction with Iran without an exemption from the U.S. would violate U.S. sanctions against the Islamic Republic. Goldberg, a former member of the National Security Council under Donald Trump, added that 'under the Iran Freedom and Counter-Proliferation Act, any energy-related transaction with Iran is prohibited.' A U.S. State Department official also told Reuters that 'we are not in a position to anticipate any decisions regarding exemptions. We currently have no opinion on reports related to barter transactions between Iraq and Iran.' Reuters noted that the Iraqi embassy in Washington did not respond to the news agency's request for comment.