WASHINGTON (Dispatches) -- Iraq won't be left hanging amid Washington's sanctions on Iran, which supplies almost half of its electricity, U.S. business news channel reported, citing experts familiar with American policy.
The President Donald Trump administration in November granted Iraq a 45-day waiver to continue its energy purchases and is now expected to continue allowing transactions with Iran under yet-to-be-decided conditions, it said.
"I think that the U.S. is going to try to find a workaround for Iraq," Richard Nephew, who served as the State Department's lead sanctions expert for negotiations with Iran from 2013 to 2014, told CNBC. "The U.S. government knows that Iraq is a key country in the competition starting between the United States and Iran."
A determination will be made to extend Iraq's waiver, a state department official told CNBC, though a decision has yet to be reached.
Iran is Iraq's third-largest trading partner, with an estimated $12 billion in cross-border trade per year, and the two countries share strong cultural, religious and geographic ties. And despite being OPEC's second-largest producer of oil, Iraq is dependent on Iranian natural gas plants for up to 45 percent of its electricity — a setup now facing potential jeopardy amid U.S. sanctions.
Without continued sanctions exemptions, Iraq could lose around a third of its power overnight, energy analysts say. Already burdened by failing infrastructure, pockets of Daesh activity and poor public service provision, the scenario makes Iraq a "ticking time bomb," according to Michael Stephens, a regional expert at the Royal United Services Institute in London.
Over the summer, Iraq failed to pay its electricity bill to Iran on time. This prompted Tehran to cut the power off and triggered widespread protests in the country's south, particularly in poverty-stricken Basra.
According to CNBC, millions of Iraqis maintain a loyalty to Iran, particularly for its role in supporting the Arab country to defeat Daesh.
Iraqi Prime Minister Adel Abdul-Mahdi this month signaled his opposition to the American sanctions, and has been in talks with his counterparts in Tehran to increase bilateral relations.
But as eager as the Trump administration is to curtail trade with Iran, it could plunge Iraq back into chaos, warned Michael Rubin, a former Pentagon official and Arab affairs researcher at the American Enterprise Institute in Washington D.C.
Asked whether the U.S. is likely to continue granting waivers, Rubin replied, "Yes, absolutely."
"Even Trump administration Iran hawks understand that sanctioning Iraq would likely collapse the Iraqi government," he said.
"In the short term, Iraq cannot wean itself off Iran gas that easily without serious electricity shortages," regional energy analyst Shwan Zulal said.
The best that Washington can do, Zulal believes, is to agree to extend waivers for a much longer time while supporting Iraq's power sector development.