With Focus on Economic Relations, Iran-Iraq Ties Move Into the 'Daylight'
Expectations were high when Iranian president Hassan Rouhani visited neighboring Iraq last month. During the trip, his first as president, Rouhani signed multiple trade deals with Iraq, where the return of peace and stability has renewed the government’s focus on economic development. The deals covered a variety of sectors including railway construction, electricity infrastructure, and engineering services.
Today, the volume of annual bilateral trade between Iran and Iraq stands at around USD 12 billion. But Rouhani has targeted ambitious growth, saying the two sides should aim to reach USD 20 billion in trade.
The deputy governor-general of Iran's southeastern Khuzestan province—close to the Iraqi border—said Rouhani's trip prepared the ground for the growth of trade in the Arvand Free Economic Zone. Agreements to complete a railway link connecting the southwestern Iranian town of Shalamcheh to the Iraqi Port of Basra and the decision to eliminate visa fees for travelers were among the most notable achievements of the trip. The tourism sector is booming as Iraqis find it increasingly appealing to visit cities in Iran’s west as well as the northeastern holy city of Mashhad, a popular destination for Iraq's Shiite pilgrims. Iranian pilgrims also travel to Iraq in huge numbers, visiting shrines in Najaf and Karbala.
Any planned growth in bilateral trade will depend on Iran and Iraq addressing a range of financial disagreements, exacerbated in part by US secondary sanctions. Since the reimposition of sanctions by the Trump administration in November, complaints have grown among Iranian stakeholders—including oil minister Bijan Zanganeh—that Badghad was effectively siding with Washington given non-payment of rising debts. Prior to Rouhani’s visit, Iran’s central bank governor, Abdolnasser Hemmati, traveled to Baghdad for technical meetings and secured commitments that Iraq would pay significant arrears related to the import of Iranian natural gas and electricity. A few weeks later, Rouhani told his Iraqi counterpart, Barham Salih that using national currencies in banking transactions would help protect bilateral trade from sanctions pressures.
Just last week, Rouhani stressed in a phone conversation with Iraqi Prime Minister Adil Abdul-Mahdi that an agreement to dredge the Arvand River—signed during his visit to Baghdad—was being implemented. Rouhani was speaking in the context of recent deadly floods that have left behind a trail of death and destruction in several Iranian provinces. During the phone call, Iraqi Prime Minister Adel Abdul-Mahdi noted that Iraqis have warmly welcomed proposals that would see a greater presence of Iranian firms in their country.
For its part, the Iraqi government has sought to reassure Iran of its commitment to expanded economic ties with Iran, despite Iraq’s continued reliance on security and economic support from the US. "Iraq insists that the interests of our friendly and neighboring country must be met. We will do our best to reduce tensions in this regard and decrease the damage that will be done to the Iranian nation," declared President Salih.
Overall, Rouhani’s visit won praise across Iran’s political landscape. Hardline newspaper Kayhan, usually highly critical of the Rouhani administration, described the president’s visit as “an act of resistance” to US pressure, which served to “provide relief to the economy.” Financial newspaper Donya-e-Eqtesad, similarly highlighted “Tehran's message to Washington from within Baghdad.”
Iranian media also took pride in comparing Rouhani’s visit to the recent visit to Baghdad of US President Donald Trump. Iran’s state television focused on a series of comments Trump made following his return from Iraq, in which he complains about the secretive style of his visit. Trump sneaked into Iraq "in the dark" while Rouhani landed in "broad daylight,” boasted several Iranian papers. The obvious displeasure of US officials at Iraq’s warm welcome of Rouhani also featured in reports about the trip.
Iran’s reinvigorated diplomacy towards Iraq reflects a new diplomatic and economic strategy towards its onetime foe. By placing a greater priority in ties with Iraq, Iran is seeking to both mitigate the impact of US sanctions, while also countering US influence. In some ways, this strategy is a continuation of the tug of war between the US and Iran which began in the aftermath of the US invasion of Iraq in 2003.
For some Iraqis, this contest for influence reflects an unacceptable threat to Iraq’s sovereignty. Even the country's top Shiite cleric Grand Ayatollah Ali al-Sistani raised the matter with Rouhani when the latter visited the holy city of Najaf. The highly revered religious leader stressed Iraq's sovereignty in his meeting with Rouhani, the first Iranian president to have secured such an audience.
Emerging from nearly two decades of conflict, first during the Iraq War and then during the rise of the Islamic State (ISIS), Iraq is now entering a post-war era in which reconstruction will be the foremost political priority. Iran, which played a role in the defeat of ISIS, sees for itself a constructive role in this new phase of Iraq’s development. It remains to be seen to what extent U.S. economic sanctions and political opposition prevent tighter bilateral ties between Iraq and Iran.
Photo Credit: IRNA
