On November 5, the second package of US sanctions against Iran began, meaning that the Trump administration decided to pursue a policy of sanctions against Iran. These sanctions are the result of the withdrawal of the United States from the Iranian nuclear agreement. After tough negotiations with China, Russia, America, France, Germany and Britain, Iran agreed to that agreement in 2015. The nuclear deal with Iran was aimed at preventing it from developing military nuclear capabilities. But Trump’s motivation to withdraw from the Iranian nuclear deal was clearly not Iran’s behavior in Syria, Iraq and Yemen, but Iran’s policy towards Israel, which included its manufacture of long-range missiles with a real presence of troops near the border in Syria.
The United States sanctions on Iran raise serious concerns that Iraq is one of the biggest affected by it due to its dependence on energy derivatives, such as gasoline and gas, as well as construction materials, industrial and food, while inflation is expected to be boosted by a drop of Iraqi deposits in Iranian banks because the real interest rate has turned negative. The volume of trade exchange between Iraq and Iran during last year reached about 8 billion dollars, of which only 77 million dollars is the value of Baghdad’s exports to Tehran, according to an official source at the Iraqi Ministry of Commerce.
Observers confirm that US economic sanctions on Iran will turn Iraq into a corridor to supply many of the goods that Iran is forbidden to import. “There are armed factions that will seek to help Iran and finance it in the coming days of sanctions, especially as it is a window in the Iraqi political reality and moves on Iranian orders, as well as the existence of politicians who do not hide their strong relations with Iran.” They noted that Iran considers Iraq an emergency corridor to get rid of sanctions, While the armed factions are exerting pressure and intimidation on all Iraqi state institutions, revealing that Iraq sought to exempt itself from the sanctions, but at the same time Iraq is afraid of the collapse of the Iraqi dinar because of its link to the dollar, which is now starting to diminish in the Iraqi market for the existence of networks smuggled it to Tehran.
They pointed out that “the sanctions will affect Iraq as there are many economic matters linking the two neighboring countries, and there is a lot of trade through the ports, and stressed that” the sanctions will affect the Iraqi market. Instead of being imported from distant countries, and burdens of transportation and taxes, goods coming from Iran can serve Iraq with half of the prices it receives from others. Therefore, the internal economic situation of Iraq will be negatively affected by these sanctions. “Thus, Iraq will have to abandon the dollar in its trade with Iran to circumvent the sanctions. The official spokesman of the Iraqi Prime Minister, Saad al-Hadithi, said in a press statement that Baghdad will develop a “new mechanism” to strengthen trade relations between the two sides to mitigate the impact of sanctions. The Iranian Mehr News Agency reported on Saturday (September 1st) that the dollar had been canceled in trade exchanges between Iraq and Iran.
There is a factor that has not been taken into account by the US administration, of which Iran is an expert in dealing with the sanctions and evading them, and in its extension throughout Iraq, Syria, Lebanon, Yemen and other areas will succeed in managing the process of evasion of sanctions, and its permanent relations with the countries of the Middle East and the world and a number of Gulf countries opens the way for evasion of sanctions, including smuggling and markets Black. In the past , sanctions have benefited Iran because it succeeded under old sanctions in building its nuclear project, its economy and many of its industries. Sanctions in recent history have not changed policy, but sanctions are harmful to the United States, which will lose more international credibility.
According to an extensive report published by the British newspaper “Financial Times” revealed the existence of plans in the # regime _ in Iran to “circumvent US sanctions,” noting that among these plans is to “revive the role of intermediaries who will buy Iranian oil locally and then re-sell in the global markets under the guise that they are from the private sector of Iran and are not belong to the government.”The newspaper pointed out that Iran established a” bourse “in 2012, which can be used in the future for frauds that the Iranian regime plans to do. The Financial Times is talking about an Iranian businessman named Babak Zangani who is currently facing the death penalty for refusing to return $ 2.8 billion to the government, which he earned as a result of selling crude oil to consumers in Asia during the previous sanctions period; it appears that he has been part of the regime’s fraud. The question arises in this context: Can Iraq benefit from the sanctions imposed on Iran and what damage in the case of the application of sanctions on it ?
With the entry of US sanctions on Iran into force and caused the collapse of the Iranian currency, there is much talk today of the possible effects of this collapse on the economic situation in Iraq, given the neighboring relationship existing between the two countries, and active trade between them, and their link with the borders of some 1,300 km. Economic trends see the possibility that Iraq will benefit most from Iran’s sanctions If the country’s political and economic leaders are able to act as they should, other trends fear the effect of this, and its reflection in the form of a rise in the Iraqi dinar against the US dollar due to the endeavor of Iran and its agents in Iraq to get the US dollar in a fraud ways from Iraqi markets and banks.
Economists interested in the Iraqi issue believe that Iraq can benefit from Iran’s sanctions at various levels, for example, sanctions on Iran will not enable other countries to buy most of the country’s exports, but Iraq’s geographic specificity will enable it to be an open market for the Iranian economy. If Iraq becomes the first market for Iranian products, it will have the opportunity to make the most benefit of it by pressing for gains from Iran, and the ban on the export of Iranian oil will help to raise oil prices, and this entirety will be in the interests of the Iraqi economy. It is also possible to benefit from the sanctions by turning Iraq into a terminal for the disposal of Iranian exports to other countries, through re-export on the basis that they are Iraqi goods, and thus Iraq wins the value added to those goods. They fear that some of those who are loyal to Iran, wealthy ones would go to Iran and buy financial assets there because of lower prices instead of investing them in the country, which would affect the value of GDP.
“The sanctions from the economists’ point of view are a double-edged sword that could do a great deal of damage to Iraq, or in the best interests of Iraq.” The issue of taking advantage of sanctions against Iran is viewed by “asking the United States to allow Iraq to be the outlet and the way to meet Iran’s need for transit and trade with the world, as Jordan did with Iraq previously, so that Iraq can benefit from the role of exclusive commercial agent of Iran, and they do not exclude the negative effects that may affect Iraq as a result of sanctions, such as the cut of outlets of official exchanges, in exchange for the activity of illegal smuggling outlets, then the state will not benefit from taxes , as well as drug trafficking and currency counterfeiting, which is used by the Iranian and Iraqi money mafia to get the dollar.
They point out that the greatest danger that Iraq may face in this direction is “Iraq’s failure to comply with sanctions. This means abandoning its strategic interests with the United States in favor of its relationship with Iran. This option would be a disaster for Iraq and concerning the talk in Iraq these days about Iran’s endeavor and its followers in Iraq to get hard currencies by circumventing from Iraq, they say: we do not blame the Iranian side in this regard, it is looking for its interests; the besieged trying to manage its affairs, even if it seeks to steal neighbors, if he can, the Iraqis are required not to allow it because it exposes their country’s economy to a strong danger.
They see that Iraq is able to find alternative markets to replace Iranian markets in case to comply with the application of sanctions noting that most of the Iranian goods arriving in Iraq are made up of food, fruit, vegetables, plastic materials, building materials and ceramics, and can be compensated from the markets of Turkey, Jordan and the Gulf. “There are those who believe that the balance of trade tends to be in the favor of Iran, where the value of trade with Iraq amounted to about $ 12 billion in the past, compared to about 700 million dollars for Iraq only.” They believe that Iraq is able to modify this balance, if able to benefit from the sanctions on Iran on condition to activate the agriculture, trade and industry sectors and others ” Anton fears that” Iraq imports 85 per cent of its needs and has no industrial or agricultural products that can meet its local needs. This complicates matters for him, as well as the licenses enjoyed by Iranian goods.
Iranian Studies Unit
Rawabet Center for Research and Strategic Studies