National Security

Iran Expands Footprint in Iraq With American-Sanctioned Electricity Deal

Electric power station in Baghdad
Electric power station in Baghdad / Getty Images

Iran deepened its foothold in Iraq on Thursday, signing an $800 million two-year deal to provide electricity services to the war-torn country.

Iraq relies heavily on Iran for its electricity and is currently permitted to continue the relationship with Tehran due to a contested U.S. sanctions waiver endorsing the arrangement.

Iran experts worry the Trump administration is making a mistake by issuing the sanctions waiver, arguing that it helps Iran gain access to much-needed cash as it continues to fund terror operations across the Middle East. In addition to the cash assets, Iran can also expand its regional influence into the Iraqi government.

"Iraq is now a top trade partner of Tehran and a key hub for IRGC's terrorism financing and sanctions-busting operations," Saeed Ghasseminejad, an Iran expert at the Foundation for Defense of Democracies, told the Washington Free Beacon. "Thanks to the waivers, Tehran generates billions of dollars in revenue, which it uses to target the United States and its allies in the region. It is not clear what Washington receives in exchange for the waivers it issues."

Iraq reportedly paid Iran for half of the total sale, around $400 million, which will keep Iranian electricity flowing into Iraq through 2021.

An Iranian delegation was in Baghdad this week to finalize the arrangement. The commander of the Iranian Quds Force, a military group that has aided anti-U.S. Iraqi militia groups, was part of that delegation. The military leader's presence in the delegation is a sign that Iran remains committed to using its economic leverage in Iraq as a means to boost its military footprint.

The State Department announced late last month that it was extending the electricity sanctions waiver.

"Under a U.S.-issued sanctions waiver, Iraq is permitted to engage in financial transactions related to the import of electricity from Iran," State Department spokeswoman Morgan Ortagus said at the time. "The purpose of this waiver, which the United States is renewing today, is to meet the immediate energy needs of the Iraqi people."

The State Department last month also issued new sanctions on entities tied to Iran's Islamic Revolutionary Guards Corps for its malign activities in Iraq.

The State Department maintains that it can keep the waiver in place while preventing the IRGC and its affiliates from expanding their influence in Iraq.