Iran's Energy Minister Reza Ardakanian met with officials in Baghdad on Tuesday amid a trade dispute that has seen electricity reduced for 40 million Iraqis already facing shortages for decades.

The National Iranian Gas Company (NIGC) said in a statement that the Iraqi electricity ministry owed it "more than six billion dollars in arrears".

After years of complaints from Tehran and requests for more time from Baghdad, "Iran will reduce from five to three million cubic meters of its gas supply to Iraq" needed to run power plants, Iraqi electricity ministry spokesman Ahmed Moussa told state television.

Iraq buys gas and electricity from neighbouring Iran to supply about a third of its power sector, worn down by years of conflict and poor maintenance.

But it must navigate sanctions imposed on trade with Tehran by the United States, which blacklisted Iran's energy industry in 2018 but granted Baghdad a series of temporary waivers.

On Tuesday, Ardakanian met with Iraqi Electricity Minister Majid Hantoush, Prime Minister Mustafa al-Kadhimi and Iraq central bank governor Mustafa Ghaleb Mukhif.

Iran is meant to receive payments through public banking institutions to avoid US sanctions.

"The Iraqi Electricity Ministry owes more than $2 billion in arrears and $1 billion in contract violations, while $3 billion is blocked and inaccessible in the Trade Bank of Iraq," Iraq's main public bank, the NIGC statement said.

For decades, Iraqis have had to cope with power outages that can last up to 20 hours a day in some areas.

Virtually all households are connected to private generators, but the prices of those services have recently soared amid a severe economic crisis accompanied by currency devaluation.

Using its own fuel plus Iranian gas, Iraq can produce a total of around 16,000 megawatts of electricity.

That is far below demand, which hovers around 24,000 MW but can jump to 30,000 in summer, when temperatures reach a sizzling 50 degrees Celsius (122 Fahrenheit).

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