Iraq has reached an agreement to trade crude oil for Iranian gas, putting an end to the recurring issue of payment delays caused by the need for US approval. Iraqi Prime Minister Mohammed Shia Sudani announced the deal on Tuesday, stating that Iran had reduced its gas exports to Iraq by over 50% since July 1 due to delayed payments. However, Tehran has now agreed to resume gas exports in exchange for Iraqi crude oil.

The agreement was reached during talks between an Iranian delegation and Iraqi officials in Baghdad. Iraq heavily relies on Iranian gas and electricity imports, which make up approximately one-third to 40% of its power supply. This is particularly crucial during the scorching summer months when temperatures can exceed 50 degrees Celsius (122 degrees Fahrenheit) and power consumption reaches its peak.

Iraq has faced difficulties in paying for these imports, accumulating around €11 billion ($12.1 billion) in outstanding debts to Iran. The US sanctions imposed on Iran have made it challenging for Iraq to access funds for payment. The sanctions only permit Iran to use funds to purchase non-sanctioned goods such as food and medicine, adding complexity to the payment process and causing unwanted delays.

By trading Iraqi crude for Iranian gas, Iraq aims to avoid power shortages that have plagued the country every summer. The deal provides temporary relief while Iraq works on completing gas capture and extraction projects, ultimately aiming to achieve energy self-sufficiency.

While the barter arrangement may not fully satisfy Iran's need for hard currency, analysts suggest that it may not prevent Iran from seeking the billions of dollars still held in Iraqi accounts. The United States has been urging Iraq, the second-largest producer in OPEC, to reduce its dependence on Iranian gas. In a move towards diversification, Iraq recently signed a significant deal with French oil major TotalEnergies, including plans to capture gas from oilfields in the southern Basra region.

Iraq's shift towards trading crude oil for Iranian gas offers a solution to the payment delays and paves the way for Iraq to work towards energy independence while ensuring a stable power supply for its citizens.