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Iran questions Iraq's promise to import oil despite sanctions

In a surprising statement, Iran's oil minister recently complained that Iraq is abiding by the US sanctions and canceling some energy deals with Iran.

Iran and Iraq have quite different views of their relationship status, with Tehran claiming it's been jilted and Baghdad declaring it's being faithful.

Iranian Minister of Petroleum Bijan Zangeneh surprised Iraqi officials Feb. 7 when he very publicly expressed dissatisfaction with Iraq “reversing some oil agreements, and refusing to invest in the border oil fields and to pay Iran its [$2 billion in] debts.” He indicated that “Baghdad's commitment to the US sanctions has prompted [Iraq] to revoke minor agreements, such as the Kirkuk deal, under which we traded 11,000 barrels of oil a day."

Iraq ended that deal in November under US pressure. The United States has imposed sanctions on Tehran and countries that defy those sanctions by continuing to do business with Iran.

Zangeneh's remarks contradict the outcome of his meeting in Baghdad with Iraqi Oil Minister Thamir Ghadhban last month, when they agreed that Iraq would import gas from Iran and develop some border fields.

There were no obvious political developments during the three weeks that separated the meetings. Also, the Iraqi government made no apparent decision that would back Zangeneh’s allegations. Shortly after Zangeneh’s statement, Iraq’s Ministry of Electricity said Feb. 11 that it had renewed for a year a contract to import electricity via Tavanir, an Iranian company that transports and distributes electric power.

Furthermore, Iraqi Prime Minister Adel Abdul Mahdi told an Iranian delegation Feb. 6, “Iraq is not going to be a party to the system of sanctions against Iran.”

Nevertheless, Iran seems to doubt that Iraq will maintain that position. This is true particularly since Iraqi parliament Speaker Mohammed al-Halbusi spoke Feb. 13 with Kuwait's emir about possibly bringing in electricity from Kuwait, which would certainly affect electricity imports from Iran.

Hamza al-Jawahiri, an oil expert and consulting engineer for the Iraqi Ministry of Oil, said Iraq only has so much control over circumstances. “Even though Iraq insists on promoting cooperation with Iran in the oil sector, US-controlled Iraqi oil sale and purchase mechanisms will be an obstruction,” he told Al-Monitor.

There also may be a misunderstanding, he said. “The truth is that Iraq, in the first place, doesn't aim to develop the joint oil fields that Zangeneh spoke of. This is because they aren't a priority for Baghdad at present,” Jawahiri said, adding that an agreement was reached on two joint fields that are already developed.

Even so, "The US sanctions will impede any work there," he said. "Iraq and Iran developed the joint large Badra field, which now requires a global company to embark on production activities there and give each party its share."

Iraq imports almost 1.5 billion cubic feet of gas per day from Iran via pipelines in the south and east to operate turbines to generate electricity, Jawahiri said. "Yet Washington insists on Iraq halting cooperation in the gas and electricity sectors with Iran, which is a major problem that Iraq is required to resolve.”

Zangeneh’s remarks don't align with those of Iraqi officials regarding continued cooperation with Iran and noncompliance with the US sanctions. Mohammad Zaki Ibrahim, another expert for the Iraqi Oil Ministry, told Al-Monitor, “Zangeneh’s remarks stem from [his misinterpretation] of Iraq's oil policy in the first place, away from the impact of the US sanctions on Iran, which Iraq hasn't been complying with, as it renewed for another year the contract to bring in gas from Iran.”

Ibrahim said, “It's hard [for Iraq] to dispense with Iranian oil supplies — at least before 2022. This is a reason behind the continuation of bilateral ties. The possibility that such a thing would occur presently would mean a shortage of 2,500 to 3,000 megawatts in Basra alone.”

Baghdad's actions contradict Zangeneh’s conclusions and aim at fortifying the countries’ bilateral relations. On Feb. 11, Iraqi Minister of Industry and Minerals Saleh Abdullah al-Jubouri affirmed Baghdad's willingness to take advantage of Iranian companies’ expertise in developing the industrial sector. On the same day, the current governor of Basra, Asaad al-Eidani, released a significant statement, saying, “Basra will not be a party in the US sanctions on Iran.”

Kathem al-Haj, a political analyst at Al-Hadaf Network for Political and Media Analysis who focuses on Iranian affairs, said Tehran appears to have opted to consolidate its ties with Iraq in fields other than petroleum and to be delivering to Washington the message that Iran's presence in Iraq had deep roots. He told Al-Monitor, “The US will fail to achieve its desired impact [anyway], because the Iranian budget is not oil-dependent."

Sources within Iraq’s ministries of oil and planning refused to delve into the topic, saying they can only answer technical questions and that it's not their job to comment on political matters, particularly on Zangeneh’s remarks. Iran-Iraq energy relations are obviously going through tough times, with the US pressure for these ties to be severed and Washington's apparent ability to pursue this goal, particularly when it comes to financial transactions.