Baghdad and Tehran earlier this month signed a deal to swap Iranian natural gas for Iraqi crude and fuel oil. If implemented, the July 17 accord will facilitate Iran’s energy exports to its western neighbor—but may also introduce new complications caused by US sanctions.

History of agreements and exports

Iran and Iraq first began negotiations on gas trade in 2010. An initial agreement on supplying Baghdad’s Bismaya power plant with Iranian natural gas was reached in 2013. Two years later, in 2015, it was agreed that an electric power plant in the southern city of Basra would also be fed with Iranian gas.

After extensive delays, Iran initiated exports for the Baghdad plant in 2017 and to Basra in 2018.

As an informed senior source in Baghdad previously explained to Amwaj.media, assuming 50 million cubic meters (mcm) a day of natural gas imports, such a volume could be used to generate up to 7 GW, or just over a third of...