Biden Admin Greenlights Sanctions Waiver That Allows Iraq To Pay Iran Millions for Electricity

Waiver signed day after administration officials denied Iran's claim that Tehran was set to receive $500 million thanks to waiver

(Olivier Douliery/Pool via Reuters)
March 24, 2023

The Biden administration last week greenlit a sanctions waiver that will allow Iraq to make cash payments for electricity to Iran, whose cash-strapped regime says it is set to receive a $500 million payment from Iraq thanks to the waiver.

A non-public sanctions waiver issued by Secretary of State Antony Blinken and transmitted to Congress earlier this week authorizes Iraq to pay Iran for multimillion-dollar electricity debts, according to a copy of the notice obtained on Wednesday by the Washington Free Beacon. The waiver was issued a day after Biden administration officials denied Iran's claims that the United States had paved the way for Tehran to receive the $500 million, which was first reported by the Free Beacon.

The latest sanctions waiver, however, permits "the Trade Bank of Iraq to engage in financial transactions … with the Central Bank of Iran in connection with the purchase of electricity."

It is unclear how Iran arrived at the $500 million figure, or if it is related to this most recent sanctions waiver, which does not detail specific amounts of money. Iranian officials claim they are owed around $18 billion from Iraq in back payments for electricity. Blinken signed the waiver on March 17, one day after the Free Beacon reported on Iran's claims, which elicited a denial from the Treasury Department. The Biden administration's decision to authorize new Iraqi payments to Iran has generated anger on Capitol Hill among Republican hawks who accuse the administration of helping Tehran access cash at a time when the regime is funneling weapons to Russia for its war in Ukraine.

"Of course the Biden administration lied that they wouldn't waive sanctions on Iran just days before they did so," said Sen. Ted Cruz (R., Texas). "They know that by allowing money to pour into Iran, they are not only endangering the safety and security of Americans but also undermining everything they claim to believe about defeating Putin. They say that Iran is a terror sponsor and Russia's top military backer, but appeasing Iran and getting back into a nuclear deal with the Ayatollah is more important to them. They are funding both sides of the Ukraine war."

In response to the Free Beacon's initial report on the matter, a Treasury Department spokesman said, "The United States did not provide a waiver for the payment of any blocked or restricted funds to Iran." The State Department would not confirm or deny the report.

When approached on Wednesday for comment about the congressional waiver notice, a Treasury Department spokesman referred the Free Beacon to the State Department for comment. A State Department spokesman would not comment on the record about the issue.

The latest sanctions waiver includes a determination by Blinken that "it is vital to the national security of the United States to waive the imposition of sanctions" on transactions from Iraq's Trade Bank to Iran. The waiver will last for 120 days, at which time the United States will decide whether it will reauthorize these transactions. A classified portion of the notice provided to Congress outlines the reasons why the administration granted the waiver.

Hamid Hosseini, the secretary general of the Iran-Iraq Joint Chamber of Commerce, claimed last week the Biden administration "granted another sanction waiver and allowed the payment of 500 million dollars from Iraq's electricity debt to Iran." The agreement was reportedly made while Iraq's foreign minister was in Washington, D.C., for meetings with State Department officials, according to Hosseini.

The funds have been frozen in Iraq's Trade Bank due to U.S. sanctions and control over the bank's assets.

"Iran's money is in a bank that is under the supervision of the United States, and it is only allowed to import goods that are not sanctioned," Hosseini said last week in comments published by Iran's state-controlled press.

These funds have long been a sticking point in U.S.-Iraq relations, given Iraq's reliance on Iran for electricity and other services. Iraq's government claims the payments to Iran are necessary to ensure the country does not experience power shortages.

The Trump administration also granted these sanctions waivers, and President Joe Biden continued them in March 2021 and March 2022. Each waiver permitted Iraq to import electricity from Iran without facing sanctions for a period of 120 days.

Though the United States has mostly abandoned its hopes of reviving the 2015 nuclear accord, the sanctions waivers leave open the possibility of further concessions to Iran.