U.S., IRAQ SANCTIONS

PLATTS - 27 Apr 2020 - Iraq can import Iranian electricity without the risk of sanctions for another 30 days, the US State Department said Sunday in extending a key waiver, despite some predictions that the Trump administration would end the exemptions this time.

Iraq has secured a series of waivers for power imports since the US reinstated sanctions on Iranian energy exports in November 2018. But the latest two 30-day waivers have been the shortest yet, while others have been 45 to 120 days.

US Secretary of State Mike Pompeo "granted this brief extension of the waiver to allow time for the formation of a credible government," a State Department spokesman said in a statement.

"Once that government is in place, the secretary will reassess whether to renew the waiver and for how long, and looks forward to resuming our cooperation with the government of Iraq to reduce Iraq's dependence on unreliable Iranian energy imports," the spokesman said.

The statement made a distinction between Iranian electricity and natural gas imports, saying the waiver only covers electricity, while the US Treasury Department oversees compliance of payments related to natural gas imports. That left some questioning whether Iraq could still import Iranian gas, on which it also heavily relies.

Treasury did not respond to requests for clarification.

Richard Nephew, former deputy coordinator for sanctions policy at the US State Department during the Obama administration, said that technically speaking, State is responsible only for the electricity waiver, while natural gas sanctions are covered by Treasury.

While Nephew said State's statement does not make clear if Iraq could continue natural gas imports from Iran, "I would find it absolutely stunning if they didn't allow them."

Iraq is heavily reliant on Iran to maintain its power supply, and even then it has significant blackouts that are exacerbated by the summer heat.

Electricity Minister Luay al-Khatteeb told S&P Global Platts last week that the oil ministry needs three to four years to complete projects that would provide the necessary natural gas feedstock for power stations.

The country can import up to 1,200 MW/year of electricity and up to about 1.2 Bscf/d during peak usage in the hot summer months when temperatures in the southern part of the country can soar to 50 Celsius. Electricity supply was estimated at 19 GW in 2019 and forecast to reach 20 GW in 2020, while power demand in peak time is around 25 GW, the minister said.

-----