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U.S. Plans to Renew Sanctions Waiver on Iraq’s Imports of Iranian Power

Iraq relies heavily on Iranian natural gas but the U.S. is pushing for the country to wean itself off that energy source


BAGHDAD—The U.S. plans to renew a waiver allowing Iraq to import natural gas and electricity from Iran without risking sanctions, U.S. and Iraqi officials said, as Washington and Baghdad move to ease tensions after diplomatic ties nearly unraveled last month.

Iraq relies heavily on Iranian natural gas for power generation. The Trump administration had previously granted waivers protecting Baghdad from any penalty to avoid plunging the country into crisis on condition the government moved to wean itself off Iranian energy.

But relations between the two allies reached a low after the U.S. in January killed a prominent Iranian commander on Iraqi soil, mobilizing opposition to the American troop presence in the country. Iraq’s parliament voted in favor of expelling U.S. troops, prompting the U.S. to threaten sanctions if forced to leave.

Some U.S. officials suggested not extending Iraq’s exemption after the last one—renewed in October for 120 days—expires next week, according to U.S. officials.

The recent designation of Mohammed Tawfiq Allawi as the country’s next premier tipped the balance in favor of those in the Trump administration who wanted to extend the waiver and give the new Iraqi leader a chance, the officials said.

“We want to maintain maximum pressure on Iran,” said a U.S. official focused on Iran. “But it should not be at the expense of the economic stability of its neighbors.”

Ending the waivers could expose Iraq to sanctions and disrupt electricity generation, compounding challenges to the new government as it faces a four-month-old uprising. At least nine people were killed on Wednesday when a militia loyal to populist cleric Moqtada al-Sadr sought to break up a protest in the southern city of Najaf, security officials said.

The U.S. on Thursday denounced the violence against protesters. Iraq’s government has an “obligation to put an end to this thuggery,” its embassy in Baghdad said in a statement.

Tensions between the U.S. and Iraq appeared to ease slightly after Baghdad last week said it was resuming joint operations with the U.S.-led coalition against Islamic State—suspended earlier in January—until a new relationship is worked out.

Prime Minister Adel Abdul-Mahdi, who remains in office in a caretaker capacity after resigning in December, has left it to the country’s next prime minister to decide on the presence of U.S. troops.

Mr. Allawi won’t become prime minister unless parliament passes his cabinet, which he must submit to a vote by early next month. Among the many challenges Mr. Allawi would face is determining the shape and size of the American troop presence.

“They [U.S.] want to give him the benefit of the doubt,” said a senior Iraqi official.

Iraqi officials said U.S. counterparts had warned they could reverse their decision to extend the waiver if any American personnel in Iraq are harmed before it expires next week. Bases where U.S. troops are stationed as well as the American embassy in Baghdad have come under repeated rocket fire in recent months. The U.S. blames Iran-backed militias and says the Iraqi government isn’t doing enough to stop the attacks.

Iraq, which burns large amounts of gas because it doesn’t have the infrastructure to process it, has held talks with U.S. companies to reduce its dependency on Iran.

An adviser to the Iraqi prime minister said the government was taking steps to develop alternatives to Iranian energy imports but faced resistance from officials. “There are people who work against the state and against our relationship with the U.S.,” he said. He didn’t specify further.

While U.S. officials say the waivers aren’t tied to signing deals with American companies, the officials say they still encourage them to help Iraq develop the gas it needs to cover its electricity needs.

A number of U.S. companies, including Exxon Mobil Corp., Chevron Corp., Baker Hughes and Bechtel Corp. have been vying for billions of dollars worth of contracts, according to Iraqi and U.S. officials and oil executives. They said most talks were interrupted by a wave of antigovernment protests and the subsequent resignation of Mr. Mahdi and his cabinet.

The Trump administration has encouraged the Iraqi government to sign a $50-billion oil-field deal with Exxon Mobil, which would include gas production, according to an international oil official, an Iraqi official and a U.S. official.

In October, Bechtel was also close to returning to Iraq after an absence of over a decade. The company was in the final stages of signing a $1 billion agreement to build a methane processing plant but the talks were interrupted by the protests, according to Iraqi and international oil officials.

Exxon Mobil and Bechtel declined to comment.

The Trump administration has imposed harsh sanctions on Iran, including on its energy sales, in a bid to coerce it to renegotiate its nuclear program and curb its military influence in the region.


Source: Wall Street Journal, February. 6, 2020


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