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Making Nice With The Neighbours
Between US Sanctions and Iranian Influence, Iraq Will Try, And Fail, At Compliance

Mustafa Habib
Officially Iraq has said it will abide by the US’ new sanctions on Iran. Unofficially, it puts the country in a very difficult position. It will be almost impossible to stick to the rules.
9.08.2018  |  Baghdad
Iranian imports in Iraq. (photo: صباح عرار (جيتي- اي اف بي))
Iranian imports in Iraq. (photo: صباح عرار (جيتي- اي اف بي))

On Tuesday the US announced its latest round of sanctions against Iran. In Iraq, locals and politicians alike looked on, concerned at the ever-growing rift between their two major allies. With a long, land border with Iran, a political system in which Iranian influence is rife and important and an economy dependent on Iranian imports, the Iraqis are right to be concerned. 

While the Iraqi government declared that it would abide by the new US sanctions, it did so reluctantly. “We consider them a strategic mistake and incorrect but we will abide by them to protect the interests of our people,” Iraq’s prime minister, Haider al-Abadi, said this week. “We will not interact with them or support them but we will abide by them.” And Iraqi foreign minster Ibrahim al-Jaafari described the sanctions as foolish.

Iraq has depended on Iranian groceries for years.


There was no way that Iraq could really avoid agreeing to the sanctions: The US remains an important ally. But there was plenty of criticism of the decision and it is also hard to see exactly how the Iraqis are going to be able to abide by the sanctions, given their own porous banking system and border.
If there is one country that knows what the sanctions mean, and the implications for the region, it is Iraq, a country often caught in the middle of greater geo-political conflicts. After all, at one stage, Iranian loyalists and US soldiers were fighting in Iraqi streets.


“The Iraqi government is not convinced of the usefulness of the economic sanctions,” Saad al-Hadithi, a spokesperson for the Iraqi government, told NIQASH. “They only create more difficulties for people. But we will abide by the sanctions, in order to protect our own national interests.”


“Iraq will abide by the sanctions related to banking transactions and we hope that the problem will be resolved through dialogue and through diplomatic channels,” al-Hadithi continued. “Those are the Iraqi government’s bywords.”


Despite this though, it is also quite clear that it will be difficult for Iraq to actually abide by that agreement. The country’s banking system is almost continuously under suspicion of money laundering and politically, there are some powerful political factions in the country who consider the sanctions an attack on their belief systems.

 

Iranian cars were cheap but many Iraqis say they're also badly made.

In August, the head of Iran-Iraq Chamber of Commerce, Hamid Hosseini, said that Iranian exports to Iraq regularly add up to around US$20 million worth in a day. It is also well known that Iraq is Iran’s biggest export partner, receiving, among other things, building materials, petroleum products and food products.

In fact, Iraq has depended on Iranian groceries for years. Over the last decade, an increasing number of Iraqi farmers have given up on agriculture, thanks to unfavourable conditions and drought. Due to economic dependence on oil, Iraq’s manufacturing sectors have also been languishing a long time. All of which makes Iraq very dependent on imports. It also means it would be extremely difficult to stop trading with Iran.


“Iran will try and prevent its own currency from collapsing by getting more dollars into the country,” suggests Anwar Katheem, an Iraqi economist. “Iraq is the country closest to Iran and one way of getting dollars, would be to increase exports here and to other allied countries. That is similar to what happened in 2009, when sanctions were imposed. Iran has benefited hugely from exporting to Iraq, including large quantities of cheap vehicles.” Caption cheap vehicles not so good in long run.


There is also a problem with Iraq’s banking system, Katheem continued. Foreign exchange transfers are notorious for not being adequately controlled; the Iraqi Central Bank sells millions to banks and exchange shops almost daily, he notes, and its all done in a very non-transparent way.


This has been discussed many times in Iraq’s parliament. At one stage, an MP and member of the parliamentary committee on integrity, was moved to say that “nobody can ever stop the currency market, because there are politicians who own banks, some of them fake banks, that benefit from it.”


There are still many Shiite Muslims in Iraq who have strong feelings toward Iran and the US sanctions against Iran will also have an impact on how they regard the US. In particular some of the Shiite Muslim militias, formed to fight the extremist group known as the Islamic State and now a political force, will not like this: Certain factions are sponsored by Iran, in terms of funding, weapons and advice.

 

A few days ago, media organizations affiliated with those militias began to publish reports saying that in the near future, the US would be behind the formation of a new terrorist organization in Iraq and they would do this so that US soldiers would have a reason to remain in the country. Last month, senior members of Hezbollah in Iraq told UN officials that they wouldn’t allow such a thing.


The disinformation is actually part of an ongoing campaign to link the US with the Islamic State, or IS, group. In May, Facebook pages associated with the militias published videos of what they claimed were US planes carrying IS fighters, landing in the central province of Anbar. Militia members and leaders called for all US troops to leave – they still describe them as an occupying force - and also threatened them.  It is thought that there are no more than 6,000 Us troops in Iraq these days and most are based at the Ain al-Asad base in Anbar, where they train Iraqi military and tribal fighters as well as provide intelligence on the movements of IS fighters.


“They are indispensable,” says Rashid al-Mahalawi, a tribal fighter in Anbar. “The security situation in Anbar now is good but there are no guarantees it will stay that way – and the presence of US troops is important. There is the serious problem of our long borders with Syria. We cannot protect those borders without US expertise and equipment. That’s why we are concerned about the threats being made against them.”


“Ten years ago both Sunni and Shiite men were fighting US troops and seeing them as occupiers,” al-Mahalawi told NIQASH. “But the ones here today are not occupiers, they are advisers approved of by the Iraqi government. What we fear now is that Iran will urge some of their factions to threaten the US forces, because of the sanctions. Then it will be Iraqis who are going to pay the price.”