Iran has signed a long-term strategic power supply contract with Iraq to provide its Arab neighbor with sustainable energy supplies, Iranian Energy Minister Ali Akbar Mehrabian said, Press TV reported.

The Islamic Republic is already a key energy supplier to Iraq, which faces chronic power shortages despite having the world's fourth-largest oil reserves.

“Given that we are facing a surplus of electricity production in the country at many times of the year, we pursue the development of energy diplomacy centered on electricity with neighbors in order to both solve their problems and create a stable flow of income and use the maximum capacity of our electricity network,” Iranian media on Wednesday quoted Mehrabian as saying.

He added that knowledge-intensive private sector companies in Iran are also building 1,700 megawatts of power plants in Iraq.

According to the minister, entering into long-term strategic contracts in the electricity sector has been one of the central elements of the Iranian government's “dynamic regional diplomacy which has brought brilliant results for the country”. “In this regard, we prepared the ground for the first long-term cooperation in the electricity sector with Iraq, and signed an important and strategic contract with the country,” he added.

The agreement comes amid unilateral U.S. sanctions re-imposed on Iran since 2018, which prohibit countries from buying Iranian energy.