Iran’s central bank governor Abdolnaser Hemmati says he is “hopeful” his visit to Baghdad on Monday and successful talks with Iraqi officials would enable Tehran to use more than $5 billion of its funds in the country.
Money from Iran’s exports of gas and electricity has accumulated and been trapped in a bank account in Iraq because of US sanctions.
Hemmati secured a trade agreement with officials in Baghdad Monday to use payments from energy exports to buy essential goods from Iraq.
“The recent trip to Iraq was a success and we hope to be able to use our resources in Iraq, which are more than five billion dollars,” he told reporters after a cabinet meeting in Tehran Wednesday.
“Some other countries have also responded positively to the use of foreign exchange earnings. In this regard, traders and importers will gradually realize in which areas we have access to our resources,” Hemmati added.
Iraq relies on Iran for natural gas that generates as much as 45% of its electricity. Iran transmits another 1,200 megawatts directly, making itself an indispensable energy source for its Arab neighbor, but the United States is trying to pry Baghdad away from Tehran’s orbit.
The US has been enlisting its companies and allies such as Saudi Arabia to replace Iran as Iraq’s source of energy.
Officials in Baghdad have said there is no easy substitute to imports from Iran because it will take years to adequately build up Iraq’s energy infrastructure.
They have said American demand acknowledges neither Iraq’s energy needs nor the complex relations between Baghdad and Tehran.
In addition to natural gas and electricity, Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, and air conditioners.
Another country which is holding a sizable amount of Iranian funds is South Korea. Iranian authorities have been pressing Seoul to release between $6.5 billion and $9 billion dollars frozen since 2018 when the United States imposed its unilateral sanctions on Iran.