Iraq, U.S. Clash Over Buying Energy From Iran

Date: 11 February 2019 - 21:49

News ID: ۶۳۰۳۰

WASHINGTON (Dispatches) -- The Trump administration is pressuring Iraq to stop buying energy from its neighbor and sole foreign supplier, Iran, in what has become a major point of conflict between Washington and Baghdad, the New York Time reported on Monday.
Iraqi leaders, fearing that a further shortfall in power would lead to mass protests and political instability in their electricity-starved country, are pushing back on the demand, which is rooted in President Trump’s sanctions against Iran, the paper said.
The dispute has frayed American diplomacy with Baghdad as Iraq tries to steady itself after the United States military withdrawal in 2011 and the Arab country’s campaign against Daesh terrorists.
According to the Times, Iraq’s defiance further jeopardizes Trump’s goal of getting all nations to comply with sanctions after withdrawing from a nuclear deal with Iran last year. Already, European nations have set up a legal financial mechanism to do business with Iran, and China and India are resisting American efforts at prodding them to cut off oil purchases.
Tensions rose after Trump said on Feb. 3 that he planned to have American troops who have returned to Iraq "watch Iran,” despite Baghdad’s need to maintain cordial ties with its neighbor. Trump’s comments added momentum to proposed legislation in Iraq that would limit the movement and activities of American troops.
"The people of Iraq have suffered from the blockade and are aware of the harm done to the people by their actions,” Prime Minister Adel Abdul Mahdi of Iraq said last week after a meeting with the governor of Iran’s central bank, Abdolnaser Hemmati. He was referring to 13 years of crippling sanctions imposed on Iraq by the United States when Saddam Hussein was in power.
"Iraq will not be part of the sanctions regime against Iran and any other people,” Abdul Mahdi said.
Hemmati said he hoped Iraq and Iran would cooperate more in banking, which could also weaken American sanctions.
American officials are seeking to cut off Iraqi purchases of natural gas and electricity, even though the country relies on those for a good portion of its energy needs.
Iraq’s energy production and grid capabilities have lagged since the American-led invasion of 2003, and blackouts in cities are common, even with the current purchases. The energy shortfall is especially acute in the sweltering summers, which has led to large protests that become national crises.
Iranian natural gas is the single most critical energy import in Iraq, but American officials say purchases must end now because gas falls under the American sanctions. And the Trump administration has told Iraq’s leaders that they have until late March to end electricity purchases. Officials in Baghdad say there is no easy substitute for either one because it would take three years or more to adequately build up Iraq’s energy infrastructure.
Iraq was given a 45-day waiver on electricity, which was extended by 90 days in December. On Jan. 9, Secretary of State Mike Pompeo spoke to Iraq’s two top leaders in Baghdad about "energy independence,” a State Department spokesman said.
Iraqi officials said the American demand acknowledges neither Iraq’s energy needs nor the complex relations between Baghdad and Tehran.
Haider al-Abadi, the former prime minister, said in an interview that Iraq was in a precarious situation with the United States because "we cannot afford to make them angry.” But, he said, the Americans have failed to "look at the geopolitics of Iraq.”
"We happen to be neighbors of Iran; the U.S. is not,” al-Abadi said. "We happen to have the longest border with Iran; the U.S. does not. And we don’t have that powerful an economy.”
"The defiance by Iraqi leaders underscores the lack of support among many nations for the sanctions and the American goal of crippling Iran’s government,” the New York Times wrote.
"Analysts say they do not expect China and India to stop their purchases of Iranian oil even after the 180-day waivers expire. On Jan. 31, Britain, France and Germany announced a mechanism to allow countries to do business with Iran in a way that does not violate sanctions,” it added.
This week, diplomats from dozens of countries will meet in Warsaw for what American officials originally billed as a discussion of the Iran sanctions and containment strategy. But Western European nations balked at the focus on Iran and threatened to send lower-level officials, forcing the State Department to broaden the theme to addressing instability in the Middle East.
Inside Iran, the sanctions have led to a scarcity of medicine, adding to global criticism of the American policy.
Last month, top American intelligence officials contradicted Trump by saying Iran was not taking any steps to make a nuclear bomb. Those officials and the International Atomic Energy Agency say Iran still is complying with the nuclear deal from which Trump withdrew the United States in May.
Iraqi officials have also expressed concern over demands from the Trump administration to sign deals with American companies to build up energy infrastructure.
Last October, the Trump administration pushed Iraqi officials to sign agreements with General Electric for multibillion-dollar power generation deals, after Siemens A.G., a German company, had been on the verge of landing a $15 billion deal with Baghdad. Iraqi officials ended up signing nonbinding agreements with both companies.
Senior American officials had warned al-Abadi, then the prime minister, that signing the deal with Siemens would put Iraq’s relations with the United States at risk, Bloomberg News reported.
Iraq’s power sector suffers from many problems, including a poor grid and lack of fuel to be converted to electricity.
In 2017, Iraq signed a deal with Iran to import up to one billion cubic feet of natural gas daily, which would cost $2.8 billion annually at crude oil prices of $70 per barrel.
Even with that, Iraq has a shortfall of three gigawatts of power.
For a long-term solution, the Trump administration is urging Iraqi officials to connect their grid to Saudi Arabia, Jordan or Kuwait.
They are also pushing Baghdad to sign contracts with foreign companies for natural-gas capture, processing and transport to use gas that is lost during crude oil production. Iraq has 1.7 billion cubic feet of gas flaring per day across 30 fields.
But that is not a short-term fix for energy shortfalls, and Iraq has been slow in signing contracts. Last year, Iraq signed a single natural-gas processing contract, with Baker Hughes and General Electric. The product would equal only a fraction of the imports from Iran, and it would take at least two years to come online.