Iranian-Turkish Trade With Iraq

When the Coalition Provisional Authority (CPA) took over the administration of Iraq in 2003 it tried to promote capitalism, privatization, and free market reforms. As part of that process it got rid of all of Iraq’s tariffs and opened the country’s doors to foreign commerce. Since then Iran and Turkey have become the country’s two largest trade partners, which has not always been good for Iraq’s economy.

Immediately after the overthrow of Saddam, Tehran moved into Iraq in an attempt to spread its hard and soft power throughout the country. Iranian products started flooding the country as a result. Iran quickly became Iraq’s second largest source of trade. On April 14, 2010 the Iranian ambassador to Iraq announced that commerce between the two countries had reached $7 billion by 2009. The two had also signed 165 memorandum of understanding, mostly to do with economic exchanges. This year Iraq is planning on holding 20 trade fairs in Iraq to promote more business between the two starting with one in Najaf in April. With Tehran having largely shifted its focus away from supporting Shiite militias and Special Groups for now it is emphasizing soft power tools such as trade more than ever.

Turkey on the other hand has changed its stance towards Iraq. At first, it was worried what a new Iraqi government that included Kurds might mean for its own Kurdish population, as well as the presence of the Kurdistan Workers’ Party (PKK) insurgent group within northern Iraq. Now Ankara is focusing upon building up ties with Baghdad and the Kurdistan Regional Government (KRG) so that it has influence with both after the U.S. withdraws. That has meant greatly expanding economic ties between the two countries, which has made Turkey the largest trade partner with Iraq. By 2009 Turkish-Iraq trade was worth $9 billion, up from $6 billion in 2008. Turkey has also invested $8 billion in Iraq. As a result, an estimated 80% of the goods sold in Kurdistan are Turkish imports, and 55% of the foreign companies in the KRG are Turkish as well. In the process, Ankara successfully became an important partner with the major parties within Iraq.

Iran and Turkey have greatly profited from their increased trade relations with Iraq. Their products are found throughout the country, and it is a means to gain soft power. Iraq has not benefited as much. The lack of tariffs and cheap imports has devastated many Iraqi factories and businesses, forcing some to even close down as a result.  This in turn, has made Iraq more dependent upon imports and its oil industry, and reduced job opportunities for a country with massive unemployment and underemployment problems. Iraq is unlikely to break from this trend as Ankara and Tehran’s economic ties are only going to increase in the near future until parliament decides that it wants to protect and promote its domestic businesses with tariffs and other measures.

SOURCES

Agence France Presse, “Iraq-Turkey trade up 50 percent in past year,” 4/10/10

AK News, “Iranian Ambassador: Trade exchange volume with Iraq, US$ 7 billions in 2009,” 4/14/10

Collier, Robert, “Imports inundate Iraq under new U.S. policy,” San Francisco Chronicle, 7/10/03

Fielding-Smith, Abigail, “Turkey finds a gateway to Iraq,” Financial Times, 4/14/10

Hanna, Michael Wahid, “Uneven Tracks for Iraq’s Regional Reintegration,” World Politics Review, 2/23/10