Iran Tries to Expand Business in Iraq to Blunt U.S. Sanctions

March 11, 2019
President Barham Salih of Iraq, second from left, welcomed his Iranian counterpart, Hassan Rouhani, center, at the Salam Palace in Baghdad on Monday.Thaier Al-Sudani/Reuters

President Barham Salih of Iraq, second from left, welcomed his Iranian counterpart, Hassan Rouhani, center, at the Salam Palace in Baghdad on Monday.Thaier Al-Sudani/Reuters
BAGHDAD — From financing the expansion of the vast courtyards that lead into the Shiite shrines of the holy city of Najaf, to ensuring that a Tehran-friendly candidate gets the job of interior minister, Iran’s role in Iraq keeps growing.

President Hassan Rouhani of Iran arrived in Baghdad on Monday for a visit to a place that his country has shaped in ways big and small over the past several years. Iran was the real winner of last year’s parliamentary elections in Iraq: The parties linked to the paramilitary Popular Mobilization Forces, most of them with ties to Tehran, emerged as the kingmakers.

“Iran is a small body with a big brain, and the United States is a big body with a small brain,” said Mahmoud al-Mashhadani, a Sunni Muslim who was a former speaker of the Iraqi Parliament, trying to explain how Iran seemed to have gained the upper hand in Iraq.

Adnan al-Zurfi, a Shiite member of the Iraqi Parliament who has lived in the United States, put it succinctly.

“There is no American presence in Iraq, only a military presence,” he said. By contrast, Iran has insinuated itself into Iraqi political life and the military, and now seeks to expand economically and culturally, he said.

Cementing its dominance in Iraq is a piece with Iran’s regional ambitions, which aim to secure a route to the Mediterranean through friendly countries, in part so it can ship arms and support to Hezbollah in Lebanon, continue assisting President Bashar Assad’s military in Syria and threaten Israel.

Now that Iran has expanded the Shiite armed groups into a political force, much as they have done with Hezbollah in Lebanon, Tehran’s new priority is to increase economic ties with Iraq to offset the reinstated American sanctions.

Previewing Mr. Rouhani’s visit, the Iranian ambassador to Iraq, Iraj Masjidi, said on Saturday that Iran “considers Iraq the first destination for Iranian goods” and wants to outstrip Turkey and China as one of Iraq’s top trade partners.

He said that there would be 40 trade fairs in Iraq in the coming year and that Mr. Rouhani would discuss plans to extend a railroad from Kermanshah, in Iran, to the Iraqi city of Basra. Iraq and Iran are also set to agree on new visa rules to make it easier for Iranian businessmen to travel to Iraq, the ambassador said.

Loading Iranian goods on to an Iraqi trailer at the Iran-Iraq border in 2017.Sergey Ponomarev for The New York Times

Loading Iranian goods on to an Iraqi trailer at the Iran-Iraq border in 2017.Sergey Ponomarev for The New York Times
Although Iran already has extensive economic ties in Iraq — it provides natural gas, processed petroleum products and about 20 percent of Iraq’s electricity, as well as some of its fiber optic cables — it wants to expand the relationship. Mr. Rouhani said at a recent news conference that his goal was to see trade with Iraq increase to $20 billion annually, from $12 billion.

The push to bolster Iranian trade when the country is under American sanctions leaves Iraq caught in a vise between Washington, whose military and reconnaissance resources it still needs, and Tehran, which has also provided crucial military support when Baghdad needed it.

Iran has also gained leverage over many factions in the Iraqi political system, making it hard for Iraqi politicians to turn away from Iran’s demands, said Joost Hiltermann, the head of the Middle East and North Africa division of the Brussels-based International Crisis Group.

“The Iraqis know that Iran is their neighbor, they will always be neighbors. They know that the Iranians penetrate the security process,” Mr. Hiltermann said.

Although it will be difficult and the United States will push back, the result is that the Iraqis will try to accommodate the Iranians’ demands, he said.

“They need to keep good relations with Iran and they can’t afford to anger Iran because Iran has a huge spoiling capacity,” Mr. Hiltermann added, referring to Tehran’s ability to use its political and military power to undermine the fragile Iraqi government.

Iran is overwhelmingly Shiite Persian, while Iraq is majority Shiite Arab, with a sizable Sunni Arab minority, along with Kurds, Turkmen, and Christians.

Recently Iran has made a point of reaching out to Sunni Muslims, a tack it had not taken so actively in the past, in an effort to gain support and to invest itself in Iraq’s heterogenous population.

Members of the Iraqi Parliament, including some who are Sunni Muslim, describe a steady stream of invitations to conferences in Tehran, meetings with visiting Iranian officials and attention to Iraq’s concerns.

Iran also makes a point of sending senior officials to Iraq on a regular basis. In the past three months, there have been visits by Iran’s foreign minister, Mohammad Javad Zarif; its oil minister; and its energy minister. All of them came to talk about potential business ties.

Iraqi Shiites protested in central Baghdad in December against foreign intervention. The sign proclaimed, “Our neighbors are our friends, not our masters. Our decision is Iraqi.”Ahmad Al-Rubaye/Agence France-Presse — Getty Images
Iraqis have responded in kind. The president, Barham Salih, went to Tehran to discuss how the two countries could continue to have close economic links despite the American sanctions.

Less than a week ago, the speaker of Iraq’s Parliament, Muhammad al-Halbousi, a Sunni, was in Tehran to discuss the two countries’ mutual interests, and Iraq’s culture minister, Abdulameer al-Hamdani, was in the Iranian capital recently to discuss collaboration on archaeological projects.

But that is little comfort to many Sunnis who fear that when the chips are down, Iran favors the Shiites. Some Shiites who view themselves as Arab as much as Shiite are also concerned that Tehran is pushing to make Iraq more like Iran rather than respecting its differences.

In that line of thinking, although the Iranians have reached out, the effort seems intended more to ensure that Sunnis are also in Iran’s ambit than to be inclusive.

Iran “is pulling Iraq away from its Arab homeland and identity,” said Ayatollah Sheikh Fadhil al-Badairi, one of the Iraqi Shiite marja, or religious leadership, in Najaf.

And that undermines Iraq’s “special character,” he said, which is Arab and religiously diverse.

That does not dim the importance of the role Iran played when the Islamic State overran northern Iraq. It was the Iranians who moved quickly to help Iraq, creating and expanding the paramilitary forces made up of Shiite militias that came to be known as the Popular Mobilization Forces. Those efforts burnished Iran’s status in Iraq and gave the paramilitary groups the aura of having helped save the country.

Today, there are more than 20 different paramilitary groups, and although they all come under the umbrella of the Popular Mobilization Forces, they vary in their structure and in the depth of their ties to Iran.

More recently, Iran encouraged the creation of a Sunni version of those forces in Sunni-majority areas of Iraq that were overrun by the Sunni extremists of the Islamic State.

Initially, Iran helped provide weapons and training to many of the Popular Mobilization Forces, but it did not have the money to field a large new force inside Iraq for a long time. Now, those forces are funded by the Iraqi government and, technically, are under its control.

Despite the official ties to Iraq, some of the paramilitary groups are viewed as all but directly following orders from Iran, making them a parallel armed force that the government cannot entirely control. At least two of them, Kata’ib Hezbollah and Harakat Hezbollah al-Nujaba, are labeled foreign terrorist organizations by the State Department.

Iranian leaders, top right, pictured on a billboard in Basra, Iraq, in 2018, with fighters from the Iranian-backed Popular Mobilization Forces who were killed in battles with Islamic State militants.Nabil Al-Jurani/Associated Press
Even in Najaf, the intellectual center of Iraqi Shiism and the home of the country’s most revered ayatollah, Ali al-Sistani, the Iranians have staked out ground. They raised the profile of the representative in Najaf of Iran’s supreme leader, Ayatollah Ali Khamenei, enabling the representative to attract more students and more of a following.

Najaf is a center of Shiite studies, and the senior religious figures there have traditionally viewed religion and government as separate realms. In Iranian Shiism, the senior religious leader makes political decisions adhering to Shiite doctrine.

Iran now appears to be trying to extend its influence over the Iraqi Shiite religious leaders, according to Ayatollah al-Badairi of the religious leadership in Najaf.

“They are attempting to strengthen the influence of the Iranian marjiya and weakening the others,” said Ayatollah al-Badairi, who, like some other Shiite figures, says he has been angered that Iran meddles in Iraqi politics but does not invest in Iraq.

“They could have paved the streets for the poor in Najaf, or built a house for the orphans, or brought one company or two,” he said.

What Tehran has principally done is win contracts from Baghdad, meaning that Iranians are getting paid by Iraq rather than bringing their own money and investing and creating jobs, said Mr. Zurfi, the Iraqi member of Parliament, who has a similar critique of the Americans.

Now Iran is pushing for even more commerce, in large part to buffer itself from the impact of the American sanctions that President Trump announced he was reinstating when he pulled out of the Iran nuclear deal, several senior Iraqi politicians said.

Since the sanctions were reinstated, the value of Iran’s currency, the rial, has tumbled, hopes for foreign investment have been dashed and the market for Iranian oil drastically cut.

“Iran wants Iraq to be a market for Iranian goods; it has no other way to reduce the impact of the sanctions,” said Karim al-Nuri, a senior leader in the Badr Organization, one of the oldest of the Shiite paramilitary groups in Iraq.

“Iran is being targeted by the Americans, and because Iran feels targeted, they are trying by all means to protect themselves.”