Iranian media said, on Monday, that Baghdad and Tehran have reached an “agreement” to pay the Iranian debts owed by Iraq, which have hindered the sanctions imposed by the United States for years, but an Iraqi government source denied to Al-Hurra that a new agreement had been reached. “The mechanism currently adopted is the same as the mechanism used to pay off Iranian debts for years.”
The size of Iraq’s debt to Iran is about four billion dollars, according to the source, who said that these debts resulted from Iraq’s purchase of Iranian gas and other oil derivatives, as well as the import of electric power.
In an attempt to collect these debts, or part of them, the Governor of the Central Bank of Iran, Abdul Nasser Hemmati, arrived in Baghdad, on Monday, to meet with Iraqi officials, including the Iraqi Minister of Finance Ali Allawi, the Governor of the Central Bank of Iraq, Mustafa Ghaleb, and the Director of the Iraqi Trade Bank.
After the meeting, the Iranian media quoted “Hemati” as saying that the two parties reached an “agreement on releasing Iran’s financial assets in order to purchase basic goods in the country.”
“The Iraqi prime minister expressed his welcome and satisfaction with this agreement and promised to follow up on its implementation on a weekly basis,” IRNA said.
These means did not indicate what the “mechanism” agreed upon, while the Central Bank of Iraq statement did not indicate any agreement.
However, an Iraqi government source familiar with the talks denied the “Al-Hurra” website an agreement on a new mechanism for debt repayment.
The source, who requested anonymity, said, “The Iranian side hoped that the changes in the Iraqi government and the appointment of a new governor of the Iraqi Central Bank would lead to facilitation in the payment of funds to Iran.”
The source added, “The Iraqi side informed the Iranians that it would adhere to the old debt repayment mechanisms due to the sanctions imposed by the United States on Iran.”
The old mechanisms include deducting customs dues on Iranian goods, and fees for services such as aircraft services and visas from Iranian debts, as well as allowing Iran to buy goods in Iraqi dinars from the local Iraqi market, according to the source, who also said that “Iraq paid Hajj fees to Iranian pilgrims in one year and deducted The amount of the total debt owed by him to Iran. “
And Iraq tried in the past to pay sums to Iran through China, according to the source, who said that “the money returned to Iraq after the Chinese Central Bank was unable to deliver it to Iran,” without giving further details.
Iraq is using Iranian gas to run its power plants, to alleviate its energy crisis.
The head of the Future Iraq Foundation for Economic Studies, Manar Al-Obeidi, said that it is not possible for Iraq to conclude such agreements with Iran without taking a “green light” from the United States.
While the exemption from US sanctions, granted to Iraq, allows it to continue buying gas and electricity from Iran, it is not allowed for Iraq to pay dues for these materials in US dollars or euros.
Iraq can pay the debts in Iraqi dinars, which does not benefit Iran, or exchange them for goods and fee exemptions. However, the current mechanism only allows Iran to collect part of the debt.
“If Iraq takes a unilateral move without consulting the American side, then this is a very dangerous matter that could destabilize the Iraqi economy with a set of sanctions,” Al-Obaidi said.
The Iraqi government does not provide an accurate annual estimate of the amount of electricity or gas it imports to generate electricity, but it is well established that the imported gas is much less than the Iraqi gas that is wasted.
Iraq is the second highest country in the world, after Russia, in wasting natural gas, as the quantities of gas that Iraq burns during its extraction of oil amounted to about 18 billion cubic meters in 2019, according to a report issued by the World Bank.
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