The United States has renewed a sanctions waiver that allows Iraq to buy gas from Iran, an Iraqi official told AFP on Wednesday.

There was no immediate confirmation from Washington.

The exemption is crucial to keep Iraq’s dilapidated and corruption-ridden electricity sector afloat. For over a year it has posed a dilemma for US policy makers who have ramped up a sanctions on Iran but held off from extending the sanctions in a way that substantially harms their allies in Baghdad.

The 60-day waiver will allow Baghdad to continue importing gas from Iran, which supplies Iraq with the equivalent of one-third of its electricity needs. Iraq suffers crippling power cuts and imports electricity and gas from Iran to boost production.

The US blacklisted Iran's energy sector in late 2018 but has since granted its ally Baghdad a series of waivers, without which the country’s power crisis would deepen sharply.

Mudher Salih, a veteran Iraqi economist who advises the government, said in May that the electricity sector costs the the treasury about $10 billion (Dh36.73bn) a year to run but generates only 7 per cent of its operating costs in revenue.

Official datas show its generation capacity at 16,000 megawatts, compared with the 24,000 to 30,000 megawatts needed to satisfy demand.

In May, Washington granted Iraq a four-month extension, in implicit backing of the new government of Mustafa Al Kadhimi, a former intelligence chief who is well-connected in the US.

Washington has pressured Iraq, with little success, to use the waivers to abandon its power sector reliance on Iran. Mr Al Kadhimi met with on a visit to Washington in August with US

Energy US firms frustrated by lack of progress in their activities in the Iraqi market.

The National