Iraq Looks to Iran

Iraqi prime minister Nuri al-Maliki’s visit to Iran last week, his fourth since he became premier in May 2006, suggests that Iraqi-Iranian ties will grow stronger as the United States reduces its troop presence and funding for reconstruction in the coming years.

This latest visit was intended to ease Iranian concerns about the lingering US presence in Iraq and to drum up investment for the reconstruction of his war-torn country.



While the US plans to scale back its funding for Iraq, Iran has been positioning itself as both a provider of goods, services and energy to Iraq and a potential saviour of its crumbling infrastructure.



Iran has been exploring Iraq’s oil and electricity sectors and offered the country a one billion dollar loan in 2008. It plans to boost its annual trade with Iraq from 4.2 to 10 billion dollars by 2010, the secretary of Iran-Iraq economic development, Hossein Danaeifar, announced earlier this month.



Iran enthusiastically entered the Iraqi market after its long-time foe Saddam Hussein was ousted by US forces in 2003. Iran has since won several contracts to build power plants and supply electricity in border areas.



About 30 per cent of Iran’s exports are destined for Iraq. Iranian food and other goods are widely sold there, particularly in border cities and towns, and the country’s energy shortages are shored up by Iranian fuel and electricity.



Iran seems especially eager to venture into reconstruction efforts where the US has struggled, pointing out that its domestic experience of rebuilding after its war with Iraq could aid its neighbour.



According to The New York Times, a watchdog overseeing the flow of US reconstruction funds in Iraq is expected to issue a damning report in February. It is said to reveal that the US has made very little progress despite spending 117 billion dollars on development efforts.



The report by the Office of the Special Inspector-General for Iraq Reconstruction will not come as a surprise to Iraqis, who since 2003 have complained of deteriorating services that have severely affected their quality of life, even in areas largely sheltered from conflict.



The poor state of the electricity supply typifies reconstruction shortcomings. Washington spent five billion dollars to build and repair power grids, many of which were destroyed by US attacks on infrastructure, aimed at crippling Saddam’s regime during the Gulf War.



But electricity production still hasn’t met the goal the US set for July 2004, and only reached pre-war levels in 2008. Iraq had an average of 14 hours of power per day in December, according to the Washington-based Brookings Institute’s Iraq Index.



Poor financial oversight, corruption and insecurity have been blamed for reconstruction failings, which have done little to help the US – or Iraqi governments – win over the Iraqi public.



Now facing a record trillion-dollar deficit and its worst economic crisis in nearly a century, the US is expecting Iraq to start picking up the tab for its reconstruction. The Baghdad government is likely to dedicate about one quarter of its budget to development projects in 2009.



US president-elect Barack Obama made Iraq’s 2008 budget surplus a key issue of his campaign, echoing American public opinion that the US should no longer shell out ten billion dollars per month for Iraq, which pulled in unexpected revenue last year as oil prices briefly skyrocketed to nearly 150 dollars a barrel.



Iraq’s budget surplus shrank considerably as oil prices plummeted, however. With crude now hovering around 40 dollars per barrel and US funds drying up, it is no surprise that Baghdad is redoubling its efforts to drum up foreign investments. It also comes as no surprise that Iraq is turning to its neighbour.



Many Iraqi leaders, particularly Shia, have deep political and religious ties to Iran, which supported opposition movements to the Ba’athist regime during the 1980-1988 Iran-Iraq war.



Maliki’s Dawa party has strong Iranian links, forged during its years in exile plotting the overthrow of Saddam.



Iraqi president Jalal Talabani, a Kurd who enjoys strong US support, has very good ties with Tehran.



According to a former aide to the Iraqi president, two countries offered their aircraft to speed him to hospital when he was taken ill in Iraq in February 2007: one was American, the other Iranian.



But Sunni Arabs fear Iran’s influence over Iraq. They along with the US have openly blamed Iranian intelligence for arming Shia militias, stoking sectarianism and destabilising the country.



Iran has been said to back radical Shia cleric Muqtada al-Sadr’s Mahdi Army, which is virulently opposed to the US presence in Iraq, as well as the Supreme Islamic Iraqi Council’s Badr Organisation.



Iran has especially strong ties with Iraq’s oil-rich southern Shia communities, where some local leaders have recently been pushing for more autonomy from Baghdad. Such a move would open up more economic opportunities for Iran, though it may irk nearby Gulf states, who regard Shia Iran as a rival.



But even as Iran eyes opportunities in Iraq’s oil sector, it is unlikely that it will be able to seriously compete with the major oil companies that Iraq is hoping to attract.



Iran’s contracts, such as a 32 million dollar project to drill nine oil wells north of Baghdad by 2010, pale in comparison to other deals awarded to international firms



China’s state-run oil company has a three billion dollar oil-development contract in Iraq, and Baghdad is buying three billion dollars worth of gas turbines from the US corporate giant General Electric, which is expected to more than double its power-generating abilities.



Having installed a free-market economy in Iraq and with Iran posing no economic threat to multi-national corporations, the US is unlikely to interfere with Iraqi-Iranian economic relations, even if the financial ties raise eyebrows in Washington.



But the US, which has in the past accused Iran trying to destabilise Iraq, will undoubtedly watch Baghdad and Tehran closely.



The views expressed in this article are not necessarily the views of IWPR.