BAGHDAD, Aug 9, (Agencies): Caught in the crossfire between its key allies Tehran and Washington, Iraq’s economy could suffer the heaviest collateral damage from the US reimposing sanctions against Iran. Washington slapped unilateral sanctions back on Tehran on Tuesday, after pulling out of a landmark 2015 nuclear deal in May.
For Iraq, recently emerged from an expensive war on jihadists, the embargo on its neighbour could hit jobs and cut off a crucial source of cheap imports. In 2017, Iraq imported around $6.6 billion (5.7 billion euros) worth of products from Iran, ranging from cars and washing machines to agricultural goods. Iraq has already witnessed a month of protests over a stagnant economy, widespread corruption, unemployment, chronic power cuts and an agriculture sector devastated by drought. “Eighty percent of products on the market are Iranian-made, so if the border closes, it will be a crisis for us,” said Ali Ajlan, whose Baghdad store sells household electrical items.
Another importer, Abbas Mukhaylef, said he can’t even imagine an alternative to Iran as a supplier. “Each year we import between 200,000 and 300,000 containers of air coolers” from Iran, he said. “We depend on Iran for most goods.” For the Iraqi consumer, Iranian goods have a big advantage: they are the cheapest on the market. Iraqi Prime Minister Haider al- Abadi said on Tuesday he would reluctantly comply with the new American embargo.
“We don’t support the sanctions because they are a strategic error, but we will comply with them,” Abadi said. “In general, sanctions are unjust.” Baghdad is allied with Washington, a strategic partner in the war that saw Iraq declare “victory” over Islamic State group jihadists in December 2017. But Baghdad also has strong ties to Tehran, a Shiite powerhouse that is heavily involved in the politics of Shiite-majority Iraq. Imports paid in US dollars have already ground to a halt. “To comply with the American sanctions, we’ve stopped imports of Iranian cars,” said a senior official in the auto import industry.
The official, who asked not to be named, said Baghdad had asked for an exemption from Washington to allow imports of Iranian spare parts for car assembly facilities in Iraq
Production has ground to a halt with 5,000 jobs on the line, he said. While Iraq’s exporters won’t feel too much of a pinch — Iran only imported $77 million worth of Iraqi goods last year — economic tourism looks set to take a hit. “The two or three million Iranian pilgrims who come each year (to Shiite holy sites) represent a major economic activity that Iraq could now be deprived of,” warned Muzhar Mohammed Salah, an economic advisor to Iraq’s prime minister.
The big winner will be the black market, which will feed demand for Iranian goods, predicted trader Ajlan, pointing out the border between the two countries runs more than 1,000 kms (600 miles). “Imports will continue, even if, officially, they are prohibited,” he said.
Yassin Faraj of the chamber of commerce in Sulaymaniyah, an Iraqi Kurdish province bordering Iran, told AFP smugglers could use several unofficial crossing points. He also forecast that tougher US sanctions on Tehran would spark “an influx of Iranian workers”, especially to the autonomous Kurdistan region, in a fresh blow to Iraq’s own workforce. Iraq can ill afford further economic and social troubles.
At least 14 people have been killed since protests erupted in early July in the southern province of Basra before spreading north, including to Baghdad. Iraq itself endured more than 12 years of international sanctions after late dictator Saddam Hussein’s 1990 invasion of Kuwait.
Al-Abadi has meanwhile, sacked a number of electricity ministry officials, his office said Thursday, in the latest attempt to quell public anger at chronic power cuts. Four directors have been dismissed and a number of others moved “in order to reorganise the operation of the ministry in the service of the country”, the prime minister’s office said in a statement. Those sacked were in charge of investments, contracts, distribution and administration at the ministry.
The decision follows the dismissal last month of electricity minister Qassem al- Fahdawi “because of the deterioration in the electricity sector”, the premier’s office said at the time. Iraq has been hit by more than a month of protests which erupted in Basra and quickly spread to other southern cities, as well as reaching the capital Baghdad. Demonstrators are angry at the dire state of public services, with regular power cuts offering little respite from sweltering summer temperatures. With the national grid providing just a few hours of electricity per day, many Iraqis are forced to pay to use generators through the private sector. Protesters have also rallied against water shortages, unemployment and graft in a country where citizens argue they fail to benefit from the country’s oil wealth.
Officially $40 billion (34 billion euros) has been allocated to the power sector over the past 15 years, but a substantial slice has been siphoned off by corrupt politicians and businessmen who have fronted fake contracts. Iraq’s anti-graft Commission of Integrity said Thursday it had succeeded in “recovering and preventing the waste” of public funds to the value of $322 million in the first six months of the year. The UN envoy for Iraq urged its political leaders on Wednesday to listen to the people and seize the opportunity to form “a patriotic, inclusive and non-sectarian national government” that will use the country’s vast resources including oil to benefit all Iraqis. A new government can’t be formed until final results of May 12 parliamentary elections are announced. Voting was marred by allegations of fraud and irregularities and a partial recount of ballots was ordered. It was completed Monday but the election commission didn’t make the final results public.
UN special representative Jan Kubis told the Security Council that a new national government must prioritize a host of political, economic and social reforms as well as reconciliation and good governance including fighting corruption. It must also create jobs, put all armed groups “under the strict control of the state,” and act against “insubordinate militias and criminal gangs,” and tackle inequality, he said. Despite billions of dollars spent since the 2003 US-led invasion toppled dictator Saddam Hussein, many Iraqi cities and towns are still experiencing severe power cuts and rolling blackouts, issues that partly fueled last month’s protests in Iraq’s southern Shiite heartland. Kubis said Prime Minister Haider al-Abadi “has made major efforts to provide swift and tailored responses to legitimate popular demands,” but the measures “remain insufficient to address the depth of people’s needs and concerns.”