AFP, Baghdad :
Iraq is establishing a financial “loophole” to continue buying vital gas and electricity from Iran despite US sanctions, mirroring a European mechanism that came into effect Friday.
The “special purpose vehicle” (SPV) would allow Iraq to pay for imported Iranian energy in Iraqi dinars, which Iran could use to exclusively buy humanitarian goods, three senior Iraqi officials said.
The workaround would allow Baghdad to keep the lights on and avoid shortage-driven protests without triggering US sanctions, as it treads an increasingly precarious tightrope between its two main allies Tehran and Washington.
One senior government official told AFP it was the product of months of talks between Iraqi, Iranian and US officials.
“The Iraqi government will continue to pay Iran for gas by depositing money into a special bank account inside Iraq, in Iraqi dinars,” the official said.
“Iran will not be able to withdraw the money, but will be able to use it to purchase goods from outside Iraq.”
Iraq has an outstanding bill of around $2 billion for previous gas and electricity purchases, according to Iranian Oil Minister Bijan Zangeneh.
A US official told AFP that Washington was aware of the mechanism’s creation.
The US embassy in Baghdad declined to comment, while Iran’s embassy did not respond to an AFP request.
Two additional high-level Iraqi officials confirmed Baghdad was establishing such an account with US knowledge, but could not say whether payments into the account had begun.
“How else is Iraq supposed to pay what it owes Iran? We have no other choice,” the second official said.
To offset its notorious power shortages, Iraq imports around 1,400 MW of electricity and 28 million cubic meters (988 million cubic feet) of gas for power stations from neighbouring Iran, which together make up about a third of Iraq’s power supply.
