Economics have been front and center as the Islamic Republic attempts to offset biting U.S. sanctions
Iranian President Hassan Rouhani is in Iraq on a three-day visit to shore up economic cooperation with his neighbor to the West. According to the Islamic Republic News Agency (IRNA), the official reason for the trip—Rouhani’s first since assuming office in 2013—is to “strengthen brotherly ties” which involves the signing of trade pacts in the agriculture, energy, health and other sectors.
“We are very much interested in expanding our ties…particularly our transport cooperation,” Rouhani said prior to his departure at Tehran’s Mehrabad Airport.
A senior Iranian official traveling with Rouhani stated that another goal is to “bypass America’s unjust sanctions” in order to stabilize Iran’s sinking economy.
“There is some tension between these objectives,” Nathaniel Rabkin, Managing Editor of Inside Iraqi Politics, a political risk newsletter, told The Media Line.
“Iran has a very acute need to maintain relations with whatever countries are willing to trade with it despite the U.S.-imposed sanctions,” he said.
While some argue that Iran is enhancing regional economic ties to provide cover for its military adventurism and support for terrorist groups like Lebanon-based Hizbullah, Rabkin qualified that such ambitions are controversial among Iranians who feel their government spends too much money and devotes undue attention to developments in Syria, Yemen and elsewhere.
“Iranians are upset that not enough is being done to fix Iran’s economic challenges. Therefore this visit that deals mostly with trade cooperation is a way to bridge that gap. It communicates to people watching TV at home that Tehran’s foreign adventures are actually beneficial to the country.”
When it comes how Iraqis view the visit, Rabkin stressed that the population is very reluctant of their country being dragged into the U.S.-Iran dispute. They would prefer for Iraq to stay out the brewing conflict while maintaining good relations with both Washington and Tehran.
“The problem is that there are a lot of Shiite politicians in Iraq that are very close to the Iranian government,” Rabkin noted. “Yet the pro-Iranian camp is aware that moving too far and too fast in Iran’s direction will create a domestic backlash. This is why they also want to play up the economic side of this relationship.”
Saad Hattar, a Jordan-based media consultant and formerly a correspondent stationed in Iraq, told The Media Line that “since 2003 Baghdad has fallen into the Iranian sphere as many Iraqi politicians and parties have become puppets for [the mullahs].”
In international institutions and organizations, including Arab ones, Iraq often dovetails with Iran’s policies, he explained. “The Islamic Republic uses the country as a launching pad to interfere and influence the Arab geo-political status quo.”
The U.S. has been trying to stem Iranian influence in Iraq but Tehran has the upper hand on the ground and with most politicians, even though many prominent Iraqis have been trying to steer the country away from the mullahs, according to Hattar.
Mahdi Ghodsi, an expert on Iranian trade and industrial policy at the Vienna Institute for International Economic Studies, told The Media Line that “the data for the previous round of U.S. sanctions…[shows that] Iran was exporting to Turkey and instead of getting money in return, Tehran was importing a few billion dollars’ worth of Turkish gold.”
The same scenario could play out with regard to Iran-Iraq relations.
“Maybe there is no transaction between banks in the two countries but perhaps there could be pure product exchanges, leading to an overall increase in trade between the two nations,” Ghodsi explained.
“U.S. Secretary of State Mike Pompeo granted Iraq a temporary and unofficial waiver on adhering to the sanctions a few months ago because if Baghdad would cut its purchase of electricity or gas from Iran, its power infrastructure would collapse,” he said.
Rouhani’s visit comes as Iran is charting a new course in the wake of the Trump administration’s pull-out of the 2015 nuclear deal last May, which was followed by the re-implementation of tough economic sanctions on Tehran.
The Iranian leadership has shown frustration with European powers as the latter hope to salvage the pact through a so-called “Special Purpose Vehicle” that would allow for non-dollar trade with the Islamic Republic, thereby circumventing American sanctions.