Iraq and its neighboring Iran have a shared history through a set of political links, which is often referred to by the new Iraqi President Barham Salih.
In light of the economic variables that currently face both countries, this relationship took on more expressive approaches towards exiting the “bottleneck” by Iran, and needing more money to reconstruct Baghdad.
Iranian President Hassan Rouhani said on Saturday Iran and Iraq could raise annual bilateral trade to $20 billion from the current level of $12 billion.
Rouhani’s remarks came during a meeting with Iraqi President Barham Salih, which came about two weeks after the United States restored sanctions targeting Iran’s key oil industry as well as its banking and transportation sectors.
“We seek to boost cooperation (with Iran) at all levels … in order to serve the interests of both countries,” the website quoted Salih as saying.
“We will not forget your support for the Iraqi people in the fight against dictatorism. Neither do we forget Iran’s stand in the recent fight against terrorism,” added Salih, an Iraqi Kurd.
Iran seeks to use Iraq as a “dollars faucet” after the US sanctions affected the flowing of the foreign currency to Tehran’s banks, in a bid to weaken the Iranian economy and reduce its foreign reserves.
Washington has also allowed Iraq to import crude oil from Iran, provided that Tehran should get paid in Iraqi dinar, not US dollars.
Iraqi officials announced that Baghdad is seeking to get Washington’s approval to allow it to import gas from Iran.
Some 21 percent of Iran’s non-oil exports are destined for Iraq while Iran imports just one percent of its needs from the neighboring country, former Iranian commercial attaché in Iraq Ebrahim Mohammadrezazadeh told the Islamic Republic News Agency (IRNA).
Mohammadrezazadeh, who is currently the chair of Iraq desk at Iran’s Chamber of Commerce, said that the UAE, Turkey, China and Iran are the four main importers to Iraq having 25, 18, 17 and 13 percent shares in the Iraqi market, respectively.
Chairman of Iran-Iraq Chamber of Commerce, Yahya Ale Eshaq, further announced that Iran exported technical and engineering services valued at almost $6 billion to Iraq in the last eleven months.
Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, air conditioners and spare car parts.
Iraq central bank officials in August said Iraq’s economy is closely linked to Iran.
Iraq’s dependence on Iranian trade and public services is largely due to the U.S. invasion in 2003, according to The Politico.
The report further said U.S. Treasury officials visited the Central Bank of Iraq in July and said the U.S. would sanction any Iraqi bank that conducted financial transactions with Iran.
The Iraqi government has bank accounts with the U.S. Federal Reserve, where its dollars are kept. And these dollars, which the Iraqi economy relies upon, could be frozen should Iraq violate sanctions.
Despite such possible hardships, Iraq has no choice but to violate sanctions, for several reasons.
Iraq has been suffering a severely damaged infrastructure as a result to the fight against Daesh, which deliberately dredged agricultural lands, destroyed oil pipelines and fields, and polluted water reserves.
Iraqi Minister of Electricity Qassem al-Fahdawi said in 2017 that the Iraqi government it has approved a deal to import natural gas from Iran for the next seven years to operate its electricity-generating stations. Iran’s gas to Iraq contributes to about 20% in the country’s electricity production.
Iraq, which received its latest Standard and Poor’s credit rating outlook, hopes to overcome its crises.
The rating said it had confirmed Iraq’s rating at “B- / B” with a stable outlook.
The stable outlook reflects expectations that the fiscal deficit will be modest over the next few years, the agency said, pointing out that it expected the prospects for Iraq’s economic growth to be under pressure from political tensions at home, production quotas imposed by the OPEC agreement and restrictions on government spending.