Restoring Iraq as the beating heart of Arab commerce

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There is something almost tragi-comic about Iraqi prime ministers’ predilection for visiting Tehran and Riyadh in immediate succession, whether the intention is to play one side off against the other or simply to prove to the Americans that Iraq isn’t trapped in the Tehran camp.

It is hugely important that Mustafa Al-Kadhimi’s visit to Riyadh, postponed last week because King Salman was undergoing medical tests, goes ahead — for consolidating progress on bilateral ties, developmental support, GCC energy supplies, and trade. Tehran has been actively sabotaging Iraq’s relations with its Arab neighbors: Foreign Minister Mohammad Javad Zarif’s sudden appearance in Baghdad, and a raft of new measures during Kadhimi’s subsequent Tehran visit giving Iran monopolies on energy provision and trade, were clearly calculated to sour the atmosphere ahead of the prime minister’s arrival in Riyadh.

There is no equivalence in Tehran and Riyadh’s relations with Baghdad: Iraq is dominated by Iran — economically, theologically, politically, and paramilitarily. As a US-affiliated former intelligence chief, Kadhimi was not Tehran’s first choice for prime minister. Tehran’s Iraqi paramilitary affiliates denounce him as an enemy. Nevertheless, the ayatollahs continue scheming to straitjacket Baghdad inside their economic bloc of “resistance” states.

Iraq’s diplomatic and trade relations with GCC states relaunched from a low base. As recently as 2014 there were few meaningful diplomatic interactions, and Prime Minister Nouri Al-Maliki was baselessly accusing the Gulf states of supporting terrorism and insurgency while simultaneously proclaiming Iran-sponsored paramilitaries as the solution to all Iraq’s problems. The Saudi trade minister’s trip to Baghdad last year provided for $1 billion in development loans, $500 million to boost exports and four new consulates to cultivate trade ties. Relations with the UAE and Kuwait have been bearing fruit, and work has been progressing (slowly!) for GCC states to provide electricity to Iraq.

Iraqi agriculturalists and traders accuse Iran of “economic sabotage” by flooding the market with below-cost goods. Imports worth up to $12 billion, about 25 percent of Iraq’s total, originate in Iran, and up to 40 percent of energy consumed in Iraq comes from Iran. Via the Kurdistan border route alone, about 800 lorries a day swarm into Iraq, saturating the market with Iran-made products; machinery, construction materials, vehicles, plastics, and home appliances, all with a reputation for inferior quality. With few states willing to trade with sanctions-wracked Iran, Iraq is its captive market.

Iraq once produced three-quarters of the world’s dates. In a humiliating turnaround for this potent symbol of national identity and pride, 80 percent of dates consumed in Iraq today are cheap, inferior Iranian imports, depressing prices so severely that Iraqi date cultivation is hardly cost effective. To protect the local economy, importing dates is banned; yet politicians and customs officials find it profitable to turn a blind eye to this and a thousand other nefarious Iranian trading scams.

In Basra markets, up to 90 percent of vegetables and basic goods are imported from Iran, sometimes at a third of the price of Iraqi produce. Hezbollah leader Hassan Nasrallah is calling for Lebanese vegetables to be exported to Iraq — although given the precarious nature of the Syria overland route, “Sayyid” Hassan’s potatoes may be rotten and insect-infested before they even arrive. How would this help Iraq? Or Lebanon, where much of the population is going hungry?

Throughout this spring, Tehran was persistently pressuring Iraq to reopen its 1,400km border, even as coronavirus ravaged Iran’s provinces. A short-lived initiative to boost Iraqi agricultural self-sufficiency by May has been thrown into reverse, with the value of imported Iranian goods last month rebounding to $800 million.

When entrepreneurs in the Shiite southeast sought to set up businesses, such as local dairies, corrupt politicians in the pay of Iran blocked them, arguing that this would have a negative effect on cross-border trade. No wonder Iraqi protesters in these regions chanted: “Iraqi officials sold the country to Iran, and local farming is now over.”

Tens of thousands of acres of prime agricultural land were burned in 2019, mostly in disputed central regions under paramilitary control. Video footage of paramilitaries setting light to fields fueled rumors that this was a calculated Iranian plot to destroy Iraqi agriculture, although Daesh was also blamed. “There is economic warfare between countries so as to force Iraq to import,” declared Duraid Hikmat, agricultural director for Nineveh, one of the worst-hit provinces.

Intensive efforts to establish rail and road routes through Iraq to Damascus are a central plank in consolidating Iran’s closed “resistance” economic system, which has nothing to offer except perpetual poverty to those trapped inside. With financial institutions and companies in Iraq and Lebanon already facing US sanctions due to close links with Iranian entities, it is increasingly difficult to sustain commercial ties with the outside world.

Kadhimi’s foreign travel coincides with his struggles to rein in the criminal activities of Iran-backed Al-Hashd Al-Shaabi paramilitaries, who through the duration of his visit to Tehran kept up sustained attacks against the prime minister through their media outlets, while almost ignoring his trip altogether. Kadhimi will have no success in combating these overmighty mafioso militias unless he also curbs Iran’s economic and political dominance. Just like Hezbollah in Lebanon, the Hashd are deeply involved in smuggling Iranian goods across the border (including narcotics, arms and laundered currency), while exploiting paramilitary muscle to monopolize key economic sectors.

For much of the 20th century, under successive leaderships, Iran and Iraq were mortal enemies. Trade was actively suppressed, with Iraq’s economy deeply enmeshed with its Arab neighborhood. Indeed, during the 1970s Iraq was one of the most successful Arab states in transforming its oil wealth into a diversified economy, a world-standard educational system, and economic opportunities for all — before it all went disastrously wrong under Saddam Hussein’s dictatorship and the war against Ayatollah Khomeini.

While Baghdad and Tehran should remain on amicable terms, Iraq must urgently rebalance its economy, abolishing this insalubrious state of dependence that impoverishes workers, farmers and traders, and results in stagnating markets and severance from Iraq’s Arab neighborhood.

Transformed trade relationships with Saudi Arabia, Kuwait, Jordan and other Arab states would open Iraq up to the wider world. Kadhimi’s visit to Riyadh must not merely be about headline-grabbing investment pledges, but a comprehensive roadmap for reintegrating Iraq into its rightful position at the beating heart of the Arab world.

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