The US slapped tough sanctions on the Iranian energy sector in late 2018 and has granted Iraq a series of waivers, usually for 45, 90 or 120 days.

Baghdad relies on gas and electricity imports from its neighbour Tehran to supply about a third of its power grid, crippled by years of conflict and poor maintenance.

"This is the final extension," one source at the Iraqi president's office told AFP.

The source said Washington had been frustrated that Iran was meddling in the government formation process in Iraq.

In Washington, the State Department confirmed the extended waiver "to meet the immediate energy needs" of Iraq without specifying the duration.

The Treasury Department simultaneously announced sanctions on Iranian economic interests in Iraq including the Reconstruction Organization of the Holy Shrines in Iraq.

The Treasury Department said the body was under the control of Iran's powerful Revolutionary Guards and had funnelled weapons to Iraqi Shiite paramilitaries, who have increasingly waged a proxy war with US forces.

Treasury Secretary Steven Mnuchin in a statement accused arch-rival Iran of "prioritizing terrorist proxies over the basic needs of its people."

Adnan Zurfi, who has had close ties with US officials since the American-led invasion of Iraq in 2003, was nominated for Iraq's premiership on March 17 and has a month to pull together his cabinet.

"The US did not want to put Zurfi in a difficult position by not renewing the waiver," a second senior Iraqi official told AFP, confirming the 30-day extension.

The official said Baghdad had prepared a checklist at the beginning of the last 45-day waiver period of ways the country could decrease its reliance on Iranian oil.

"But we haven't been able to accomplish any of them because of the circumstances," the source said.

Iraq has been hit by a cocktail of crises in recent weeks, including stalemate over forming a government, collapsing oil prices and the novel coronavirus pandemic.

OPEC's second-biggest producer relies on crude exports to fund more than 90 percent of its state budget, but the crash to a price of under $30 per barrel has seriously undermined the government's fiscal position.

In a further blow, coronavirus has spread across the country, with nearly 350 confirmed cases and 29 deaths announced by the health ministry.