Iraq gets US sanctions break to keep the lights on

An Iraqi man checks the wiring of an electric generator supplying homes with electricity in Baghdad. (AFP)
Updated 08 November 2018
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Iraq gets US sanctions break to keep the lights on

  • Iraq relies on Iran for electricity and consumer goods
  • Baghdad has been hit by repeated power cuts

BAGHDAD: Iraq has won an exemption allowing it to buy Iranian electricity despite US sanctions, as the country plagued by chronic power shortages walks a tightrope between rivals Washington and Tehran.
With US measures imposed Monday taking aim at Iran’s banking and energy industries, there were concerns Iraq — which heavily relies on its eastern neighbor for electricity and consumer goods — would be caught in the crossfire.
But Baghdad has managed to secure an exception.
“We granted Iraq a waiver to allow it to continue to pay for its electricity imports from Iran,” Brian Hook, the State Department’s representative on Iran, announced Wednesday.
Iraq would be expected to show the US how it would wean itself off Iranian gas, a well-informed source told AFP.
“The US gave us 45 days to give them a plan on how we will gradually stop using Iranian gas and oil,” the source said.
“We told them it may take us up to four years to either become self-sufficient or find another alternative.”
The exemption came after talks between Iraqi and US officials, including from the White House and Treasury, the source said.
Iraqi government representatives have shuffled between American and Iranian officials for months in a bid to insulate their fragile economy from escalating tensions.
This week, Prime Minister Adel Abdel-Mahdi said Baghdad was in talks with both sides to protect its interests.
“Iraq is not a part of the sanctions regime. It talks to everyone, and does not want to get involved in a conflict that it’s not a part of,” he told reporters Tuesday.
Baghdad has a strong relationship with the US, coordinating on security, politics, and governance.
But its economy is profoundly intertwined with that of Iran.
Gutted by the international embargo of the 1990s and the US-led invasion of 2003, Iraq’s industries produce little.
Instead, its markets are flooded with Iranian goods — from canned food and yoghurt to carpets and cars.
These non-hydrocarbon imports amounted to some $6 billion in 2017, making Iran the second-largest source of imported goods in Iraq.
Perhaps most consequential for Iraq’s 39 million people is their dependency on Iran for electricity.
Chronic cuts, which often leave homes powerless for up to 20 hours a day, were a key driving factor behind weeks of massive protests in Iraq this summer.
To cope with shortages, Baghdad pipes in natural gas from Tehran for its plants and also directly buys 1,300 MW of Iranian-generated electricity.
That reliance is uncomfortable for the US, whose quest to diminish Tehran’s influence prompted it to reimpose sanctions on Iranian financial institutions, shipping lines, energy, and petroleum products on Monday.
Eight countries would be temporarily allowed to import Iranian crude oil.
Iraq’s special exemption appears to have come with a condition that it lay out how it would stop using Iranian electricity, said Nussaibah Younes, a senior adviser for the European Institute of Peace.
“In order to get this exemption, the Iraqis had given some sort of roadmap idea,” Younes told AFP.
One way would be capturing the gas set alight when Iraq extracts oil, which according to the World Bank represents an annual loss of about $2.5 billion — enough to fill the gap in Iraq’s gas-based power generation.
American firms may help fill the vacuum left by Iran.
In January, Iraq signed a memorandum of understanding with US energy company Orion on gas exploits at a southern oil field.
And in October, Iraq signed a memo with the US’s General Electric to revamp the electricity sector, after signing a similar agreement with Germany’s Siemens.
The source told AFP that GE was among several US companies proposed to Baghdad during negotiations with the US.
But Iraq has had to simultaneously reassure Iran, in part by granting it an outlet to circumvent US sanctions.
“The focus for the Iranians is informal sanctions-busting activity in Iraq, including accessing hard currency through Iraqi exchanges and through smuggling operations,” said Younes.
Baghdad, she expected, would likely “turn a blind eye.”
Iraq has simultaneously been granting Iranian officials more time for face-to-face meetings, including its ambassador in Baghdad, Araj Masjadi.
He met with new Finance Minister Fuad Hussein and Electricity Minister Luay Al-Khateeb on Wednesday, pledging close cooperation on the power sector in the future.
For Masjadi, the meetings appeared to be a reminder of Tehran’s entrenched role in Iraq.
“We need Iraq the way Iraq needs us,” said Masjadi.


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 44 min 33 sec ago
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.