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Iran has reduced exports of natural gas to its neighbor Iraq claiming the latter owed it more than $6 billion for supplies already made. The cuts were made two weeks ago, and further cuts will be made, Iranian officials said.
"The Iraqi electricity ministry owes more than $5bn to NIGC for gas imports from Iran," the National Iranian Gas Company said, as quoted by Argus, adding, "Of this, $3bn is blocked and inaccessible in the [state-owned] Trade Bank of Iraq, and more than $2bn has not even been released yet by the electricity ministry."
The rest of the money owned comes from "contractual offenses as per the agreements," NIGC said.
The agreements NIGC refers to call for deliveries of a total 55-70 million cubic meters of natural gas daily, with the volumes adjustable depending on demand, Argus notes in its report. The average daily deliveries averaged 50 million cubic meters daily before the cuts were made, reducing the flow of gas to just 5 million cubic meters. Deliveries are to be further reduced to 3 million cubic meters, the Iranian side has said.
The statement from NIGC came in response to a warning from the Iraqi electricity ministry, which said the reduced supply of gas put Baghdad and other cities at risk of power outages, Reuters reported on Monday.
According to the ministry, Iraq only owes Iran $2.7 billion, spokesman Ahmed Moussa told Bloomberg in an interview. Moussa added that because of the already implemented cuts, electricity production in Iraq had fallen by some 7 GW, leading to supply shortages.
"The goal of export is revenue, which we use for food and medicines," the Iranian gas company said. "Therefore, following repeated warnings, which were unfortunately ignored by the Iraqi side, the company has reduced gas export volumes to Iraq, in accordance with the terms of the contract."
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com