The United States has granted Iraq a waiver to allow it to keep importing electricity from neighboring Iran despite renewed American sanctions on Tehran, a US official said Wednesday.
The US State Department's representative on Iran, Brian Hook, said that Iraq had been granted a special permission.
"We granted Iraq a waiver to allow it to continue to pay for its electricity imports from Iran. We are confident that this will help Iraq limit electricity shortages in the south," Hook told reporters in Washington.
Iraq is now expected to demonstrate to the US how it would wean itself off Iranian gas, a well-informed Iraqi source told AFP.
"The US gave us 45 days to give them a plan on how we will gradually stop using Iranian gas and oil," the source said.
On Monday, the United States re-imposed tough sanctions on Iraq's financial institutions, shipping lines, energy sector, and petroleum products.
The exemption granted to Iraq came after talks between Iraqi and US officials, including from the White House and Treasury, the source said.
This week, Prime Minister Adel Abdel-Mahdi said Baghdad was in talks with both sides to protect its interests.
"Iraq is not a part of the sanctions regime. It talks to everyone, and does not want to get involved in a conflict that it's not a part of," he told reporters Tuesday.
Gutted by the international embargo of the 1990s and the US-led invasion of 2003, Iraq's industries produce little.
Instead, its markets are flooded with Iranian goods -- from canned food and yoghurt to carpets and cars.
These non-hydrocarbon imports amounted to some $6 billion (five billion euros) in 2017, making Iran the second-largest source of imported goods in Iraq.
Perhaps most consequential for Iraq's 39 million people is their dependency on Iran for electricity.
Chronic cuts, which often leave homes powerless for up to 20 hours a day, were a key driving factor behind weeks of massive protests in Iraq this summer.
To cope with shortages, Baghdad pipes in natural gas from Tehran for its plants and also directly buys 1,300 MW of Iranian-generated electricity.