The bank through which Iraq pays for Iranian gas imports to power its grids said Tuesday (January 21st) it would stop processing payments if a crucial US sanctions exemption expires next month.

"We will stop. As simple as that," said Trade Bank of Iraq (TBI) head Faisal al-Haimus.

Iraq's electricity sector has relied on Iran for about a third of its supply.

Amid high tensions, the US slapped tough sanctions on Iran's energy sector in 2018 but has granted Iraq a series of temporary waivers over the last 15 months to allow it to buy gas from Tehran.

Baghdad pays for the imports by depositing Iraqi dinars into an account at the state-owned TBI, which Iran is technically allowed to use to purchase non-sanctioned goods.

But if Iraq's waiver is not renewed next month, TBI would stop processing payments, Haimus said.

"If the waiver ended, of course TBI will not pay for any gas or deal with any Iranian entity over gas or electricity. Absolutely," he said.

"As a bank, the most important thing we have is that we are compliant (with international regulations). That is why people trust us," the chairman added.

Any entity that deals with institutions or countries that are blacklisted by the US could be slapped with secondary sanctions, which restrict its access to US dollars.

The waiver protected Iraq from such sanctions, allowing it to continue importing about 1,400 MW of electricity and 28 million cubic metres of gas from Iran.