Iraq will trade crude oil for Iranian gas in an attempt to settle the long-standing payment problem with Tehran, Iraqi Prime Minister Mohammed Shia al-Sudani confirmed on Tuesday.
Iraq fell into heavy payment arrears with Iran due to the imposition of US sanctions, which led Iran to retaliate by cutting regular gas transmission.
The agreement came following reports that Iran had reduced its gas deliveries to Iraq by more than half as of July 1 due to Baghdad’s failure to obtain US consent to transfer overdue funds.
Sudani said Tehran will resume gas exports in exchange for crude oil.
Iraq imports one-third of its natural gas from Iran to produce electricity. Its gas demand escalates in the summer, when temperatures can reach as high as 50 degrees Celsius.
Iran frequently either reduces or cuts gas flow to meet its rising demand or to force Baghdad to pay its overdue debt.
Iraq has ramped up around €11 billion in debt as the country struggles to make payments due to US sanctions on Iran.
While Iraq produces 19,000–21,000 megawatts of electricity, it actually needs over 30,000 megawatts and faces long hours of power outages due to the shortages.
