Rouhani in Baghdad seeks outlets against US sanctions

Iranian president Hassan Rouhani is paying his first visit to Iraq with the hope of expanding economic relations to allow Iran to counter the tightening noose of US sanctions.

al-monitor Iraqi President Barham Salih walks with Iranian President Hassan Rouhani during a welcome ceremony at Salam Palace, Baghdad, March 11, 2019.  Photo by The Presidency of the Republic of Iraq Office.

Mar 12, 2019

Iranian President Hassan Rouhani arrived in Baghdad on March 11 amid his government's efforts to expand ties with Iraq to reduce the impact of US sanction on Iran's economy. Prior to departing Tehran, Rouhani remarked, “[Iran's ties with Iraq] cannot be compared to Iraq’s relations with an occupying country like America, which is hated in the region.” The visit is Rouhani’s first one to Baghdad since taking office in 2013.

The Iranian leader's three days in Iraq will include his signing a series of agreements on energy, transport, agriculture, industry and health as well as meetings with Iraqi officials. In preparation, Iranian Foreign Minister Mohammad Javad Zarif arrived in Baghdad the day before Rouhani. Iran aims to boost annual trade with its neighbor from $12 billion to $20 billion to help offset US sanctions, which are strangling its economy. 

While meeting with Rouhani, President Barham Salih said, “Iraq is lucky to be a neighbor with Iran, as well as being a neighbor with Turkey and being connected to the Arab world at the same time.” He added, “We hope that Iraq can become a bridge between the region’s nations based on mutual respect and common interests.”

A senior Iranian official accompanying Rouhani told Reuters, “[Iraq is] another channel for Iran to bypass America’s unjust sanctions. … This trip will provide opportunities for Iran’s economy.”

Rouhani and Iraqi Prime Minister Adel Abdul Mahdi signed an agreement to connect the two countries via a railway linking the border town of Shalamche and Basra. The 48 miles of track between them will allow Iran to transfer goods to southern Iraq and even longer distances via onward transit to the north. Along with the government in Damascus, the two countries had also previously agreed to connect Iraq and Syria by rail to allow Iran to export goods through the port of Latakia, on the Mediterranean.

The connecting rail agreement might be the most important one Rouhani signs during his visit in terms of combatting the policies of the Donald Trump administration aimed at squeezing Iran. The railway link will not only provide the Iranian economy with a much-needed outlet, but will also allow Tehran to provide support to its allies there and in Lebanon and Syria, which translates into further expanding its influence in the region as the United States tries to roll it back via the sanctions and its support of the anti-Iran alliance in the region led by Saudi Arabia.

Rouhani and Iraqi leaders will discuss establishing a jointly held bank with the goal of allowing both their countries to skirt US sanctions or penalties and expand their economic relations without resort to US dollars. They also agreed to waive fees on visas in the hope of increasing the number of visitors between Iran and Iraq to help boost local economies and bring their peoples closer. The number of Iranians traveling to Iraq has decreased since the reimposition of US sanctions on Iran due to the declining value of the rial.

The Iranian delegation and the Iraqis also plan to work toward resolving long-running bilateral issues, such as demarcation of their border, ownership of border-straddling oil fields and disagreements involving the 1975 Algiers Agreement to settle their dispute over the Shatt al-Arab.

Iranian Oil Minister Bijan Zangeneh last month publicly expressed dissatisfaction with Baghdad, citing its “reversing some oil agreements and refusing to invest in the border oil fields and to pay Iran [$2 billion owed it in] debts.” He also complained, “Baghdad's commitment to the US sanctions has prompted [Iraq] to revoke minor agreements, such as the Kirkuk deal, under which we traded 11,000 barrels of oil a day.”

It is of course not expected that all the issues between the two countries will be resolved during Rouhani's visit. Some evident solutions to problems would likely not be in the interest of the United States and its regional allies, and Baghdad does not want to trigger anger in Washington or closer to home.

Iraqi policy under Abdul Mahdi has generally been a continuation of that of his predecessor, Haidar al-Abadi, which involves steering clear of regional and international tensions and conflicts by taking moderate and balanced approaches to crafting good relations with all parties.

Iranian media have reported that Rouhani will travel to Najaf to meet Grand Ayatollah Ali Sistani. The meeting has not been confirmed by Sistani's office, but as Sistani has good relations with the Iranian Reformists, such a meeting is to be expected. The Shiite authority has previously met with Zarif as well as with the late Iranian President Ali Akbar Hashemi Rafsanjani. He did not receive former President Mahmoud Ahmadinejad, a hard-liner and Principlist, when he visited Iraq in 2008.

Tehran appears to need Baghdad now more than it ever has, as US sanctions threaten Iran's stability, not only economically but also socially and politically. Iraq is one of the few doors open to Iran in the effort to prop up its economy and prove to its people that it can work around sanctions and provide adequate services.

While Iran obviously stands to gain from expanding ties with Iraq, it is unclear whether and how the Iraqi government can benefit as well without damaging its relations with the United States, Saudi Arabia and Iran’s other rivals in the region.

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