ERBIL, Kurdistan Region – Iraq will keep buying Iranian electricity for another year, despite pressure from the US to end its energy dependency on Iran.
Iran and Iraq signed a one-year renewal of their electricity contract on Friday, Iran’s IRNA reported. Under the deal, Iran exports 1,200 megawatts of electricity to its neighbour.
The extension of the contract, first inked in 2005 and renewed annually, was signed in Tehran in the presence of Iran’s Energy Minister Reza Ardakanian and Iraq’s Electricity Minister Luay al-Khatteeb.
In December, the United States gave Baghdad another 90 days to wean itself off Iranian energy imports – both electricity and natural gas to fuel Iraq’s domestic power generation plants – before it has to comply with sanctions imposed after Washington withdrew from the nuclear deal.
Baghdad has said they will not be able to find another energy source within that timeframe and that they want to maintain good relations with all countries, staying out of the dispute between Iran and the US.
The electricity contract was signed after Iran and Iraq reached an agreement for Baghdad to pay back the $2 billion it owes for its energy imports, Iran’s oil minister said this week.
Ardakanian said on Friday that Baghdad has started making payments.
Iraq’s electricity grid is undersupplied and falling apart. Importing energy is a temporary measure until Iraq can be self-sufficient, Khatteeb tweeted earlier this week.
“During the war with ISIS Iraq lost 4,500 MW of energy in addition to the destruction of 18% of the energy transfer and distribution system,” he stated.
He estimated that repairs will take two years, assuming there is adequate funding.
Renewable energy is a part of the government’s plan. On January 31, Khatteeb opened a Baghdad plant that will build solar panels – the first of its kind in Iraq to start taking advantage of the huge solar power potential.
Tehran is ready to help Iraq rebuild its power sector. Iran wants to become an energy hub and hopes to reach regional markets through Iraq, according to Ardakanian.
“Iran enjoys extensive capacity and is ready to share it with the neighbours,” he said, IRNA reported.
On Wednesday, their central banks signed a deal that will allow Iranian exporters to use Iraqi banks.