Iraq defaults on $1 billion debt to Iran

Iraq has an outstanding debt of $1 billion to Iran related to the purchase of electricity and the two neighbors are discussing mechanisms to have it settled, an Iranian deputy energy minister says.

Iran is currently exporting some 1,500 megawatts of electricity to Iraq, with a further capacity established to raise it to 2,000 megawatts.

Deputy Energy Minister Houshang Falahatian said on Wednesday that Iraq now runs a debt of $1 billion related to more than one year of power purchases from Iran and other dues related to earlier years.

Iraq had undertaken to settle the debt in 10 installments but it has fallen back on the repayments after initially fulfilling part of its commitments, he said.

“The rise in the volume of Iraq’s debts to Iran has nothing to do with the sanctions or problems related to the transfer of money through foreign banks,” Falahatian said.

The accumulation of the debt, the minister said, was chiefly due to the decline in Iraq’s revenues from the oil price crash.

“Despite the rise in the volume of the debt, exports of electricity to Iraq continue,” Falahatian added.