Where Does Iran Stand in Economic Competition in Post-Daesh Iraq?

(Picture source: Financial Tribune)

Remember June 2014 when ISIS substantially ravaged through Iraq, quickly occupying one of the main cities, Mosul. The terrorist group went on to seize control of other Iraqi cities and provinces, taking advantage of the army’s disintegration.

At the time, the Iraqi government reached out for help from many countries to fight back. Iran was the first country to join and it has played an unmatched role in defeating the IS and restore the sovereignty of Iraq over the lost regions.

With the collapse of the IS, a new competition has started in Iraq, over investment on the country’s reconstruction. This is not merely over economic interests, as many security and political considerations are subtly involved.

The Iraqi Prime Minister Haider al-Abadi has been quoted as saying that the reconstruction would take $100b. Baghdad has started an active multilateral diplomacy to attract the colossal amount. In response, sixty countries have announced readiness to help in a conference held on rebuilding Iraq.

Amid international enthusiasm to invest in Iraq, the US was among the first players to join. Americans were among the first to propose a well-drafted plan for rebuilding the country and obtaining the economic benefits thereof.

A few months ago, the US President Donald Trump proposed a bill to the House of Representatives to rebuild Iraq in exchange for oil. The bill would lead to the participation of certain US firms in the reconstruction of Iraq.

The plan prioritizes regions liberated from Daesh as well as deserts for proper utilization. The focus will be on accommodation, hospitals, and hotels.

These efforts to gain economic profits in the post-ISIS Iraq are not limited to the US. Turkish President Erdogan has also expressed his country’s readiness for play a major role in rebuilding Iraq.

Beside US and Turkey, Saudi Arabia has taken unprecedented steps to make investments in Iraq. Agreements have been sealed between Iraq and Saudi Arabia during al-Abadi’s recent visit to Riyadh over the reconstruction of Sunni-majority regions of Iraq destroyed by the ISIS.

Where does Iran stand in the race? What share has the Iraqi government reserved for Iran? Is that ex gratia? Is Tehran supposed to fall behind and leave empty-handed again?

No country except Iran volunteered in 2014 to pay the cost of Iraq’s security and fight against ISIS but today every side is rushing to gain economic benefits under the pretext of rebuilding Iraq.

Iraq has invited all countries to invest in the country, without any consideration. In fact, the Iraqi government is trying to create an atmosphere of economic rivalry regardless of security issues.

Tehran is making a great mistake if it thinks a special share is reserved for it. Serious diplomacy is needed if Iran does not want to fall behind. If so, there will be no compensation for costs Iran underwent to secure Iraq in recent years while additional security and political costs will be imposed.

It should be noted that Iraq imports $65b worth of goods but Iran’s exports to the country amounts only to $6.1b. Turkish imports are five times bigger than Iran’s. With its traditional part in the Iraqi market over the past 15 years, Turkey still stands as Iraq’s top trade partner, with a 22-percent share. Tehran is far behind Ankara. Saudi Arabia is also trying to step in the race. Iraq’s current needs allows Riyadh to find its own status and Iran will be defeated if it continues to compete without a specific strategy.

Iran should come to the understanding that the post-ISIS Iraq is quite different. The country’s people and officials, Shiites, Sunnis, Turkmen, and Kurds, want their home rebuilt as soon as possible. Therefore, any country, that is faster to step in and live up to their expectations, will find a better political status and deeper soft power. It could be Iran, Saudi Arabia, the US, or Turkey.

This becomes even more significant as we approach the parliamentary elections in Iraq, where regional and international players try to pave the way for their influence in Iraq’s politics by empowering political parties and groups affiliated with them. Many observers believe that al-Abadi is also trying to facilitate Saudi investment to gain support from Sunnis.

What can Iran do?

It is natural for the Iraqi government to use the economic potentials of all regional and international players to rebuild the country. Iran should not expect a booked place in the competition.

So what can Iran do to compete? The main policy for Iran to adopt is the empower and equip the private-sector firms. Doubtlessly, Iran could win a larger share in Iraq’s market, if it allocates credit to private firms as Turkey and Saudi Arabia have done. At the moment, the World Bank, the International Monetary Fund, the US, the UK and others have allotted credit to rebuild Iraq, under the condition that Iraq makes purchases from centers they have proposed.

On the other hand, Tehran shall seek to identify existing economic potentials and opportunities in Iraq and start serious talks with the Iraqi government to make investment. An important point is not to limit investment in Iraq to Shiite-dwelling regions. Sunni-dwelling areas most hit by the ISIS should also be targeted.

However, it should be taken into account that the tribal Sunni-Arab demography of the worst-hit areas will have its own challenges for Iran to make investments as the regions are exposed to Iranophobiac policies of Saudi Arabia and the US. Cooperation and negotiation with the Iraqi government and Sunni officials of the country could help overcome the challenge.

In the end, it should be noted that participation in Iraq’s reconstruction is not merely an economic issue, but includes remarkable security and political aspects. The main mission of actors like Saudi Arabia is not to gain economic profits but rather security and political influence in Iraq, and more particularly in Sunni majority regions. One could say actor with the biggest economic wins will be able to have more influence in Iraq’s future developments.