Modular Multilevel Converter based High Voltage Direct Current (MMC-HVDC) transmission systems are becoming a well-established technology in transmitting electrical power over very long distances. However, the performance of these systems under unbalanced grid conditions still faces challenging problems. One of the most important control targets is to eliminate the 2nd harmonic power oscillations by selecting the suitable set of current references. Among different power oscillation suppression techniques, Positive Negative Sequence Control (PNSC) and Instantaneous Active and Reac-tive Control (IARC) are considered the most important. However, it is found that, only PNSC is usually considered in all of the references that studied the internal behaviour of MMC during unbalanced conditions when power oscillation suppression is targeted. This is because IARC injects odd harmonics in line currents which results in distorted arm currents and energies among the phases. This paper aims to study the behaviour of the MMC internal variables in case of using IARC. A detailed harmonic analysis of the MMC internal currents and energies is provided. The system is simulated using Matlab-Simulink and validated using HiL technology under different unbalanced grid conditions. The obtained results are then evaluated and compared to that of PNSC to highlight the major differences. It is found that, IARC strategy is more powerful in suppressing power oscillations with simpler structure but with the cost of higher harmonic contents of internal currents and arm energies compared to PNSC strategy. Also, a modified internal energy controller using low pass filters instead of notch filters to eliminate higher order harmonics in the circulating current is proposed in this paper.