Iraq to pay for Iran gas imports with oil - PM

View of Iran’s oil industry installations on September 28, 2011 in Mahshahr, Khuzestan province, southern Iran [Kaveh Kazemi/Getty Images]

Iraq will start paying for its Iranian gas imports with oil, to circumvent the complicated mechanism agreed with Washington in order not to contravene US sanctions, the Prime Minister said on Tuesday, Reuters reports.

According to the report, Iraq cannot directly hand over cash to Iran, but payments must be held in a bank account and be used by Tehran to fund imports of food and medicines.

Oil-rich Iraq relies on Iranian gas imports for a third of its energy needs.

Ten days ago, Iran halved its supply of gas to Iraq because of unpaid bills of more than $12 billion, deposited in an Iraqi bank account, but which Tehran cannot use, Prime Minister Mohamed Shia Al Sudani said in a televised address on Tuesday.

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