Iraq Fears US Sanctions on Iran Will Affect Imports

EghtesadOnline: Iraq and Iran are neighbors: Around $25 million worth of Iranian goods enter Iraq every day. But it is not clear what will happen when a three-month US waiver that allows Baghdad to trade with Tehran expires.

News ID: ۷۴۷۹۹۸

28 July 2019

Iraqi traders are worried, as Iranian goods are much cheaper than those from other countries, according to a video report by Al Jazeera.

The transcript of the entire report follows, according to Financial Tribune:

From vegetables to milk, cooking oil to washing detergents. In southern Iraq, almost everything on sale is from neighboring Iran.

Abbas Naji, a wholesale outlet owner: “Not just dairy products come from Iran, packaged snacks, cakes, juices, all are imported from Iran. There will be a crisis, if these products are cast off.”

Some locally-produced items are available but imported goods are cheaper. Iran’s proximity, low prices and long-established trade ties make it easier for vendors to rely on Iranian products.

Karim Muttar, a grocer: “Iranian groceries dominate the Iraq market because if it wasn’t for them, locally-produced groceries would have been sold at twice their actual price.”

But as the US increases pressure and imposes biting sanctions on Tehran, Iraqi traders are concerned.

Hakim Dakhil, a truck driver: “We can’t afford the absence of Iranian goods in the market. The average income of a person only allows for buying cheap imported goods from Iran.”

Iraq is the only country exempt from US sanctions on Iran. Washington has extended Baghdad’s waiver on Iranian imports for three months. It’s not clear what will happen when that expires, as the US insists Iraq must find alternatives.

In anticipation of the sanctions, Iraq and Iran have been discussing ways of continuing trade. An estimated $25 million worth of Iranian imports enter Iraq every day.

“According to Iraqi officials, there’s a special financial agreement under which Iraq will pay Iran without sending over any money. Iran will be able to use that money which remains inside Iraq to purchase humanitarian goods. A similar agreement exists between Iraq and some European countries to work around US sanctions.”

Abdul Rahman Meshhadani, an economist: “There are other powers favoring Iran that are defending Iran’s interests which made Iraq ‘Iran’s backdoor ATM’ so to speak to mitigate sanctions. Iraq’s economy is largely unorganized. A lack of official statistics and thorough monitoring makes it impossible to accurately picture what happens at the border with Iran, which stretches 1,400 kilometers.”

France, Germany and the UK introduced a mechanism called  Instrument in Support of Trade Exchanges (INSTEX) to facilitate trade in exchange of essential goods, including food, medical equipment and medicines, between Iranian and foreign companies.

Iraq’s case is different because in addition to household items, Baghdad relies heavily on Iranian gas and imported electricity.

Jaafer Al-Hamadany of Iraqi Chambers of Commerce: “Iraq also needs Iran. Iraq’s political situation isn’t completely settled. This extends to Iraq’s economy, industry and agriculture. Besides Iranian investment, other foreign investment is low.”

Although Iraqi officials deny that Baghdad is becoming Iran’s ATM or cash machine, the fear is any restriction on trade could affect Iraq’s fragile stability.