Iranian Pres Rouhani meeting with Iraqi PM Mahdi in Baghdad March 2019 (USIP) |
Since 2005 the Iraqi government has often found itself caught in the middle in the rivalry between the United States and Iran. 2019 is no different. The Trump administration has implemented new sanctions and is pressuring Prime Minister Adel Abdul Mahdi to cut its energy imports from Tehran, while Iran is pushing for greater economic ties to get around Washington’s policy. As it has in the past Iraq has said that it will not be drawn into this conflict, and is trying to keep both sides happy.
Iran has increased its effort to expand economic cooperation
between the two countries. President Hassan Rouhani visited Iraq in March and signed
a number of memorandums of understanding. The two countries want to
increase trade from the current $12 billion a year to $20 billion. To
facilitate that there will be 40 trade fairs this year. They also discussed
building a railroad to Basra and making it easier for Iranian businessmen to
obtain Iraqi visas. Earlier in February Iran’s Foreign Minister visited
Iraq with around 100 entrepreneurs for a conference, a deal was made to continue electricity
imports, and in December the energy ministers from both countries signed a long
term energy cooperation agreement. Iran has been one of Iraq’s largest
trade partners since 2003, currently ranking third and providing one third of
Iraq’s power supply. Iranian officials have also been public that they want
trade to go up to help
get around U.S. sanctions. Commerce between the two is completely one
sided, dominated by Iranian goods going to Iraq. This was largely the result of
U.S. economic reforms that eliminated tariffs to try to boost free trade, but
ended up destroying many of Iraq’s industries.
It’s ironic because the United States is trying to end this
economic relationship it helped create. The Trump administration has demanded
that Iraq cut
its energy imports from Iran. It has been going back and forth between
issuing ultimatums, but then issuing waivers on sanctions. It has pushed
Iraq to sign deals with American electricity companies to reduce dependence
upon Iran, and also encouraged Baghdad going to Saudi Arabia, Jordan or Kuwait
for power. The New York Times for example, reported that Washington told Iraq
it had until March to end electricity imports, but Iraq said that was
impossible, and the U.S. ended up giving Baghdad another
waiver anyway. The White House also wants Iraq to no longer use dollars in
transactions with Iran. Washington comes into this situation at a distinct
disadvantage. Trying to wean Iraq off of Iranian electricity for example, is a
long term plan that will take years before foreign contracts will come to
fruition that could replace Tehran’s imports. Iraq is also pushing
for an immediate boost in electricity production to try to stave off the
annual summer protests, which means they have no interest in reducing Iran’s
contribution right now. There’s also the issue of how the Trump Administration
has addressed the Iraqi government, which has angered many politicians and
citizens.
To the Mahdi government this is the only course to follow.
For now, Iraq can’t wean itself from Iranian energy, and wants to increase its
supply out of fear of more riots during the summer. Baghdad has also repeatedly
said that it is not bound by Washington’s sanctions, while also asking for
waivers. The U.S. is important to maintain the security forces, and Iraq would
like to boost its own energy production since there have been chronic shortages
for years, so it is open to signing deals with western companies in this field.
Doing just enough to appease the Trump administration, while declaring its
independence, and maintaining its ties with Iran therefore is the best path to
ensure Iraq’s interests.
SOURCES
Lando, Ben and Van Heuvelen, Ben, “U.S. grants Iraq another Iran sanctions
waiver,” Iraq Oil Report, 3/19/19
Meyer, Henry, “Iraq Says It Will Continue Sanctions-Busting
Imports From Iran,” Bloomberg, 2/20/19
Al Monitor, “Iranian FM ‘maneuvers’ in Iraq as rivalry with
US heats up,” 1/15/19
Rasheed, Ahmed, “Iran’s Rouhani signs trade pacts in Iraq to
help offset US sanctions,” Reuters, 3/10/19
Reuters, “Iran
extends power export deal with Iraq,” 2/8/19
Rubin, Alissa, “Iran Tries to Expand Business in Iraq to
Blunt U.S. Sanctions,” New York Times, 3/11/19
Rudaw, “Iraq, Iran ink energy sector agreement,” 12/28/18
- “Iraq won’t be part of sanctions against Iran: PM,” 2/6/19
Turak, Natasha, “Iran just struck a hoard of deals with
Iraq, and Washington isn’t happy,” CNBC, 3/20/19
Van Heuvelen, Ben and Kullab, Samya, “No ‘either-or’: Iraq
wants both Siemens and GE for fast-track power boost,” Iraq Oil Report, 1/9/19
Wong, Edward, “Trump Pushes Iraq to Stop Buying Energy From
Iran,” New York Times, 2/11/19
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