Iran's state gas company says it slashed supplies to neighbouring Iraq over arrears of more than $US6 billion ($A7.9 billion), after the Iraqi electricity ministry said the cuts placed Baghdad and other cities at risk of serious power shortages.
"The Iraqi Ministry of Electricity owes more than $US5 billion ($A6.6 billion) in gas bills to the National Iranian Gas Company (NIGC), of which $US3 billion ($A4 billion) remains blocked and inaccessible in ... TBI (Trade Bank of Iraq), and more than $US2 billion ($A2.6 billion) is overdue debt," NIGC said in a statement.
Iran has been unable to access billions of dollars in assets in several countries due to US sanctions.
"In addition, the Iraqi side owes more than $US1 billion ($A1.3 billion) to the National Iranian Gas Company for contractual offences under the agreement," the NIGC statement, published by the Iranian oil ministry's news agency SHANA, said.
The feared electricity shortages could place further pressure on the government of Iraq's Prime Minister Mustafa al-Kadhimi.
Iran's Energy Minister Reza Ardakanian is scheduled to visit Baghdad on Tuesday to discuss the unpaid bills with his Iraqi counterpart, an Iraqi official said on Sunday.