Iranian officials traveled to Baghdad this week to push for expanded trade and energy ties as it tries to undercut U.S. efforts to weaken Iraq’s economic links to its neighbor.
Iranian Foreign Minister Javad Zarif is in Iraq this week with a delegation of more than 50 companies. The visit comes a week after Iranian energy officials traveled to Baghdad to discuss strengthening energy links and keeping Iranian natural gas flowing to Iraq, where it accounts for over 40% of the country’s electricity needs.
The visits from top Iranian officials highlight the tightrope that Iraq walks, as competition intensifies between Iran and the U.S. for influence in Iraqi politics and market share of its economy. Iran and the U.S. both helped Iraq defeat Islamic State but are now locked in an economic battle after the Trump administration pulled out of the nuclear deal and reimposed sanctions.
Mr. Zarif flew to Baghdad days after U.S. Secretary of State Mike Pompeo made an unannounced stop in the city as part of a regional tour partly aimed at strengthening the American-led front against Tehran.
Last month, U.S. energy secretary Rick Perry also traveled there to persuade Iraqi officials to stop buying Iranian natural gas for electricity, and to hire American companies to develop their energy system. Last month, the U.S. gave Iraq permission to buy Iranian natural gas for 90 days after pledges from Baghdad to buy American energy technology.
“After defeating Daesh terrorist group, some such as the U.S. tried to create obstacles [to the] expansion of ties and cooperation between Iran and Iraq but failed to attain their goals,” Mr. Zarif said on arriving in Baghdad Monday, according to Iranian state media.
The foreign minister met senior Iraqi officials including Prime Minister Adel Abdul-Mahdi and, on Tuesday traveled to the northern Kurdish region. He is also expected to visit the southern city of Karbala.
In addition to buying Iranian natural gas, Iraq is one of Iran’s top non-oil export markets, with a trade volume of $9 billion, mostly in agricultural products, foodstuffs, fruit, poultry and construction materials. U.S. sanctions have helped increase that trade by weakening the Iranian rial, resulting in a swell of cheap Iranian goods flowing into Iraq.
Overall, though, the sanctions have hit Iran’s economy hard, curtailing its oil sales, sending foreign investment plummeting and making money transfers across borders difficult.
Jaafar al-Hamdani, the head of the Iraqi Chamber of Commerce said he and Iranian officials had discussed ways to mitigate the impact of U.S. sanctions on business. Mr. Zarif said Iran and Iraq would set up joint industrial zones to promote business.
An Iraqi businessman said there was a sense of urgency among his Iranian counterparts. “This time, the Iranians are very serious about gaining the Iraqi market because they have no option but Iraq to obtain quick cash,” the businessman said. “After the sanctions they have become really flexible. We feel they are in desperate need of us. It seems they are hurting.”
Iraqi officials say they oppose the sanctions in principle but are reluctantly complying to avoid U.S. punishment. But they also can’t afford to antagonize their eastern neighbor, which wields significant influence in Iraq. After meeting with Mr. Zarif, Mr. Abdul-Mahdi said Iraq sought to develop relations with all neighboring countries and would strive to improve bilateral ties with Iran.
Iranian businesses said they wouldn’t be deterred from selling goods in Iraq.
“We face challenges in transferring money, but we are smarter than the Americans and believe we will find a way to beat them,” said Wahid Karji, who runs Xardbrand, a pharmaceuticals company specializing in herbal medicines and cosmetics.