Trump Ends Sanctions Waiver on Iraq’s Purchase of Iranian Electricity

Latest Developments

Revocation Part of Trump’s Maximum Pressure Campaign: The Trump administration rescinded a waiver on March 8 that allowed Iraq to pay for the purchase of electricity from Iran. The move is part of the Trump administration’s revived “maximum pressure” sanctions campaign against Iran, which a State Department spokesperson said “ensures we do not allow Iran any degree of economic or financial relief” and is aimed to end “its nuclear threat, curtail its ballistic missile program, and stop it from supporting terrorist groups.”
Iraq Diversifying Energy Sources: Iran and Iraq also engage in cross-border trade in natural gas, with Iraq importing up to 50 million cubic meters of gas per day from Iran at a cost of $4-5 billion annually. In March 2024, Baghdad signed a five-year gas supply deal with Tehran to continue the imports. The Iraqi prime minister’s advisor on foreign affairs, Farhad Alaaeldin, said on March 12 that the U.S. waiver on the importation of natural gas had not been revoked, noting at the same time that the “American administration says … diversify your import sources. Go to other countries.” According to Alaaeldin, most Iraqi power plants run on gas from Iran, with 43 percent of Iraq’s electricity generated by the gas imported from its eastern neighbor.
Sanctions Waivers Released Billions to Iran: From 2018 to 2023, the State Department issued temporary sanctions waivers that allowed Iraq to import electricity from Iran on the condition that all payments remain in an escrow account in Baghdad, denying Iran access to the revenue. In July 2023, the Biden administration changed the waiver to allow Iraq to transfer $10 billion to Iran and to deposit future payments into Iranian bank accounts in Oman. The Biden administration renewed the 120-day waivers in November 2023, March 2024, July 2024, and November 2024.

FDD Expert Response

“This is a win on several fronts. Iraq will gain energy independence, bolstering the authority of its central government — which Iran has exploited with its cheap energy for too long — and satisfying the aims of the White House’s ‘maximum pressure’ campaign. The hard part now is ensuring that Tehran cannot continue exploiting Baghdad’s political environment and that the government finds reliable energy alternatives. Iraqi leaders can prove to their citizens that being a pawn of the Islamic Republic is not a necessary part of daily life.” — Behnam Ben Taleblu, Iran Program Senior Director and Senior Fellow

“Revoking the waiver for Iraq is a significant decision and a clear indication that change is underway. One can hope that a persistent and forceful push will lead to the revocation of other unjustified waivers.” — Saeed Ghasseminejad, Senior Iran and Financial Economics Advisor