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How Iran is expanding its grip on the Iraqi economy

Iran pays tribute, this Monday, January 6, to General Souleimani, the inspirer and the conductor of the intervention in Iraq. This military presence also involves strengthening economic relations between the two countries, a priori for the benefit of the Islamic Republic.

In Iraq, where Iran has been weaving its web since the fall of Saddam Hussein in 2003, it can already boast a real commercial success: with 12 billion dollars of goods exchanged this year between the two neighboring countries, excluding oil, Iran has become Iraq's largest trading partner and vice versa, and the balance of trade is largely tilted in favor of Iran. From flour to copper electrical wires, including household appliances and tomato paste, "made in Iran" dominates the Iraqi markets. The neighbor has even become an unexpected outlet since the American sanctions that have strangled the economy of the Islamic Republic. Volumes have jumped 40% in value since last year, and the two governments hope to double them within two years. Iran is also a major supplier of electricity and gas to Iraq. Finally, Iran has invested a lot in the Shiite holy cities of Kerbala and Najaf to promote religious tourism, a lucrative activity which also serves its political agenda. To speak only of the most visible aspects of this Iranian influence.

Because there are also more opaque contracts between the two countries

For example, the sewage treatment market obtained by Iranian companies, through bribes paid to Iraqi parliamentarians, a case made public thanks to leaks of Iranian information revealed by the New York Times and the site Intercept in mid-November. Or, according to the same source, the oil contracts recovered by the al-Quds branch of the Guardians of the Revolution, which General Suleimani directed, contracts obtained from the Iraqi Kurds against arms deliveries. In terms of illicit relations, Iran would see Iraq as a country of transit to other foreign markets for its production, now blocked by sanctions, by affixing a local label. It is also seeking to strengthen financial ties with its neighbor by creating a common bank, by thinking of ways to get around the dollar in their bilateral trade.

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Iran settles for a long time with its neighbor ?

This is how Iran envisions it with big projects that it has been caressing for ten years. His dream: a gas pipeline crossing Iraq and then Syria to reach the Mediterranean. Tehran has also obtained in Syria the management of the port of Latakia, in the stronghold of Bashar al-Assad, and this despite the opposition of the Russians. But if the Iranian grip is strong today in Iraq, it remains fragile. Firstly because of the hostility of the Iranian street which broke out in broad daylight this autumn and which gave voice yesterday to reject any foreign presence on the national soil. Because, on a daily basis, Iraqis suffer from this Iranian hegemony. While unemployment strikes one in four young people, Iraqis can hardly compete with Iranian expatriates paid half as much as locals. The other obstacle to Iran's expansionist intentions in Iraq is the American sanctions which seriously hamper its ability to invest significant amounts in its neighbor. Finally, apart from its military aid, the Islamic Republic does not have much to offer to develop Iraq; it does not have the technologies that Iraqis can find in many other foreign investors.

In short

This morning, the markets react strongly to the risk of armed conflict in the Gulf. Oil rebounds, the barrel of Brent has crossed the 70 dollar mark in the electronic exchanges of the night, finding a peak reached in September after the attack of drones against the Saudi oil installations. And gold is at its highest since 2013. In Asia, the equity markets are weakening, Hong Kong and Shanghai are in decline, Tokyo closed on a decline of 1.91%.

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