The US has granted Iraq a 60-day extension to a sanctions waiver allowing it to import Iranian gas for its crippled power grids, an Iraqi official said.

Baghdad relies on gas and electricity imports from its neighbor Tehran to supply about a third of its electricity sector, worn down by years of conflict and poor maintenance.

The US blacklisted Iran's energy industry in late 2018 but has since granted its ally Baghdad a series of temporary waivers to stave off country-wide blackouts.

In May, Washington granted Iraq a four-month extension as a gesture of good will towards Mustafa al-Kadhemi, who had just formed a cabinet seen as more US-friendly than its predecessor.

The US has pressured Iraq to use the waivers to become independent from Iranian energy, specifically by partnering with American firms, and had been frustrated by the slow progress under the previous premier Adel Abdel Mahdi.

While Kadhemi's cabinet has sought to fast-track such deals, it has been unable stem the near-daily rocket and IED attacks on Western military and diplomatic interests.

On his trip to Washington in August, Kadhemi scored agreements with various US firms for energy development across Iraq, including Chevron, Baker Hughes, Exxon and General Electric.

As OPEC's second-biggest producer, Iraq relies on crude exports to fund more than 90 percent of its state budget, but this year's price collapse has seriously undermined the government's fiscal position.