Iran Wants Lasting Economic Ties with Iraq

Iran must find ways to create lasting economic ties with Iraq amid fierce competition from other countries also seeking investment and trade opportunities there, Iran’s ambassador-designate to Baghdad said.

“Four to five years ago, we talked about starting exports to Iraq from scratch,” Hassan Danaeifar told business leaders at the Tehran Chamber of Commerce, Industries and Mines Tuesday. “Today, the challenge is to last in Iraq. This is what we are concerned with.”

Iraq is Iran’s main trade partner, taking one-third of the Islamic republic’s exports, Danaeifar said. Competitors also seeking to establish themselves in the Iraqi market include China, Turkey, India and Syria, said Yahya Ale-Eshagh, head of the chamber, who spoke at the same event.

Iran and Iraq fought an eight-year war that ended in 1988 and left 1 million people dead. Iran has strengthened ties with its western neighbor since the fall of Saddam Hussein’s Sunni Muslim-led regime seven years ago. Iran and Iraq both have Shiite majorities, and Iraq has been ruled by a Shiite-led government since the 2005 election.

Iraq’s economy is reviving after decades of sanctions and war, driven by revenue from the world’s third-largest oil reserves. Officials in Baghdad have called for stronger trade ties with neighbors and say the country needs about $800 billion in investment. Iran is facing fresh sanctions aimed at halting its nuclear program, with the United Nations due to vote on the measures Wednesday.

Within a year and a half of the U.S.-led invasion that ousted Saddam Hussein in 2003, 5,000 foreign companies had registered to do business in Iraq, Danaeifar said. That number has since doubled to 10,000, and only 100 of those companies are Iranian, he said.

“Having common borders does not solve the problems,” he said. “Having common religious beliefs and ethnicities is not enough. They cannot guarantee our economic relations.”

Turkey is Iraq’s biggest trade partner with a volume of nearly $9 billion. It also accounts for nearly 55 per cent of foreign companies registered in the region, according to the Iraqi National Investment Authority.

Iran’s exports to Iraq rose to $6.1 billion, of which about one-third was oil, in the 12 months through March 2010, from $790 million five years earlier, according to Danaeifar, who is due to be dispatched to Baghdad within weeks.

Iran has won projects worth $1.2 billion in Iraq, according to Danaeifar.

Two Iranian banks, Eghtesad Novin and Bank Melli, operate in Iraq, and Iran supplies one-sixth of the country’s electricity needs, he said.

Danaeifar, who is currently the secretary general of the Iran-Iraq Economic Development Center, said Iran should create joint ventures with Iraqi partners, ensure Iranian companies appoint representatives in Iraq, and register its companies in both Arab and Kurdish areas of the country.

“Iraq has huge potential for investment and trade for the world and the region,” Ale-Eshagh said. “It should be multiple times more for us.”

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