Iran names Iraq energy envoy in move to bolster ties

Iranian oil minister Javad Owji has appointed an envoy to Iraq in a move aimed at strengthening bilateral energy ties at a time when Baghdad's dependence on Tehran for gas and power imports is coming under increased scrutiny in the US.

In a decree issued today, Owji named Seyyed Abbas Beheshti as his special envoy to Iraq, a position that did not previously exist. Beheshti, who was a head of oil industry security under former oil minister Bijan Namdar Zanganeh, will be tasked with identifying opportunities for co-operation with Iraq across the energy spectrum, Owji said, including in the areas of crude and refined product trading and private-sector investment.

Iraq is one of several neighbouring countries that Iran continued to supply oil products to after US sanctions were reimposed in 2018. Iran's Oil, Gas and Petrochemical Product Exporters' Union said in April that more than 50pc of the gasoline that Iran exports to its neighbours overland — estimated at 167,000 b/d in the first half of 2021 by consultancy FGE — goes to Iraq.

Beheshti will also be responsible for pursuing an oil-for-goods deal with Iraq, similar to a scheme it has used previously to sell its sanctions-hit crude to countries such as Russia and South Korea, albeit with mixed results. And in the upstream sector, he will oversee the exchange of information on the development of oil and gas fields on the Iran-Iraq border — among them the Azadegan and Azar fields, which make up part of the key West Karun cluster.

Debt crisis

One of the most critical duties in Beheshti's new role will be to expedite the settlement of Iraq's ballooning debt to Iran for gas and electricity supplies. Iraq has been importing Iranian gas under two supply agreements signed in 2013 and 2015. One covers the import of up to 35mn m³/d of pipeline gas to the 3GW Bismaya power plant, which is the largest in Iraq and provides power for the capital Baghdad. The other covers supplies to southern Iraq, again up to 35mn m³/d. Iran also agreed a new two-year contract in June last year to export 1.2GW of electricity to Iraq through to the middle of next year.

But these supplies have been repeatedly disrupted over the last 12 months as a result of Iraq's inability to pay. In September, Iran slashed its gas exports to Iraq for the second time this year over mounting debts — estimated by Tehran at over $5bn at the start of summer — resulting in the loss of more than 5GW of power over the border. In August, Iran temporarily stopped supplying electricity to Iraq after it struggled to meet unusually high domestic demand resulting from rising temperatures and cryptocurrency mining.

These supplies from Iran are conditional on Iraq securing sanctions waivers from the US. And although Washington has regularly granted the waivers, it has done so on the condition that Iraq pledges to do its utmost to reduce its reliance on Iranian imports in the future. The most recent waiver was granted for a 120-day period through to 27 November.

By Nader Itayim