Due to U.S. sanctions against Iran, which prevent Baghdad from directly repaying its debt to Tehran, the Iraqi government has delivered quantities of fuel oil to traders designated by the Iranian regime as a means of partial debt settlement.
According to specialized oil and gas media in the region, this type of exchange has recently been employed by Iraq as a strategy to ease its debt burden to Tehran.
Two senior officials in Iraq’s Ministry of Oil, familiar with these exchanges, told the Iraq Oil Report website in Baghdad that Prime Minister Mohammed Shia’ Al-Sudani’s government has recently been delivering 190,000 barrels of fuel oil (mazut) per day to traders linked to the Iranian regime.
These sources stated that such transactions are based on an agreement between the two governments. However, the names of the Iranian-linked traders receiving the fuel oil have not been disclosed in reports.
One of the sources noted that the Baghdad government cannot directly pay Iran for its past debt due to sanctions against Tehran.
Over the past decade, Iraq has accumulated debt to Iran, primarily for electricity and gas imports. In the last week of spring 2023, the Iraqi government announced that it would pay $2.76 billion of its debt.
Fuad Hussein, Iraq’s foreign minister, stated in June 2023—during a meeting with his U.S. counterpart Antony Blinken on the sidelines of a conference in Riyadh—that Baghdad had secured a waiver from Washington to pay this amount to Iran. However, it remains unclear whether the payment was made.
Meanwhile, Yahya Al-Ishaq, head of the Iran-Iraq Chamber of Commerce, told Tehran-based media that part of Iran’s frozen funds in Iraq had been allocated for “pilgrims” and another portion had been used for essential goods.
The Washington-based think tank Foundation for Defense of Democracies estimated Iraq’s debt to Iran at $11 billion a year and a half ago.
Following the inauguration of Masoud Pezeshkian’s government in June 2024, Tehran-based economic media reported that some experts had suggested he shift away from government-to-government agreements and instead empower the private sector to facilitate debt collection from Iraq more effectively.
On the other hand, some experts in Tehran referred to “bitter past experiences,” including with China, which did not guarantee the repayment of Iran’s debts.
In this context, Western and Iranian officials told Reuters last month that the Islamic Revolutionary Guard Corps (IRGC) had increased its influence over Iran’s oil exports and is estimated to control half of them.
Iran’s Need for $45 Billion to Develop Its Gas Industry and Infrastructure
Meanwhile, the specialized website Oil Price reported on Thursday, January 2, citing a ship-tracking company, that Iran’s crude oil exports increased again in the second half of December after declining in the previous two months.
Conversely, data from Turkey’s Energy Market Regulatory Authority showed that Iran, despite facing a domestic gas crisis, has increased its gas exports to Turkey in hopes of generating revenue.
The Oil Price report indicates that Iran’s gas exports to this western neighbor surged 11 times in the fall compared to the same period last year.
This comes as Iran has been facing a significant domestic gas shortage since the beginning of fall, leading to a sharp reduction in fuel supply to industries, the agricultural sector, and power plants, disrupting daily life and production across the country.
