August 6, Iraq and Iran signed a new trade agreement that will create a free trade zone between the two countries. Iraq already has very few tariffs or trade barriers to keep out foreign goods. Iran also happens to be one of Iran’s top two trade partners along with Syria. In 2007 Iranian trade was worth $2.7 billion, and was expected to climb to $4 billion by the end of this year. Almost half of Iran’s goods go to Kurdistan in northern Iraq. Before the U.S. invasion there was little trade between the two nations. Since then Iranian consumer goods have flooded the Iraqi market due to proximity, low costs, quality, and ease of business. The trade is almost all one way with very few Iraqi goods going to Iran. The Iranian Revolutionary Guards are also in control of much of the commerce as they control the border,which has raised concerns amongst U.S. and Iraqi officials who are afraid of weapons smuggling.
After the fall of Saddam Hussein, Iran has tried to bind the two countries economically, culturally, and politically. Tehran has become one of the major players in Iraq’s markets. While Iranian goods are cheap, and from reports relatively well made, they also hinder the development of Iraqi businesses. United Nations’ sanctions after the 1991 Gulf War had a huge impact on much of Iraq’s industry. The 2003 U.S. invasion and subsequent fighting continued to impede the economy. This has put Iraq at a huge disadvantage against foreign competition, and the free trade agreement with Iran will only continue this. That will mean that Iraq will continue to be a primary product producer of oil and farm products, while relying upon other countries for manufactured goods.
Bastian, Marc, “Iranian goods offer economic lifeline to Iraqis,” Agence France Presse, 7/15/08
Iraq Directory, “Iraq Imported 21 billion dollars of goods from Iran on 2006,” 7/9/08
Mathaba News.Net, “Official: Iran-Iraq trade volume to reach 4bn US dollars this year,” 6/21/08
Roug, Louise and Daragahi, Borzou, “Iraq Edges Closer to Iran, With or Without the US,” Los Angeles Times, 1/16/07
al-Shawfi, Mundher, “Iraq, Syria to boost trade exchange to $1 billion,” Azzaman, 8/8/08
Voices of Iraq, “Iran, Iraq ink customs deal,” 8/6/08
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