Al-Kadhimi correcting the path in Iraq-Iran relations

The bold moves recently taken by Mustafa Al-Kadhimi’s interim Iraqi government with the aim of restoring the state’s battered prestige are showing promising and unambiguous indications of a desire to transition from a long phase of security chaos to one where statehood and sovereignty are imposed, despite various impediments and hindrances. This objective will not be easy to achieve and will undoubtedly be confronted by numerous challenges, especially from Iraq’s Iranian neighbor, which has taken advantage of the chaos there to maximize its own benefits for the past 17 years following the fall of Saddam Hussein’s regime.
On the ground, Iran’s regime has made many gains in Iraq over this period, in the political, security, economic and military fields. Tehran now has a militarized presence on Iraqi soil, along with allied groups in Iraq’s parliament, government and some apparatuses of the state.
It also strengthened its economic relations during the last two years to the extent that Iraq has become one of the primary destinations for Iranian non-oil exports. Iranian commodities account for nearly 25 percent of the needs of the Iraqi market, mainly edibles. Iran has also exported gas and electricity to Iraq, making Baghdad indebted to it, with the bills for these amenities mounting up. This is another deliberate move amid a series of measures aimed at tightening Tehran’s control over the apparatuses of the Iraqi state.
Recently, however, the new Iraqi Prime Minister Al-Kadhimi has taken bold steps toward transitioning Iraq to a stable state. He has ruled that every Iranian citizen entering Iraq will need a visa and has pledged to restrict weapons to the state. In addition, Al-Kadhimi has refused to meet Quds Force commander Esmail Ghaani and other Islamic Revolutionary Guard Corps commanders unless they first obtain official entry visas, while the Iraqi Counter-Terrorism Service has arrested Iraqi Kata’ib Hezbollah members following raids on the militia’s headquarters on June 25. This is in addition to dismissing the Tehran-affiliated national security adviser Faleh Al-Fayyad.
However, Tehran will not easily compromise or surrender its gains in Iraq, especially during a period when it is going through a harsh economic crisis due to US sanctions and the outbreak of the coronavirus pandemic. The combination of these and other factors has led to a steep economic decline, potentially exceeding 6 percent this year, according to estimates by the International Monetary Fund. This is in addition to the unprecedented collapse in the value of the national currency against the dollar and euro, which has aggravated a budget and trade balance deficit and caused a steep increase in the inflation rate, which surpassed 40 percent last year. The coronavirus pandemic has also aggravated Iran’s high unemployment rate, suspended tourism and disrupted border trade.
Iran’s regime is, therefore, desperately looking for outlets to alleviate its suffering at the economic and popular levels, and to circumvent the banking, oil and commercial blockade imposed on it. Tehran places Iraq at the top of these outlets, seeking to safely export domestic commodities and import required goods, even those banned by the US, via the Iraqi gateway or passage between the two nations under the guise of humanitarian-centered aid, which includes food and medicine. This is done to ensure that Iraq is not subject to US sanctions, causing Iran to lose this vital outlet.
To improve Iran’s chances of achieving these objectives, the governor of the Central Bank of Iran, Abdul Nasser Hemmati, traveled to Iraq last month to meet with Al-Kadhimi. During the meeting, they agreed that the Iranian bank would take advantage of its assets deposited in the Central Bank of Iraq, which are estimated to be worth billions of dollars. Iran’s resources in its neighboring country include Iraqi debts, which have reached about $8 billion, resulting from accumulated gas and electricity bills over the past two years, in addition to deposits in favor of Iran’s central bank in its Iraqi counterpart.
Iran’s regime is leveraging the cash owed by Iraq to covertly import essential goods from the country, particularly commodities not required in any humanitarian-centered trade. This clandestine trade channel enables Iran to secure a significant amount of its needs from the outside world, and the regime is certainly not about to abandon it easily. It is also possible that Iran is exporting goods sanctioned by the US under a “Made in Iraq” label, posing another major challenge to Al-Kadhimi’s government.

Iran’s regime is desperately looking for outlets to alleviate its suffering at the economic and popular levels.

Dr. Mohammed Al-Sulami

In the end, Iran’s access to Iraq may no longer be as smooth and free of obstacles as it was previously, given the efforts of Al-Kadhimi’s government to restore the sovereignty of the Iraqi state and the country’s security.
But the future is unclear, as Iran possesses strong levers on the ground in Iraq, including weapons arsenals and a deep-rooted presence, especially in the oil-rich southern provinces. Iran can leverage its neighbor’s overdue debt and call on its political proxies and allies in the Iraqi parliament, which can influence the work of the government. Other factors include the growing levels of trade between the two sides and the Iranian regime’s strong determination to exploit Iraq as an outlet to circumvent US sanctions. All of this means that, while Al-Kadhimi has started well, he still has a daunting path ahead of him.

• Dr. Mohammed Al-Sulami is Head of the International Institute for Iranian Studies (Rasanah). Twitter: @mohalsulami