Analysis and Evaluation of Current Methods for Receiving Financial Resources from Gas Exports to Iraq and Providing Suggestions for Reforming the Mechanism for Receiving Payment for Exported Gas
Abstract
One of the most important areas of cooperation with regional countries is in infrastructure-related matters such as energy supply, which is considered a strategic interaction and strengthens regional economic cooperation. However, the emergence of challenges, similar to those that have occurred between Iran and Iraq regarding gas exports to this country, indicates that without addressing technical considerations, this cooperation could turn into a serious issue between the two countries. On one hand, it threatens their economic interests, and on the other hand, it creates an opportunity for increased interference by non-regional countries in the bilateral relations between Iran and Iraq.
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Analysis and Evaluation of Current Methods for Receiving Financial Resources from Gas Exports
- Receiving Part of the Receivables in Cash :Some payments, like the $400 million in 2020, are made in cash, which can boost foreign reserves but is not ideal for trade needs.
- Use for Essential Goods: Foreign currency from exports is used to pay for essential goods and medicines, either by transferring funds from TBI to other banks or directly to suppliers. However, challenges include sanctions and Iraq’s trade limitations.
These methods show the complexities of managing financial transactions amid sanctions and infrastructure challenges.
Proposals for Reforming the Mechanism of Receiving Payments for Exported Gas:
- Change in Payment Currency: While gas prices remain calculated in USD, actual payments should be made in alternative currencies like Chinese Yuan, Indian Rupee, or Russian Ruble to facilitate trade with those countries.
- Enforce Buyer Commitments: Include a clause that allows Iran to halt gas exports if Iraq fails to make payments within a specified period.
- Advance Payment Mechanism: Require partial prepayment (e.g., 70%) at the beginning of each month, with the remaining balance settled at the end.
- Protection Against Third-Party Interference: Add a clause preventing either party from acting on external measures that disrupt payments or access to funds.
- Use of Blocked Funds for Investment: Allocate up to 20% of current receivables for export-oriented Iranian investment.
This study was conducted by Seyed Hasan Mahfouzi at Moqavemati Economy Think Tank in 2023.
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