On 11 March 2019, Iranian President Hassan Rouhani embarked on a three-day visit to Iraq, meeting with the main Iraqi political and religious leaders. The visit came at a delicate moment in which the United States (US), after quitting the Joint Comprehensive Plan of Action (JCPOA), better known as the nuclear deal, is trying to isolate Iran.
By introducing secondary sanctions and restoring financial sanctions, the US is attempting to force Iran’s main trade partners in the region and beyond into terminating their business dealings with Tehran. Iraq, as Iran’s main regional trade partner, is at the centre of the latest confrontation between Washington and Tehran. From Tehran’s perspective, Rouhani’s visit and his announced goals and achievements are encouraging. The question is, therefore, where is the Iranian-US competition in Iraq going and where does Iraq stands in it?
Rouhani waited five years to make the visit. His patience was calculated. Iran needed to ensure that such a visit would yield long-awaited results. This was guaranteed by the timing, meetings, agreements and general image and outcomes of the visit. Baghdad seems to have accepted many Iranian preconditions for the visit. The most important of these was the revival of the 1975 Algiers Agreement, which ended a long-lasting border dispute in that year and was torn apart by Saddam Hussain at the start of the 1980-1988 war between the two states.
Returning to terms of the agreement will mean that Iraq has no more claims over Iranian territory in the Shat al-Arab waterway. Additionally, this development will resolve a long-standing cause of political friction and possible confrontation in the long term. As such, many in Tehran see this as the main achievement of Rouhani’s visit. Beyond the aforementioned political and strategic importance, the restoration of the 1975 agreement will pave the way for the dredging of Shat al-Arab, reviving a traditional trade route that included Iran’s Abadan and Khorramshahr ports and Iraq’s Basra port, the devastation of which provided a golden opportunity for other Gulf ports, such as Dubai, to flourish during the 1980s and 1990s.
Rouhani’s visit delivered other results as well. Signed agreements included waiving the visa fee between the two nations, which is expected to increase the already high tourist numbers, dredging the Shat al-Arab after 43 years, establishing five shared industrial areas, agreement on two of which was finalized during Iraqi Prime Minister Adel Abdul Mahdi’s visit to Tehran a month later in early April 2019, and agreements on energy trade, which is set to increase Iran’s gas and electricity exports to Iraq.
Further, the two countries agreed to increase mutual trade from the current $13 billion to $20 billion in two years. They also agreed to set preferential tariffs on certain goods. The head of Iran’s Central Bank signed an agreement with his Iraqi counterpart on opening accounts for business people working with local currencies.
In addition to the economic and political importance of the agreements signed between the two states, Rouhani met with almost all the important Iraqi political elites.
He also met Iraq’s Grand Ayatollah Sayed Ali al-Sistani, raising various points. The first point was al-Sistani’s siding with Iran’s moderates against its conservative revolutionaries according to many analysts. While Iran’s conservatives differed from this line of interpretation, suggesting that he was backing Iran in general against the U.S. policy of maximum pressure. The second point was that instead of the extraterritorial Quds Force and people like its chief commander Qassem Soleimani, al-Sistani is encouraging Iraqis to work with the Iranian elected government. Again, this was raised by backers of the Rouhani administration, while its critics saw it an achievement made possible only because of IRGC’s support of Iraq against IS. The third point was al-Sistani’s support for Iran against renewed US sanctions and his encouraging of Iraqi political elites to continue working with Iran. This is important because al-Sistani is known for opposing US policies in Iraq and refusing to meet US politicians.
Iranians portrayed the meeting and visit as a whole as scoring many goals against Washington’s anti-Iran policy. Brian Hook, Senior Policy Advisor to the US Secretary of State, did not hide his anger at the visit and its outcome.
The US policy of ‘maximum pressure’ is about isolating Iran and degrading its interaction with other nations, with the aim of making it crawl back to the negotiating table for a ‘better deal’. Washington has put immense effort into talking friendly and allied states into severing or at least downgrading their relations with Iran. By enhancing economic and political ties, however, Iraq’s relations with Iran are clearly taking a different course. According to the Iraqi prime minster, Baghdad wants its relations with Iran to be a role model for the region. Neither did Iranian politicians avoid underscoring the failure of the US’ maximum pressure policy in Iraq.
The US has focused much of its anti-Iran efforts on Iraq as Iran’s main regional trade partner. Iraq’s ruling elites have said time and again that Iraq will not be part of US sanctions on Iran. However, many did not expect Iraq to withstand US pressure and continue its relatively significant business with Iran. As previous policies adopted by Baghdad suggest, expectation was that Iraq would again ask for waivers, and provided that Washington grants it exemptions, it would continue business with Tehran. Baghdad was previously able to get a waiver on the basis of its need for Iranian electricity and gas as well as food supplies. But the increased trade and shared projects expected to follow Rouhani’s visit is a development that the US will not ignore as it goes way beyond previous and expected exemptions.
Washington has several options to halt the growing relationship, but each comes with a set of challenges. The first option is to continue the current policy of putting pressure on Baghdad and at the same time giving it waivers to prevent its collapse. This option, as Rouhani’s visit made clear, will not stop Baghdad from moving even closer to Tehran. Therefore, if the maximum pressure policy is to have the desired effect, it will need to be revised.
The second option is to put even more pressure on Iraq, including stopping the waivers, to force it comply with the new US sanctions on Iran. Although this option has been a possibility since the reimposition of secondary sanctions in 2018, Iraq cannot replace many of its imports from Iran in the short to medium term. This is especially true for electricity and gas as well as some food supplies. Cutting Iraq off from Iranian imports would, conversely, but it even further into Iran’s orbit because it will risk violating US sanctions and, in doing so, will fall foul of them. This, in turn, would isolate Iraq, creating a greater economic void for Iran to fill. Iraqis would no doubt welcome this development because of the lack of any other option under US sanctions.
The third option is a combination of both a stick (increased pressure) and a carrot offered by US regional allies, namely Saudi Arabia and the United Arab Emirates (UAE). Only weeks after Rouhani’s visit to Iraq, a a high-level Saudi delegation including seven ministers visited Iraq and signed several business agreements with the government. Other delegations from the UAE and Turkey seem to be aiming for the same target. But to replace Iran’s exports to Iraq, the US and its allies need to have Iraq’s ruling elites on board, which is highly unlikely given that many of them are backed by Tehran; and provide real alternatives for Iraq’s need for Iran’s electricity and gas, which is also highly unlikely in the next two years at least. Therefore, it seems that the US anti-Iran policy in Iraq is facing a deadlock.
Beyond Iraq’s daily import needs, the fact that Iraq trusts Iran more than the US gives Tehran the upper hand in its rivalry with Washington. As a result of its trust-building measures with Iraqi communities and its engagement of Iraqis across the spectrum, including the main Shiite, Sunni and Kurdish communities, Iraq is reluctant to adhere to US demands regarding Iran. To put it simply, Iraq knows that Tehran’s policy toward it is likely to last, but it does not know if the next US administration will pursue the same policy or change course and ask Baghdad to change accordingly. This is why Rouhani’s visit was a success and why the Iraqi prime minister’s visit to Tehran, building on the former, is expected to bear expected fruits.