About the Iraqi Economy

Iran Is Playing a Growing Role in Iraq Economy
By EDWARD WONG
Published: March 17, 2007

NAJAF, Iraq — While the Bush administration works to stop Iran from meddling in Iraq, Iranian air-conditioners fill Iraqi appliance stores, Iranian tomatoes ripen on the windowsills of kitchens here and legions of white Iranian-made Peugeots sit in Iraqi driveways.

Some Iraqi cities, including Basra, the southern oil center, buy or plan to buy electricity from Iran. The Iraqi government relies on Iranian companies to bring gasoline from Turkmenistan to alleviate a severe shortage. Iraqi officials are reviewing an application by Iran to open a branch of an Iranian bank in Baghdad, and Iran has offered to lend Iraq $1 billion.

The economies of Iraq and Iran, the largest Shiite-majority countries in the world, are becoming closely integrated, with Iranian goods flooding Iraqi markets and Iraqi cities looking to Iran for basic services.

After the two countries fought a devastating war from 1980 to 1988, Saddam Hussein maintained tight control over cross-border trade, but commerce has exploded since the American-led invasion of 2003.

Much of the money is heading in one direction, though: Iraq is becoming dependent on imports because industries here have been ravaged by the economic sanctions of the 1990s and the current sectarian violence. Reconstruction and security have lagged so far behind the expectations of ordinary Iraqis that cheap goods from Iran and neighboring countries often provide the only comforts in their lives.

“What is happening in Iraq at the moment is a lot of trade, but it’s almost all one-way trade,” Barham Salih, the Iraqi deputy prime minister for finance, said of the country’s economic ties with Iran and other neighbors. “If you take oil away, there’s a lot of imbalance in this.”

Iraqi leaders from the Shiite bloc currently in power say political and economic ties with Iran, which is governed by Shiite Persians, will inevitably strengthen. As driving factors, they cite the hostility of Sunni Arab nations to a Shiite-run Iraq and the ambivalence of the White House toward the devout Shiite parties here.

“If the Shiites do not feel protected, if they feel what they’ve achieved can’t be maintained, much of the leadership will have to work with Iran,” said Sami al-Askari, a Shiite legislator who advises Prime Minister Nuri Kamal al-Maliki, himself a religious Shiite with close ties to Iran. “The Arabs and the Americans are saying Iran is bad, but it’s the only recourse.”

According to one commonly cited statistic, trade between Iraq and Iran has grown by 30 percent a year since the 2003 invasion. But American officials here say no accurate numbers are available because Iran refuses to release complete figures.

Statistics from the American Embassy’s economic section show that Syria accounted for 22 percent of Iraq’s imports in 2005, and Turkey 21 percent. Iran, which has the longest border with Iraq, would be likely to fall in that range, officials said. The C.I.A. World Factbook estimates Iraq’s total imports in 2006 at $20.8 billion.

Iran has divulged a few trade numbers. Tehran told the government of Iraq’s northern Kurdish region that trade with the region amounted to more than $1 billion in 2006, said Hassan Baqi, president of the chamber of commerce in the Kurdish city of Sulaimaniya.

Hoshyar Zebari, the Iraqi foreign minister, who is a Kurd, said that provincial governments had been making their own commercial deals with Iranian interests, but that lately he had started ordering them to go through the Foreign Ministry.

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