The US government says it will retain control of a portion of Iraq's debt with Iran over natural gas deliveries after confirming that Oman is the third-party country that will receive these payments.
“We thought it was important to get this money out of Iraq because it is a source of leverage that Iran uses against its neighbor. So, this money will be held in a fund or an account in [Oman] … but will still be subject to the same restrictions as when the money was held in accounts in Iraq, meaning that the money can only be used for non-sanctionable activities such as humanitarian assistance and that all the transactions need to be approved by the United States Treasury Department in advance,” US State Department spokesperson Matt Miller told reporters on 24 July.
The news comes one week after Washington issued a new sanctions waiver to allow Iraq to deposit payments for Iranian natural gas into non-Iraqi banks, a decision made in response to criticism that the White House's anti-Iran policies are responsible for rolling blackouts at the height of Iraq’s blistering hot summer.
Iraq heavily depends on Iran for natural gas to produce some 40 percent of the country’s electricity. For years, the US Treasury has only allowed Baghdad to deposit payments to Iran in restricted accounts at the Iraqi Trade Bank. Furthermore, Iraq can only send payments in US dollars to Iran with the approval of the US Treasury.
Washington's draconian policies led to about $11 billion earmarked for Iranian gas payments to remain in restricted accounts. This situation forced Iran to cut gas shipments to Iraq earlier this month, leading to widespread outages.
However, just one day after the US issued the new sanctions waiver, the US Treasury Department and the Federal Reserve Bank of New York barred 14 Iraqi banks from conducting transactions in US dollars as part of a “sweeping crackdown” to stop Iran and other sanctioned nations from acquiring the greenback.
These decisions were announced mere days after Iraqi Prime Minister Mohammad Shia al-Sudani sealed a deal to trade crude oil for natural gas with Iran without notifying Washington.
Baghdad also recently proposed shifting payments to the Iraqi dinar in trade with Tehran. Moreover, Baghdad has been looking to move its bilateral trade away from the greenback to negate the effect of US sanctions and, in May, banned the use of the US dollar for personal and business transactions.