Washington appears satisfied with Baghdad's intention to reduce electricity and gas imports, among other actions, and gave a 90-day waiver just as the previous 45-day waiver expired.

This provides additional time for Iraq to determine ways to pay Iran for the imports in non-dollar denominations and avoiding Iranian banks. The financial transactions technically violate sanctions, not power or gas purchases.

Iraq stopped trading in crude with Iran prior to the November 5 snapback of American sanctions, which otherwise would have violated sanctions.

Iraq does not produce enough power itself or have enough feedstock for existing power plants.

Imports from Iran account for nearly 30% of Iraq's 14,000 MW of daily electricity consumption. Cutting that supply would be devastating for Iraq's economy and, considering the ferocity of summer power protests, would likely destabilize an already fragile political balance.

Around 1.25 Bcf/d is imported by pipeline feeding three power plants in Diyala and Baghdad provinces. Another 350 Mcf/d is sent by pipeline to a power plant in Basra. Hayan Abdulghani, the director general of the South Gas Company, told S&P Global Platts last week that he's overseeing projects that replace that line in two years.

Iraq also is fed a total of 1,000 MW of electricity via POER lines from Iran.

Negotiations began after the Trump administration made clear it would re-impose sanctions.

While the specific violations were of primary concern, American officials alluded to additional requirements, multiple officials confirmed to S&P Global Platts. Washington wanted to see a plan by Iraq to eventually become self-sustaining in power and GAS, thereby reducing the need for Iranian imports.

Iraqi and Kurdistan region officials were also pressed to strike a deal to restart oil exports from federally controlled Kirkuk fields through the Kurdistan-controlled pipeline to Turkey, which began at nearly 100,000 b/d in mid November.

It's unclear what specifically will be required of Iraq when the 90-day waiver expires.