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On July 18th, Secretary of State Antony Blinken signed, for the twentieth time, a waiver allowing Iraq to pay its electricity bills to Iran, thereby violating sanctions against the Mullah state. The waiver eases the sanctions by authorizing Iraq to transfer electricity payments from frozen Iranian accounts in Europe and Oman. Initially valid for 120 days, this waiver expired on Tuesday, November 14. The United States has renewed this authorization, allowing Iran access to billions of dollars held in frozen accounts in Iraq.
The United States announced on Tuesday that they are renewing for 120 days a waiver on sanctions allowing Iraq to purchase electricity from Iran.
According to State Department spokesperson Mathew Miller, “none of this money has been paid to Iran.” He explained, “The funds are held in restricted accounts, limiting their use only for payments related to the purchase of food, medicine, and humanitarian initiatives.”
Miller stated that this measure is part of US policy aimed at reducing Iran’s influence in Iraq and weaning Iraq off Iranian energy dependence.
Secretary of State Antony Blinken informed Congress of the extension of the waiver on Tuesday. However, this decision is expected to draw criticism from Republican hawks who believe that the extension will reward Iran, accused of supporting Hamas in its current war against Israel.
Iraqi payments for Iranian electricity amount to $10 billion and are currently deposited in blocked accounts in Iraq. The waiver will enable Baghdad to maintain its energy imports without fear of US sanctions. Iraq, which is highly reliant on Iranian electricity, can therefore deposit payments in non-Iraqi banks located in third countries rather than in restricted accounts in Iraq. Conversely, during the Trump administration, authorization was given only on the condition that payments be kept in a Baghdad escrow account.
The waiver maintains a provision that allows a portion of the revenue from electricity sales to be transferred to accounts in Oman and then converted into euros or other widely traded currencies. However, this also creates a loophole through which Iran could acquire items not subject to sanctions.
July Waiver
Funds deposited related to the July waiver were supposed to be subject to restrictions, with Iran supposed to use these funds only for humanitarian expenses. Additionally, Iran was required to obtain US authorization to access these funds.
In the past, Tehran had pressured Baghdad to seek this permission from the United States by cutting off the export of Iranian natural gas to Iraq, thereby limiting the country’s ability to produce electricity and putting significant pressure on the Iraqi government. The “official” reason for the waiver would thus be to alleviate the pressure on Iraq from Iran.
Prisoner Exchange AgreementÂ
In a similar vein and within the saga of sanctions waivers, the Biden administration paved the way for the release of five American citizens detained in Iran for eight years by granting, on September 8th, a waiver to international banks to transfer $6 billion of frozen Iranian money from South Korea to Qatar.
The money had accumulated in South Korean banks as Seoul purchased Iranian oil under an agreement with the Trump administration, which had stifled most of Iran’s energy exports.
Republican lawmakers had pressured the Biden administration to halt the payment of $6 billion in ransom to Iran, arguing that even if these funds were intended for humanitarian purposes, they were diverting funds to Hezbollah and Hamas.
This waiver allowed banks in Europe, the Middle East, and Asia to avoid violating US sanctions.
The prisoner exchange agreement came as representatives of Biden sought to conclude other deals with Iran to avoid a conflict, including an agreement stipulating that no new nuclear sanctions would be imposed as long as Tehran limited uranium enrichment that could be used in making a nuclear weapon.
Republican Pressure
However, after the Hamas operation against Israel on October 7 and following pressure from Republicans accusing the Biden administration of providing Iran with a substantial sum to release funds to support Hamas, Wally Adeymo, Deputy Treasury Secretary, stated on October 12 that Iran would no longer have access to these funds related to the prisoner exchange. The money was placed under close scrutiny and subjected to the strict condition that it should only be used for humanitarian purposes. It is currently unclear if the Democratic administration will declare these funds unusable.
Iran is subject to economic sanctions reimposed in 2018 by Donald Trump, who withdrew from the nuclear agreement that Tehran had reached with major powers, namely Britain, China, France, Germany, Russia, and the United States in 2015.
Trump pursued a policy of “maximum pressure” on Iran, aiming to force it to accept stricter restrictions on its nuclear program, which raised concerns among most Western countries about its potential use in making a nuclear weapon.
Therefore, the Biden administration extended the waiver by 120 days, allowing Iraq to settle several billion dollars in electricity purchases with Iran.
Will the renewal of the waiver allow for another exchange between the United States and Iran, but this time based on the non-escalation of other fronts, such as southern Lebanon?
