Iran-Iraq Trade To Increase

While recent headlines reported that U.S. forces shot down an Iranian drone in February 2009, economic ties between Iraq and Iran have continued to increase in the last few months. Iran is already one of Iraq’s largest trade partners, accounting for almost 50% of the country’s imports. Recently the two countries have signed a number of memorandums of understandings meant to boost trade to $5 billion by the end of the year.

On March 15, 2009 the Iraqi Ministry of Trade signed a memorandum of understanding (MoU) for Iranian companies to provide products for Iraq’s Central Markets Company. This took place as part of an Iraqi trade delegation visit to Iran. The agreement would have Iranian businesses provide goods for state-run shopping centers that already sell almost exclusively Iranian products. The MoU was the latest part of a plan agreed to by both countries to boost trade to $5 billion by the end of 2009, with the goal of $10 billion by 2010.

In the previous month several other MoUs and deals were inked. One was with the Iraqi Trade Ministry. Another was with the Ministry of Housing to increase aid on construction. This occurred while Iraqi President Jalal Talabani was visiting Iran on his way back from South Korea. Earlier in February Iran won a $1.5 billion contract to construct a new town south of Basra that would include 5,000 housing units, schools, parks, and shops. It was the largest deal signed with Iran so far. All of the building supplies are supposed to come from Iran. The contract occurred just after Iranian Foreign Minister Manouchehr Mottaki visited Iraq. It was during that trip that Iran and Iraq agreed to try to boost trade to $5 billion.

Iran represents almost half of all of Iraq’s imports. The head of the Iran-Iraq Economic Development Headquarters said in January 2009 that the two countries had traded over $3 billion in goods in 2008. UPI said that trade is at $4 billion now. The Wall Street Journal recently reported that in 2007 Iraq imported $2.7 billion from Iran. That was 48% of Iraq’s total, and 30% of Iran’s trade.

As reported before, Iraq has been flooded by imports since the U.S. invasion. This began when the Coalition Provisional Authority did away with Iraq’s tariffs and duties in an attempt to boost demand and get the economy going after the war. Iran stepped in, along with Syria, China, and others. Iranian products have a distinct advantage as Tehran heavily subsidizes its businesses. The effect on Iraq has been largely detrimental, as it has undercut many domestic industries. Iraqi companies have complained about the cheap imports, and demanded some protection, but the trade agreements have only increased.

SOURCES

Aswat al-Iraq, “Iraq, Iran sign MoUs in different spheres,” 2/28/09
- “Iraq, Iran sign MoUs to enhance trade,” 3/15/09
- “Iraq, Iran to up economic cooperation to $10b,” 1/4/09

Azzaman, “Iran wins $1.5 billion Basra construction contract,” 2/16/09
- “Trade Ministry signs deals to expand imports from Iran,” 3/17/09

Chon, Gina, “Iran’s Cheap Goods Stifle Iraq Economy,” Wall Street Journal, 3/18/09

Iran Daily, “Trade Between Iraq, Iran Hits $3b in 9 Months,” 1/6/09

Nordland, Rod and Rubin, Alissa, “U.S. Says It Shot Down an Iranian Drone Over Iraq,” New York Times, 3/17/09

Rath, Tiare, “Iraq Looks to Iran,” Institute for War & Peace Reporting, 1/15/09

Roads To Iraq Blog, “Iran’s new policy towards Iraq,” 3/8/09

UPI, “Iraq-Iran trade meeting pledges $5 billion,” 2/12/09

Xinhua, “Iraqi Factories Fight to Survive Turbulence,” 11/23/08