December 21, 2018 / 2:15 PM / 2 months ago

U.S. extends sanctions waiver for Iraq to import Iranian gas, power

WASHINGTON/BAGHDAD (Reuters) - The United States has extended for 90 days a waiver granted to Iraq from sanctions against Iran, a State Department spokesman said on Friday, allowing Baghdad to keep importing Iranian gas that is critical for Iraqi power production.

The extension was reached on Thursday, when a previous 45-day waiver was due to expire, during a visit to Washington by an Iraqi delegation, according to two Iraqi officials with direct knowledge of the negotiations.

“A 90-day waiver was granted to allow Iraq to continue to pay for electricity imports from Iran,” a State Department spokesman said, adding that the waiver will apply to both electricity and gas.

The Trump administration reimposed sanctions on Iran’s energy exports in November, citing its nuclear program and meddling in the Middle East, but has granted waivers to several buyers to meet consumer energy needs.

Washington gave Iraq a 45-day waiver for imports of gas from Iran when it reimposed sanctions on Iran’s oil sector on Nov. 5. Iraqi officials have said they need around two years to find an alternative source.

Iraq relies heavily on Iranian gas to feed its power stations, importing roughly 1.5 billion standard cubic feet per day via pipelines in the south and east.

The State Department spokesman said Washington continued to work with Iraq to end its dependence on Iranian natural gas and increase its energy independence.

“These efforts will continue to promote the use of Iraqi natural resources, strengthen Iraq’s economy and development, and encourage a united, democratic, and prosperous Iraq free from malign Iranian influence,” the spokesman said.

‘VERY SENSITIVE ISSUE’

A senior Iraqi government official and a central bank official told Reuters that talks with the United States were continuing on Friday to finalize details, including how to pay Iran for energy imports, two sources said.

The Trump administration has said Iraq should not pay Iran in U.S. dollars or euros. A team from Iraq’s central bank joined the delegation to find a solution.

Washington has said it wants to roll back Iranian influence in the Middle East, including in Iraq, where Iran holds broad sway over politics and trade.

Iraqi Prime Minister Adel Abdul-Mahdi said on Dec. 11 that the United States was working with Iraq on the matter of Iranian gas because it was “linked to a very sensitive issue which is electricity.”

Persistent power shortages fueled protests this summer in the south of Iraq, which is still reeling from a three-year war against Islamic State.

The prime minister, who took office in October, met U.S. Energy Secretary Rick Perry in Baghdad this month. Perry, who came with a delegation of more than 50 business people, also met Iraq’s oil and electricity ministers.

Iraq has reached a deal with General Electric Co (GE.N) and German rival Siemens AG (SIEGn.DE) to install liquefied natural gas-operated mobile power units at some small southern oil fields, Iraq’s state newspaper reported last month.

The Financial Times reported in October that the U.S. government had intervened in favor of GE for a contract sought by both companies to supply 11 gigawatts of power generation equipment, reportedly worth about $15 billion.

(This story has been refiled to correct dateline to BAGHDAD)

Reporting by Humeyra Pamuk in Washington, Ahmed Rasheed in Baghdad and Raya Jalabi in Erbil; Writing by Raya Jalabi; Editing by Edmund Blair and Jeffrey Benkoe

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