The Forum for Partners in Iran's Marketplace

October 2021, No. 98

Trade & Business

Leap in Trade Relations with Iraq

Turkey and China are Iranís biggest rivals in Iraq. Saudi Arabia, India and Jordan are also penetrating the Iraqi market, which shows that access to the Iraqi market is becoming increasingly difficult.

With the arrival of the Iraqi Prime Minister Mustafa Al-Kadhimi in Tehran (mid-September), a new chapter in Iranís cooperation with this western neighbor began. During the meetings of this Iraqi government official with the Iranian officials, the horizon of trade relations between the two countries at the level of $30 billion was drawn.

The increase in trade between the two countries has been compiled while last year the volume of trade between the two countries was $7.582 billion.  A review of Iranís customs statistics shows that exports to Iraq in 1999 were worth $7.448 billion, although imports were limited to $134 million. On this basis, it seems that achieving the stated goal will not be possible any time soon.

The difficulty of achieving this figure becomes clear when Iran is working hard to develop exports to Iraq. Studies show that market opening in Iraq is not an easy task, while the power of regional actors is changing every day. This means that Iranís competitors are stubbornly seeking to increase their share of the Iraqi market, which will put more pressure on exports to that country.

Of course, this analysis does not mean that it is not possible to increase trade with Iraq, but it does mean that the realization of trade goals has requirements that must be considered by the countryís trade authorities so that this goal is not left only on paper.

Last year, exports to Iraq accounted for 21.3% of Iranís total exports in terms of value. This shows that Iraq is still the second largest export destination among several major destinations. A review of statistics shows that in 1999, the volume of goods exported to Iraq was 25.670 million tons, which was worth $7.448 billion. But imports from this country weighed 103,000 tons and were worth $134 million, which increased Iraqís value share of total imports to 0.34 percent.

Another important point regarding trade with Iraq is the trade balance with this country. In fact, the most positive trade balance of Iran among all trading partners is in trade with Iraq, which is positive $7.314 billion; but trade is a two-way street that balances imports and exports and ensures the benefit of both parties. This is one of the things that can create serious obstacles in the development of trade between Iran and Iraq.

In fact, a careful study of Iran-Iraq exchanges shows an imbalance in the exchanges between the two countries. Last year, Iraq was not among the 20 countries of import origin for Iran and was the sixth source of imports among the 15 target countries. Of course, in recent months this neighboring country has been among the 20 countries of origin of imports. The imbalance in exports and imports to Iraq appears in the statistics while Iranís rivals in this market are increasing their share day by day.

Turkey and China are Iranís biggest rivals in Iraq. Saudi Arabia, India and Jordan are also penetrating the Iraqi market, which shows that access to the Iraqi market is becoming increasingly difficult. Therefore, in order to advance in this market, requirements must be considered. Yahya Ale Ishaq had recently mentioned these requirements in an interview with Fars News Agency. He said that Iraq has many comparative advantages for developing trade relations, and that this market cannot be ignored in various fields, including technical and engineering services and trade.

At the same time, the economic potential of the Iraqi market has made it difficult for us to maintain this market because the country has the largest investment capacity in the region for the next 15 years, and therefore in the near future with a huge volume of economic and trade contracts from competitors. According to Ale Ishaq, the production and export of Iraqi oil makes it possible for the country to pay for development projects, and the country has a large market for investment and consumption that should not be overlooked.

He also noted the expansion of Saudi Arabiaís presence in the Iraqi market: ďUntil recently, there was only one active border between Saudi Arabia and Iraq, but now Saudi Arabia is trying to expand the common border so that economic actors can travel more between the two countries.Ē According to this economic activist, Iran should change its approach in order to develop trade with Iraq, and just as the establishment pays much attention to Iraq in the security and political dimensions. It should also increase its support in the economic dimension.

However, the government is not very supportive in the economic dimension and does not pay much attention to this issue because the profit of the development of economic relations will benefit the private sector.

While our security is linked to economic development, the government must look at economic development from a security perspective. Ale Ishaq stated: ďGovernment support is needed in all sectors of the economy, including finance, banking, marketing information, litigation, trade agreements, and transportation. Provide development of trade and economic relations between the two countries. To develop trade relations between the two countries, we also need joint trade agreements and joint venture investments.


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