From The Wall Street Journal
The Trump administration has given Iraq permission to buy Iranian natural gas without penalty for at least three more months, after pledges from Baghdad to buy American oil and energy technology, U.S. and Iraqi officials said.
The decision extends a 45-day waiver Iraq received from the U.S.’s Iran sanctions in November, as the country relies on Iranian natural gas for up to 45% of its electricity needs.
The Trump administration has tried to use the threat of crippling penalties to help U.S. companies get a head start over European rivals and wean Baghdad off its dependence on Iranian gas, according to administration officials.
Iraq’s exemption was among nine that the U.S. granted to countries that buy a lot of Iranian energy, including China and Turkey. But the U.S. increased its leverage over Iraq by limiting the country’s waiver to 45 days, while the others received six months.
A State Department spokesman confirmed the waiver, saying the “efforts will continue to promote the use of Iraqi natural resources, strengthen Iraq’s economy and development, and encourage a united, democratic and prosperous Iraq free from malign Iranian influence.”
An Iraqi official said the new 90-day sanctions exemption would “give us time to sign with U.S. companies,” including General Electric Co. and Orion Gas Processors LLC. GE is seeking to close on a sale to the government of up to $15 billion in power-generation equipment, while Texas-based Orion has bid on a contract to help build a gas-treatment plant.
U.S. Energy Secretary Rick Perry traveled to Baghdad last week to ask for progress on these deals, as the administration is eager to expand the U.S. business footprint in Iraq now that violence has largely subsided 15 years after the American invasion.
The administration has also pressed Iraq to sign up to $60 billion in production, refining and gas-processing deals with Exxon Mobil Corp. and award a contract to Chevron Corp. to help develop a giant oil field.
A Chevron spokeswoman said it had signed a letter of cooperation this summer with the state-run company overseeing development of Iraq’s southern oil fields, but declined to comment further. A GE spokeswoman says the company has worked closely with the electricity ministry as it tries to win contracts for rebuilding of the nation’s power grid. Exxon and Iraq’s oil ministry declined to comment. Orion didn’t comment.
According to Iraqi and U.S. officials, Mr. Perry told Iraqi officials that the U.S. would be more likely to continue allowing natural-gas purchases from Iran, for now, if Iraq improved its business environment and struck deals with companies that could help it find new sources of energy.
Many American oil companies say Iraq is among the most difficult oil-producing countries they work in, and complain of a bloated bureaucracy, endemic corruption and poor profit returns on government contracts.
Senior Trump administration officials stressed that Mr. Perry’s connection of sanctions relief and business deals wasn’t a quid pro quo, but part of the U.S.’s longstanding effort to get Iraq to improve the business environment and reduce Iran’s influence on Iraq. While U.S. energy companies would benefit from the lobbying effort, so would any foreign companies, they said.
“The Administration’s discussions with Iraq are focused on helping Iraq make decisions that are in its own best interests, including taking the necessary steps to become energy independent from Iran and escape Iranian malign influence,” an administration official said in an emailed response.
Previous U.S. administrations have avoided explicitly tying American business contracts to relief from sanctions, particularly in natural resources like oil and energy.
But President Trump has encouraged his cabinet secretaries to use as much leverage as possible to prop up U.S. business interests. Mr. Trump has publicly mused about seizing Iraq’s oil as a prize for overthrowing Saddam Hussein and recently said he would consider intervening in the U.S.’s effort to extradite Huawei Technologies Co.’s chief finance from Canada, if it would help Washington and Beijing resolve their trade dispute.
Some reform-minded Iraqi officials haven’t pushed back against the Trump administration’s efforts to connect waivers to business reforms, Iraqi and Trump administration officials said. It gives them cover for making overhauls to barriers for foreign businesses, these officials said.
Until recently, American companies had ceded much Iraqi business to European and Asian counterparts that were ready to take more risks and yield smaller returns. With the country now seen as safer, U.S. companies are pushing for business, although they face stiff competition.
GE has been locked in a fierce contest with German rival Siemens AG to revamp Iraq’s troubled electricity grid.
A Siemens spokesman said it believes “competition is healthy and eventually is beneficial to Iraq,” but said it is confident in its own ambitious plan proposed to Baghdad in October to boost the country’s electricity supply.
Honeywell International Inc., of New Jersey, has sought State Department support as it competes with British oil-services firm Petrofac to supply equipment for Iraq’s new $2.2 billion ar-Ratawi gas hub, people familiar with the matter said.
A Honeywell spokesman said the company “always welcomes U.S. government advocacy,” but he declined to elaborate on specific Iraqi deals. Petrofac declined to comment.
By encouraging American business in Iraq, the Trump administration could win influence through economic power that it couldn’t in Baghdad’s complex politics, said Ramzy Mardini, an independent Iraq analyst. Iran largely thwarted U.S. efforts to shape the next Baghdad government.
“Politics isn’t a game in which the U.S. can outmaneuver Iran,” Mr. Mardini said. “They may be choosing to compete in the economic domain given its heightened importance now and Iran’s weakened financial position at home.”
