Iraq Maintains Ties With Both Iran And US During Sanctions

Iran's Energy Minister (left) and Iraq's Electricity Minister (right) meeting in Baghdad to sign energy agreement (Rudaw)

Iraq is continuing its balancing act between Iran and the United States over sanctions. On the one hand it is continuing with its trade deals with Tehran, while attempting to comply with parts of Washington’s demands.

Iraqi officials continue to say that they will not abide by the Trump administration’s sanctions. Prime Minister Abdul Mahdi has said this several times, and Foreign Minister Mohammed Ali al-Hakim repeated that statement in January 2019. At the end of 2018, Iran’s Energy Minister Reza Ardakanian was in Baghdad and signed a Memorandum of Understanding with Iraq’s Electricity Minister Luay al-Khateeb for long term energy cooperation between the two. Iraq depends upon Iran for nearly one-third of its electricity. It imports electricity and natural gas to run power plants. Iraq can’t wean itself off of Iranian energy and gas immediately, so it needs to maintain these ties. There is also a large group of pro-Iranian parties in the parliament that resent the American actions, so the public statements by the government about not following Washington appease them as well.

Iraq’s continued ties with Iran does not mean Baghdad is neglecting the U.S. It just received another waiver on sanctions from the Trump administration for 90 days. It also signed a large deal with General Electric to build new power plants and improve the network, which will lessen the need for Tehran in the future. The Americans have pushed such deals to maintain its waiver, and to wean Iraq from Iran. Finally, the Central Bank of Iraq has agreed to not allow Iran access to dollar auctions it runs and not to use American currency in transactions with Tehran to deprive it of hard currency. These steps show that the Mahdi government is complying with Washington so that it can maintain its exemption.

Iran and the United States are two of Iraq’s most important allies. That is the reason why the Mahdi government has tried to play it down the middle between the two. It has assured Tehran that it will maintain ties throughout the sanctions, which will allow Iran to continue to make money while other sources are cut off. At the same time, it is promising Washington that it will help with its Iran policy, and attempt to reduce its dependence upon Iranian energy in the long run. This is a reasonable approach as Baghdad cannot afford to antagonize either one and serves its own interest to play both sides.

SOURCES

Faucon, Benoit, Puko, Timothy and Coles, Isabel, “U.S. Grants Iraq Sanctions Relief in Bid to Boost Business Deals,” Wall Street Journal 12/21/18

Hickin, Paul, “Iraq gets 90-day Iran sanctions waiver from Washington,” S&P Global Platts, 12/20/18

Lando, Ben and Van Heuvelen, Ben, “U.S. grants new Iran sanctions waiver to Iraq,” Iraq Oil Report, 12/20/18

Al Masalah, “Abdul-Mahdi: Iraq is not part of US sanctions against Iran,” 12/11/18

Middle East Eye, “Iraq ‘not obliged’ to abide by US sanctions on Iran, says foreign minister,” 1/2/19

Rudaw, “Iraq, Iran ink energy sector agreement,” 12/28/18

Zidane, Salam, “Iran pushes Iraq to maintain trade without US dollar,” Al Monitor, 1/4/19