U.S. State Department: No Financial Benefit to the Islamic Republic from Iraq Exemption

After the Washington Free Beacon reported that the Biden administration had granted Tehran access to over $10 billion in frozen funds through a sanctions exemption, the U.S. State Department responded to the Persian section of Voice of America, stating that funds from electricity purchases by Iraq will not enter Iran. A State Department spokesperson said that on November 8, the department extended the exemption for Iraq to purchase electricity from Iran for the 23rd time for another 120 days. This exemption has been in place since 2018 (during Donald Trump's presidency). The spokesperson continued that the Biden administration remains committed to reducing Iran's malign influence in the region, and a stable, independent, and secure Iraq is essential for achieving this goal. The spokesperson clarified that this exemption permits a transaction, not the transfer of dollar amounts; it allows Iraq to buy electricity from Iran for another 120 days. In response to a question about whether Iran had control over this money to spend as it wishes, the spokesperson stated that funds from Iraq's electricity purchases will not enter Iran. According to the conditions of the exemption for electricity purchases by Iraq, no funds from Iran's frozen assets are given to Iran. Any interpretation contrary to this is incorrect. The spokesperson added that these funds are kept in restricted accounts and can only be used for humanitarian trade and other non-sanctionable transactions. When asked why the Biden administration continues to issue exemptions for Iran despite the Islamic Republic's insistence on continuing its malign activities in the region, the spokesperson said that since 2018, the department has allowed Iraq to purchase electricity from Iran, and as long as Iraq develops its domestic electricity production capacity, the Biden administration will continue issuing exemptions as previous administrations did. The spokesperson noted that Iraq currently does not produce enough electricity to meet the growing demand due to its expanding economy and demographic changes. As Iraq continues to increase its capacity to achieve energy independence, an early removal of imports from Iran would leave a significant number of Iraqis without electricity, destabilize Iraq, and undermine U.S. security interests in the region. The spokesperson emphasized that continuing to issue this sanctions exemption would weaken the Biden administration's progress in countering the Iranian regime's narratives that blame the U.S. for energy and economic insecurity in the region. The spokesperson added that this strategy is effective in reducing the Iranian regime's influence. Iraq is taking significant steps to reduce its dependence on imports from Iran. Currently, Iraq relies on Iran for about 25% of its electricity production capacity, down from about 40% a few years ago. Part of the Washington Free Beacon article mentions that the Biden administration has repeatedly extended this exemption due to opposition from Republican members of Congress who have warned that cash is aiding terrorism and the Islamic Republic's war against Israel.