BAGHDAD — As soon as the most recent round of U.S. sanctions, announced by the Trump administration on August 7, hit Iran, Iraqi Prime Minister Haider al Abadi said his country would reluctantly comply. But a week later, reality has sunk in and many Iraqi officials have pushed for Baghdad to maintain trade relations with Tehran.
The reason: Iraq, which shares a 1,458-kilometer border with Iran, could be badly hurt by the sanctions. Iraq relies on its eastern neighbor for everything from gas supplies to electricity to water and foodstuffs. Not only is Iraq in a no-win position, but it is the United States, which still maintains some 5,200 troops in Iraq, that put it there: The country’s dependence on Iranian trade and public services is largely due to the U.S. invasion in 2003.
When the international community imposed sanctions on the late Iraqi leader Saddam Hussein from 1990 to 2003, next-door Jordan was exempt. The United Nations excused Jordan from sanctions that banned it from buying oil from Iraq, for instance. So there’s a strong precedent for exempting Iraq from the Iran sanctions.
If that doesn’t happen, and Iraq violates sanctions and is hit by U.S. penalties, it is likely to place the country further into Iran’s sphere of influence — exactly what President Donald Trump’s administration says the United States wants to combat in the broader Middle East, where Iran is becoming increasingly powerful.
Even Abadi, who is considered to be more pro-American than his predecessor, cannot afford to comply with sanctions. He has been backpeddling since last week. On August 13, he said: “I did not say we abide by the sanctions, I said we abide by not using dollars in transactions. We have no other choice,” the prime minister told reporters in Baghdad.
The U.S. has re-imposed sanctions on precious metals, including gold, the automobile industry, and the purchase of U.S. dollars. Beyond what Abadi announced about trade in dollars, the government in Baghdad says it has not come to agreement on whether to comply with other sanctions — a buzz phrase for non-compliance. Abadi has already faced a significant backlash from Iraqi and Iranian politicians merely for suggesting at first that Iraq would comply with sanctions.
According to Iraqi media reports, U.S. Treasury officials visited the Central Bank of Iraq in July and said the U.S. would sanction any Iraqi bank that conducted financial transactions with Iran. According to the Wall Street Journal, the Iraqi government has bank accounts with the U.S. Federal Reserve, where its dollars are kept. And these dollars, which the Iraqi economy relies upon, could be frozen should Iraq violate sanctions.
Despite such possible hardships, Iraq has no choice but to violate sanctions, for several reasons.
First, Iraq needs Iran’s refined gas. Iraq’s electricity minister said in July 2017 that Iraq would be reliant on Iranian gas to generate electricity for at least seven years. Iraq does produce natural gas of its own, but lacks the facilities to process it into fuel for local consumption. The gas Iraq receives from Iran constitutes approximately 20 percent of the electricity it produces. Already, Iraq meets only 70 percent of its electricity demand. Iraq has been sending Iran oil to pay for its gas imports and to pay its electricity debt.
Second, Iraq’s water supplies are dependent upon the flows of the Euphrates and Tigris rivers from where it gets 98 percent of its surface water. If it chose to do so, Iran could divert 13 percent of Iraq’s water resources. Iraqi Deputy Water Minister told Gulf News in April that 20 to 30 percent of the Tigris River’s water in Iraq originates in Iran. If Iraq complied with sanctions, Iran could easily cut the flows of water, as it already has done in the northern Kurdistan area in Sulaimaniyah province, according to the Kurdistan Regional Government’s Ministry of Agriculture. At a time of serious drought in Iraq, this is no idle threat.
Third, Iran has deliberately flooded the Iraqi market with cheap imports, such as foodstuffs. This has undercut Iraqi agriculture by decreasing demand for homegrown products that are more expensive. Even if Iraq were to stop buying these goods, farmers would not be able to produce enough supplies at home. Over several years, Iraqi farmers have fled to urban areas due to a lack of demand and conflict with the Islamic State. At the moment, a decline in the numbers of farmers is also an obstacle.
Iran has political leverage, too. Since the May 12 national election, Iraq’s political elites have been unable to form a government in part because of enormous pressure from Tehran to install politicians in their favor. If Iran’s loyalists succeed and dominate the new government, Iraq’s rulers will definitely make decisions that support Iranian interests.
In penalizing Iran, the United States is unintentionally encouraging Iraq to drift away Washington and into the arms of Tehran.
The Gulf states and Turkey would seem to be a logical alternative to Iranian trade. However, Iran has loosened Iraqi restrictions against it by greasing the palms of local border and trade officials for years. It seems unlikely that corrupt officials will seize the opportunity to broaden Iraq’s list of trading partners.
In general, while Gulf states object to Iraq’s economic reliance on Iran, governments have done little to help Iraq become more independent. The Kuwait-sponsored reconstruction conference to help Iraq, held in February, has yielded no results, according to Iraqi sources, even though millions of dollars of pledges were made.
Once again, Iraq is finding itself controlled by outside forces and without any recourse at a time of widespread civil unrest in the country over water and electricity shortages. In penalizing Iran, the United States is unintentionally encouraging Iraq to drift away Washington and into the arms of Tehran.
Geneive Abdo is a resident scholar at the Arabia Foundation and the author of four books on the Middle East, most recently, The New Sectarianism: The Arab Uprisings and the Rebirth of the Sunni-Shi’a Divide. Sarah Lord, a research analyst at the Arabia Foundation, contributed to this article.