Iraq working on own SPV to pay off debts, continue imports from Iran

TEHRAN, Jul. 02 (MNA) – Iraq is lining up a special purpose vehicle (SPV) of its own, a mirror European trade mechanism, to pay its arrears to Iran and to continue vital gas and electricity imports from the country under US sanctions.

According to three Iraqi senior officials, the country is now working out a financial loophole similar to the European SPV to pay for imported Iranian energy in Iraqi dinars.

Iraq is reliant on Iranian gas and electricity and tries to avoid a repeat of violent protests over power shortages which hit Basra and other cities last year. The country currently has an outstanding debt of around $2 billion, as Iranian Oil Minister Bijan Namdar Zanganeh announced, for previous gas and electricity purchases from Iran. Via the said SPV it can pay what it owes Iran.

The Arab country has long been in a war of sorts with the US which wants the imports be halted in line with Washington’s policy of “maximum pressure” on the Islamic Republic. The SPV mechanism is the product of months of talks between Iraqi and Iranian officials and those in the US, since Iraq has been pushing back on US pressures to stop buying natural gas and electricity from Iran in what has become a major point of conflict between Washington and Baghdad.

As reported, under the new mechanism, the Iraqi government will pay Iran for gas by depositing money into a special bank account inside Iraq, in Iraqi dinars. Iran will not be able to withdraw the money, but will be able to use it to purchase goods from outside Iraq.

Baghdad's SPV would likely be set up at the Trade Bank of Iraq. A TBI source announced that the bank had been involved in the negotiations but the account had not yet been created. "We are in discussions to reach an agreement, which would be fully within US exemptions," the source said.

One official said Iraq would be like “Iran's ATM” under the new mechanism, through which Tehran would probably import goods from outside the Arab country.

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