Iran has dramatically increased imports from Iraq.
The neighboring country exported a total of 1.99 million tons of goods worth $920.48 million to Iran during the first 10 months of the current Iranian year (March 21, 2021-Jan. 20), registering a staggering rise of 2,414% and 793% in weight and value respectively compared with the similar period of last year, according to the spokesperson of the Islamic Republic of Iran Customs Administration.
“During the same period of last year, we imported close to 80,000 tons of goods valued at $103 million from this western neighbor. In talks with Iraqi officials, we have come to an agreement to balance our bilateral trade exchanges, therefore Iran is taking measures to meet a bigger part of its domestic demand from Iraq,” Rouhollah Latifi was also quoted as saying by ILNA.
The official noted that last year, Iraq was the 26th biggest exporter to Iran but, given the above figures, it has now come become the ninth supplier of goods to Iran after the UAE, China, Turkey, Germany, Switzerland, Russia, India and the UK.
“Our main imports from Iraq during the period [March 21, 2021-Jan. 20] were essential goods with more than 1.86 million tons worth $734 million, accounting for 93% and 80% of the weight and value of total imports from Iraq respectively,” Latifi said.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
“The import of essential goods included $329 million worth of wheat, $159 million of field corn, $101 million of soymeal, $55 million of barley, $44 million of unrefined vegetable oils and $36 million of sugar,” he added.
Iran exported 25.04 million tons of goods worth $7.29 billion to Iraq during the same period under review, registering a 12% and 14% rise in volume and value respectively compared with the corresponding period of last year.
According to IRICA, exports mainly included industrial machinery, minerals, construction materials, seafood, livestock, dairy and agrifood products with a total of 2.66 million tons worth $1.22 billion.
Kermanshah in western Iran shares around 371 kilometers of borders with Iraq and the Kurdistan Region.
The province accounts for around half of Iran’s annual non-oil exports to Iraq.
$1.6 Billion in Arrears on Gas Payments
Iraq is $1.6 billion in arrears on its payments for the purchase of Iranian gas, its acting electricity minister has said, urging Washington to allow cash payments despite its sanctions on Tehran.
Despite its immense oil and gas reserves, Iraq remains dependent on imports to meet its energy needs, and neighboring Iran currently supplies a third of its gas and electricity under a tightly controlled waiver from US sanctions, the New Arab reported.
The restrictions, imposed when Washington reimposed sanctions on Tehran after abandoning the nuclear deal with Iran in 2018, require Iraq to pay for its energy imports from Iran in kind, not in cash.
The restrictions then require Iran to use the gas money to fund imports of farm and pharmaceutical products, which must be approved by US officials on a case-by-case basis.
In an interview with state television late Wednesday, acting electricity minister, Adel Karim, said Iraqi arrears on payments to Iran now totaled $1.69 billion.
"These funds remain in the Trade Bank of Iraq and have not been paid to the Iranian government," Karim said.
"With the funds, [Iran] is supposed to buy food products or drugs. This requires lengthy vetting by US government or other bodies before the purchases can go ahead. Given the US government has allowed us to import the gas, it should also allow us to release the funds," he said.
Iran "needs to make very large investments in renovating its infrastructure in the gas sector".
Frustrated by Iraq's failure to pay its debts, Iran has already on several occasions cut its gas and electricity deliveries to Iraq, further aggravating the chronic outages that plague the Iraqi grid.
The Iraqi official said Iranian interruptions in deliveries to Iraq were sometimes due to the shortfalls in its own domestic supply.
"When they need gas, they cut our supplies," Karim said.
He also noted the contract with Iran contained no penalty clauses for failure to honor agreed deliveries.
"I imagine this contract was drawn up rather hastily," he said, adding that an Iraqi delegation was due in Tehran to discuss the issue "in the coming days".
Railroad Connection
Iran and Iraq recently agreed to build a railroad connecting both countries with Iran’s Minister of Roads and Urban Development Rostam Qasemi signing an agreement with his Iraqi counterpart for the implementation of the Basra-Shalamcheh railroad.
The Islamic Republic of Iran Railways and Iraqi Republic Railways plan to establish a joint venture to complete the project within two months, IRNA reported.
The project would connect Basra in southern Iraq to Shalamcheh in western Iran. There are only around 30 kilometers (18 miles) between the two areas. The railroad would be strategically important for Iran, linking the country to the Mediterranean Sea via Iraq and Syria’s railroads.
According to Al-Monitor, this is not the first time Iraqi and Iranian officials have promised to build the railroad. The Islamic Republic of Iran Railways revealed details of a plan to connect Basra with Shalamcheh in 2018. Iraqi Prime Minister Mustafa al-Kadhimi and then-Iranian President Hassan Rouhani also pledged to move forward with the project last year.
Iraq’s Transportation Minister Hussein al-Shibli signed the agreement for the Iraqi side. The delegations also agreed to double the number of direct flights between their countries, according to Tasnim News Agency.
Iran and Iraq have close political and economic relations.
The 32-km-long railroad will be funded by Iran's Mostazafan Foundation.
In May 2021, former deputy minister of roads and urban development, Mahmoud Ghaffari, said an investment of up to €100 million is required to complete the project.
The Iraqi side failed to build the railroad from Shalamcheh to Basra due to economic problems and a shortage of funds.
The launch of the railroad boosts Iran's exports to Iraq and from this route to West Asian and North African countries.
In order to complete the Shalamcheh-Basra railroad, the 17-kilometer Khorramshahr-Shalamcheh railroad was completed in 2011 to connect Iranian railroads to the Iraqi city of Basra.
The project is aimed at facilitating the travel of Iranian pilgrims, especially during the Arbaeen pilgrimage season and travelers could use this railroad from Iran via Basra to Karbala and other holy cities of Iraq.
While Iraqi passenger and freight trains are using the rail link of Basra to Karbala, Iranian pilgrims have been travelling by train from Tehran to Shalamcheh and from there after a 32-km trip by bus to Basra and depart from Basra to Karbala by Iraqi train.
According to Al-Monitor, the railroad is part of Syria’s reconstruction deal … promoting religious tourism among Iran, Iraq and Syria. Syrian opposition parties, however, have rejected the railroad, believing it will entrench Iranian influence and help provide the logistic services necessary for its presence in Iraq and Syria.
Former Iranian president, Hassan Rouhani, says the Shalamcheh-Basra railroad will connect Iran to Iraq, Syria, and the Mediterranean, causing a fundamental change in the region.
"Iran's Khorramshahr, Abadan and Shalamcheh are located in a very important strategic area," he was quoted as saying by Mehr News Agency recently.
"Due to the agreement made with the Iraqi government on connecting Shalamcheh to Basra, we will be able to witness a fundamental change in this region. This will be a very big change, and Iran's railroad will be connected to Iraq and Syria, and in fact to the Mediterranean, which is very important," he added.
