Iraq Attracts Wave of Saudi and Gulf Investments for the First Time

Saudi Arabia, the UAE, Qatar, and others have been investing billions of dollars in Iraq, especially in the real estate sector, and analysts are divided about the political messages behind the investments

Two decades after the fall of Saddam Hussein’s regime in Iraq, the country is now, for the first time, attracting investments from Gulf Cooperation Council countries, including from Saudi Arabia. This is a milestone given past major differences between them over Iraq’s relationship with Iran.

Saudi Arabia announced that it has multiple investments in various sectors in Iraq valued at more than $5 billion. The largest share is in the real estate sector in the capital, Baghdad.

The United Arab Emirates, which was the first Gulf country to invest in Iraq, recently announced that it would be expanding its investments there. After 20 years of limited investments in Erbil, the capital of Iraq’s autonomous Kurdistan region, the UAE said it would be expanding its investments to include large real estate projects in Baghdad.

Qatar also officially announced investments in Iraq, without revealing their monetary value.  The Qatari government now joins private Qatari investors who previously entered into large real estate investments in Baghdad.

The Saudi Public Investment Fund, the economic arm of the Saudi government, officially announced the establishment of a new unit for investment in Iraq, with a capital of $3 billion. The fields of investment will include infrastructure, mining, agriculture, real estate development, and financial services. To assist with these investments, the fund established a branch of the Saudi Arab Bank, the Arabi Bank of Iraq.

The fund also established the Saudi-Iraqi Company, part of an initiative of Saudi Crown Prince Mohammed bin Salman to establish five regional companies targeting investments in Jordan, Bahrain, Sudan, Iraq, and Oman.

Official figures and statistics indicate that trade between Iraq and Saudi Arabia grew by 50% between 2021 and 2022, totaling $1.5 billion.

Saudi Arabia’s largest investment project in Iraq, recently announced by the Saudi ambassador to Iraq, Abdulaziz Al-Shammari, is the “Baghdad Avenue” project near the city’s airport. This $1 billion investment includes the largest mall in Iraq, 4,000 apartments, and 2,500 villas.

As part of the UAE’s investment efforts, a deposit of $3 billion has been made in a special fund to invest in Iraq while the UAE company Emaar announced new real estate projects in the Iraqi capital.

“Preparations are being made to announce 10 major real estate projects in Iraq, with Saudi, Emirati, and Qatari investments,” a source in the Iraqi Ministry of Commerce told The Media Line.

The projects have an initial estimated value of $15 billion and are located on large areas of land around the Iraqi capital, the source said. He said that “dozens” of trade delegations were traveling between Iraq and Saudi Arabia each week, and that in January Saudi Arabia presented the largest pavilion in a special investment exhibition in Baghdad.

Many agreements have been signed with Saudi Arabia, and are now being fully implemented on the ground

The projects are being followed up directly by the Iraqi Prime Minister’s Office and are also subject to the Investment Authority, according to the source.

“Many agreements have been signed with Saudi Arabia, and are now being fully implemented on the ground,” he said.

Sinan Al-Jaber, a director in the Iraqi Ministry of Housing and Construction, told The Media Line: “Since we discussed trade exchange with Saudi Arabia, we offered them to enter into real estate projects to help in the reconstruction of Iraq, and provide housing units, as there is a major crisis in housing units, and the side agreed.”

He said that the country is planning to offer further investment opportunities to Arab and other countries.

“Land is available, most of it within the borders of the Baghdad Governorate and the rest of the Iraqi governorates, and we will see other projects soon in new governorates,” he said. Al-Jaber, said the recently announced real estate projects “have achieved stability in the Iraqi real estate market, and there is a decline in prices in some areas that witnessed irrational inflation, which is a great benefit for Iraq.”

Farouq Ali, an Iraqi who works as a real estate consultant in the Baghdad Avenue project, told The Media Line: “The Iraqi market is thirsty for real estate projects. There is a demand for more than 1.5 million housing units, including 1 million immediately and half a million during the next four years.”

Ali said that in most of the current real estate projects, there is either Iraqi or Turkish investment, mostly implemented by Turkish companies.

“But now, we see the entry of investors from the Gulf countries, which is a major development that will benefit everyone,” he said.

“What distinguishes real estate projects in Iraq is that they have continuous profits. The government requires the real estate developer to implement the infrastructure and provide electricity, water, and municipal services, and the investor provides these services for a monthly fee, which means that the continued presence of the investor means continued profits for him, unlike projects in other countries.”

Sources said the investment by Gulf companies of large sums of money in Iraq means that they have confidence in the safety and stability of the country.

There are political messages that Saudi Arabia is trying to send, which is that it controls the countries of the Middle East, and that it is the dominant country

“Saudi investments came after the Saudi-Iranian reconciliation. Iraq was part of this reconciliation, and these projects are a gift to it,” Ibrahim al-Janabi, an Iraqi political analyst residing abroad, told The Media Line.

“From my point of view, the militias still control Iraq, and at any moment, they may undertake hostile projects towards Saudi and Gulf investments there, whenever they receive orders from Iran in this regard. There are political messages that Saudi Arabia is trying to send, which is that it controls the countries of the Middle East, and that it is the dominant country, by pumping investments. But this matter is relative and depends on major political consensuses that may change at any moment.”

Al-Janabi said Iraqis will benefit from these projects, which are supported by the Coordination Framework government headed by Iraqi Prime Minister Muhammad Shiaa al-Sudani. However, he also cautions that despite succeeding in attracting investments, “the truth is that political stability does not exist, and it is now relative.” he said.

“As long as there is the specter of war in the region, and the presence of the Iranian Revolutionary Guard and the Iranian Quds Force less than 100 kilometers from these projects, they will be directly affected by any American strike or any war taking place there,” he said.

“Perhaps the existence of these projects and their approval by the Iraqi government is an Iranian attempt to gain more allies not to carry out any military operation against Tehran. The interests of Saudi Arabia, the Emirates, and Qatar will be in danger, and then these countries will put pressure on the American and Israeli sides not to carry out any action, including a military operation against Iran’s interests and presence in Iraq.”

Awad Al-Thunayan, a Saudi political analyst, told The Media Line: “Saudi Arabia is now supporting economically exhausted countries, but through projects instead of direct support that is wasted due to corruption. Iraq is currently in a stage of recovery after many wars it has witnessed since the 1980s, and now everyone is aware that economic advancement is the best path. Saudi Arabia will not risk these billions without feasibility studies and political consensus. These projects are real and not just a letter on paper. The militias in Iraq have changed their military path to become a parallel economic path. They are now only protecting their interests, and as long as their economic interests are not harmed, there will be no armed military confrontations,” he said.

Speaking of whether reconciliation with Iran was the reason for Saudi investments entering Iraq, Al-Thunayan said: “This is not true. Saudi Arabia has repeatedly tried to enter the Iraqi market, but the circumstances were not favorable at the time. There was a war against Islamic State, and then came the COVID pandemic.”

According to Al-Thunayan, many agreements between Iraq and Saudi Arabia were signed during Mustafa Al-Kadhimi’s prime ministership, which coincided with the pandemic.

“Now the government of Mohammad Shia al-Sudani is more open towards the Arabs and towards investments. There are many major development projects in Iraq, and this is part of them,” he said.

Since the announcement of the Saudi projects, we have seen a change in the tone of the Iraqi government towards Iran. … The stability of Iraq means the stability of Saudi Arabia.

Muwaffaq Al-Dulaimi, a former professor of political science at Anbar University, told The Media Line: “Saudi Arabia was far from Iraq, and the Saudi crown prince realized that the only way to return ethnicity to the Arabs was by directly entering the investment market and influencing political decisions.”

He said that “since the announcement of the Saudi projects, we have seen a change in the tone of the Iraqi government towards Iran. We witnessed for the first time that an official Iraqi speaker came out and objected to an Iranian bombing inside Iraq. The stability of Iraq means the stability of Saudi Arabia. … This step has been awaited by the Iraqis for a long time, and it is now of great benefit, and will bring great economic returns to the two countries.”

Saud Al-Hathal, a Saudi investor in Iraq, told The Media Line that “Iraq has more than 40 million people, and approximately 15 million of them are in Baghdad, so investment there is very important. Iraq is not a poor country, but rather has very large resources and capabilities, and the level of Iraqi income is much better than we expected.”

Ibrahim Al-Aboudi, an Iraqi economist, confirmed that Saudi investments in Iraq will be very profitable as long as investors ensure that an effective Iraqi banking system is built.

“The current system is ineffective, and there will be problems with financial transfers. These problems must be solved quickly,” he told The Media Line.