Most analysts agree that the Iranian economy is a fragile oil economy ; is suffering from inflation and unemployment, low value-added, especially after the decline in oil prices, with inflation up to 15% and unemployment around 22% among young people, and lower average of salaries in Iran, domestic public debt is equivalent of the size of national income that raise the interest rates and bad debts.
While Iran’s budget of the fiscal year, which began on 21 of the last March 2016. 89 billion dollars, equivalent to the size of Iraq’s budget, which has a population of half of Iran’s population, and Iran’s oil minister said that the oil and the petrochemical sector suffers a deficit as it needs to be 200 billion dollars in the next eight years. (Arabic) 12 / January 2016.
All these motives make Iran looking for real resources to support the economy and the market for their products. The supreme Murshed Ali Khamenei has put forward his vision in August 2010 to establish a “resistive economy” to avoid Western sanctions imposed on Iran, the development of interior manufacturing and agriculture sectors, and reduce dependence on oil revenues with the rationalization of consumption, make the Iraqi neighbor a market for the disposal of Iranian non-oil exports, making Baghdad to pose an irreplaceable customer for Tehran , with the fact that Iraq is supposed to be an oil rival to Iran in the global market.
It has become the Iran’s development goals to increase non-oil exports to Iraq and occupied a high priority on the agenda of Iranians decision makers where Iran has expanded the volume of trade with Baghdad that have signed agreements with Iran that is only in the service of Iranian economic activity .
In September 2014 , an agreement was signed under which Baghdad has reduced customs tariffs in front of Iranian goods to be between 0% and 5%. In February 2015, Iran agreed with Baghdad on the abolition of controls on Iranian exports of goods at border ports to facilitate the movement of trade, and thus become Iraq’s imports 72% of the total Iranian non-oil domestic goods , which is ranked first in the import of such goods.
In 2005, the volume of trade (unilateral) between the two countries, US $ 730 million, and more than $ 12 billion from the beginning of 2012, and reached $ 13 billion in 2014 and Iran is seeking as the President of the Chamber of Commerce Tehran Yahya Al-Ishaq mentioned , to the access of the volume of trade exchange between the two countries in 2017 from 20 to 25 billion dollars, expecting the continuation of trade relations between Tehran and Baghdad in the pattern of disproportionate and inappropriate, and the tendency of its balance in favor of Tehran; what keeps Iraq a prime importer of Iranian exports.
According to the annual reports of statistics of the Foundation for Iranian Trade Development that Iran’s non-oil exports to Iraq (excluding exports of gas liquids) for the fiscal year 2011-2012 about $ 5.1 billion equivalent (15.30% of the value of total exports), and in fiscal year 2012 -2013 non-oil exports stood at $ 6.2 billion (19.30%), and these increases by exports varied and included broad sectors, including commodities of energy (natural gas and electricity), and goods from non-oil (cars, food, supplies, household, and the manual works ), and technical services and engineering (in the sectors of energy, housing, health, and transportation).
According to the statement of the Secretary-General of the Iran-Iraq Chamber of Commerce Sinjabi Shirazi, Tehran acquires through these exports at 17.5% of the Iraqi market after it had been accounting for only 13% before the rise of the organization of the Islamic State (Daesh). Indicating that Tehran is aimed at the acquisition of 25% of the Iraqi market in the coming years.
And the economic losses of Iraq due to the expansion of state regulation in Iraq and the battles waged by militias of popular crowd have become gains for the Iranian side, as investors of Tehran are aspiring to obtain the contracts to reconstruction of the liberated provinces due to the dependence of Iraq by 70% on the technical and engineering Iranian services. This is the share of investors of Tehran. Not to mention the 15 thousand of housing units have been given to the Iranians contractors to build it, this means acquisition of Iranian contractors over a large part of the housing units that Baghdad intends to build in the coming years, which the number will reach two million units .
Tehran is also seeking a greater presence in Iraq’s energy sector, as it said by the Iranian Energy Minister Hamid Chet Xi’an in July of 2014 that Iran was involved in 27 projects to generate electricity worth one billion and 245 million US dollars, and Iran expected acquisition on the proportion of 5 to 10% of development projects in Iraq, which will cost $ 275 billion until 2017.
On the other hand, the Iraqi oil revenues which now impose financial restrictions on the options available to the government in Baghdad, made Iranian goods are the only option without a competitor for the invasion of the Iraqi market and truly , the Iranian border ports finally saw a significant increase in the movement of exports toward Iraq. While Turkish exports saw a decline worth two billion dollars due to the events in Mosul, that increased to Iran’s economic stake in the Iraqi market.
And the Turkish Statistics Institution stated that “Iraq was in 2014 ranked second among the most importing nations of Turkish goods ,” as the size of Turkey’s exports to Iraq amounted to 11 billion and 949 million and was expected to rise in this volume, but after the domination of the state regulation over the city of the vital Mosul ,Turkish exports received a severe blow that made it to fall by 58%, which confirms that the only winner from the collapse of the security situation in Iraq is Iran! With the closure of Iraq’s borders with Jordan, Syria and Saudi Arabia, it has given a golden opportunity to the Islamic Republic’s exports to Iraq; to have become a consumer market for it .
But more importantly for Tehran is involved in the transport sectors in Iraq due to its role in facilitating the movement of trade between the two countries and more precisely: to facilitate the movement of Iran’s non-oil exports toward Iraq. The project of train of Basra – Falmjh expected to be implemented soon, 40 km length of the most vital projects that Tehran aimed from which to link the Iranian railway network to its Iraqi counterparts to facilitate the movement of travelers and commerce (the island) 32/3/2015
Iran’s commercial attache in Iraq, Mohammad Reza Zadeh in (the thirteenth meeting of the Shura Council of the government and private sectors) said that Iraq imports 95% of its needs from the world, and Iran is able to make Iraq a promising market for the Iranian products and goods, and that the common boundary to Iran with Iraq from north to the south to help it acquiring the Iraqi market, Alizadeh said that Iran occupies the second place after the People’s Republic of China in the size of exports to Iraq, stressing that “Iran can export five times of the current exports which are benefiting much for the Iranian traders .”
He revealed about Iran’s intention to open three trade centers in three Iraqi cities: Baghdad, Najaf, Sulaymaniyah, it’s also going to send a trade negotiator to all Kurdistan – Iraq and Basra.
Iran’s trade negotiator to Iraq Reza Zadeh pointed out “programs that Iran intends to carry out are the establishment of stores to display goods directly and cooperate with construction companies and food and commercial centers, and joint investment with Iraq in sectors of the industry.
He said the past 13 years have seen the rise of Iranian exports to Iraq as it rose 17-fold. He pointed out that fruit exports to Iraq alone won $ 2.200 (two billion two hundred million), and said that 90% of the total tile imported to Iraq are supplied by Iran, in addition to 90% of the currants (food), and nearly 80% of imported cars to Iraq, as it is exported from Iran. The international Agency of Tasneem of News 29/11/2016.
Although the Iranian cars are the worst in the Iraqi market, their lack of durability and safety requirements, as it caused the deaths of dozens of Iraqis, but the promotion of it has increased the demand for them by the citizens because of the lower prices.
The head of the financial and banking department at the University of Mustansiriya Maitham Laibi told al-Jazera net : that the trade exchange between Iraq and Iran is not valid, because the import is from only one side, which means that Iraq has become a net importer, and Iran is a net exporter, indicating that this exchange of unilateral interest caused the exit of the net foreign currency from Iraq, which is estimated at $ 16 billion for in exchange of the entering goods . And the Iraqi Finance Ministry abolished the examination of Iranian products entering into Iraq, according to the announcement by Iran, and “this procedure is incorrect and irresponsible, despite the justification that facilitates the export of work, because it weakens the control and application of quality standards on exports to Iraq , and helps to increase smuggling and entry of goods do not match the required specifications.
The economist expert Abdul Rahman al – Mashhadani revealed to Al-Jazerah net , that the control of Iranian goods in the Iraqi market resulting from the cut lines with Turkey , Jordan and Syria due to exit the borders of these countries for the control of the central government, stressing that “Iraq had imported from Turkey annually up to $ 14 billion, and Syria toward $ 5 billion and Jordan $ 5.5 billion. But the equation now is turned that Iran became the uncontested control of the Iraqi market , which means to control the supply and prices.
The indiscriminate dependence on import “in the absence of laws and the real controls that regulate the import, and the absence of the supervisory role of the Central Agency for Standardization and Quality Control plunging the Iraqi market with cheap goods and commodities where the most basic healthy conditions and specifications of durability are not available, and the biggest loser is the Iraqi citizen.
And that the Iraqi economy turned into a consumer market for Iranian goods has led to the disruption of the Iraqi / Iranian trade balance in Iran’s favor, and the reverse of the economic development and the weakness of the national product and the neglect of agriculture and the lack of industry and the lack of economic projects, and the trend to the imported product in general, and this is reflected negatively on the Iraqi economy and its dependency , and on the overall of the joints of the Iraqi state and its policies, and the impact on the availability of necessary income and a decent living for their citizens.
Shatha Khalil
Translated by : Mudhaffar Alkusairi
Rawabet Center for Research and Strategic Studies