WASHINGTON: In a significant move, the US has allowed Iran to receive payments for its energy exports to Iraq, providing the sanction-stricken nation a much-needed economic respite.

The US State Department confirmed on Monday that even though sanctions would remain in place, Iran will receive hundreds of millions of dollars from Iraq for the energy products it has sold to the neighbouring state.

At a news briefing in Washington, State Department Spokes­person Matthew Miller confirmed that Oman will manage the account, in which Iraq would deposit the money, while Iran would be able to use it, with some restrictions.

Earlier on Monday, a spokesperson for the Iranian Foreign Ministry said Oman and Qatar had agreed to manage the proposed transactions.

Asked to confirm the Iranian official’s claim, Mr Miller said, “Yes, I can confirm that Oman has indicated a willingness to receive a portion of those funds and we believe that it’s an important step.”

“[It]’s important to get that money out of Iraq because it’s a source of leverage that Iran uses against its neighbour,” he said.

Explaining the restriction, Mr Miller said the money can only be used for “non-sanctionable activities such as humanitarian assistance” and that all the transactions need to be approved by the US Treasury Department.

Iraq owes billions of dollars to Tehran for energy imports but was unable to pay as US sanctions prevented such payments. Iran has been pushing Iraq to secure US permission to release the funds, indicating that it may suspend power supplies if not paid.

Published in Dawn, July 25th, 2023