Economy, Domestic Economy

Prospects, Pitfalls of Trading With Iraq

Prospects, Pitfalls of Trading With IraqProspects, Pitfalls of Trading With Iraq

No matter how hard the authorities of Iran and Iraq have striven to push economic ties to a higher level, there is no end to challenges facing bilateral transactions.

The prospects and pitfalls of undertaking trade with the neighboring country have been reviewed by the Persian daily Forsat-e Emrooz.

Iraq, which currently has the lowest trade tariffs in the world, has announced plans to make reforms in its tariff system by 2017. The country plans to increase import tariffs from 4% to 25%.

At present, the ongoing war with IS militants not only increased the risk of doing business in Iraq, but it has also scared many contractors and exporters of technical and engineering services away. This is while services hold a major share in Iran-Iraq trade.

Amid western sanctions imposed on Iran’s nuclear energy program, the country banked on trade with Iraq to make up the trade deficit. The two sides have targeted $25 billion in bilateral annual trade.

However, the figure barely reached $6 billion last Iranian year (ended March 20, 2015). This is while forecasts show it could be even less in the current Iranian year.

Many experts believe despite having major advantages, Iran failed to grab a considerable portion of the Iraqi market as opposed to Tehran’s other competitors, especially another neighbor Turkey.

Keyvan Kashefi, a member of the board of directors at Iran Chamber of Commerce, Industries, Mines and Agriculture, attributes Iran’s failure in meeting expectations to domestic problems facing Iranians with regard to doing business with Baghdad.

He refers mostly to inadequate understanding of Iranian traders about the Iraqi market and their unwillingness to accept the risks involved in doing business in the neighboring country as the main reasons behind the unimpressive mutual commerce.

Secretary-General of Iran-Iraq Chamber of Commerce Jahanbakhsh Sanjabi believes there has been a transformation in Iraqi demand from capital goods to consumer goods, which has been a result of government’s strategic thinking amid insecurity, political conflicts and protests against the dull economy.

The risks and disadvantages of the Iraqi market, according to the official, should not prevent Iranians from doing business with Baghdad as there are many unexploited capacities in bilateral ties, especially since Iran is soon poised to open up and increase connectivity with the world economy.

Sanjabi says the recent thaw in Iran-West relations following the July 14 nuclear deal–as part of which sanctions imposed against Tehran over its nuclear energy program are to be lifted–will transform Iran into the focal point for regional trade, given the country’s security, stability and geopolitical status in the region.

“It would be a mistake to neglect Iraq in Iran’s international trade future,” he added.

However, besides promoting trade with Iraq, the official warns that in doing business with the country, traders should exercise caution amid violence and military conflicts there.  

Sanjabi suggests investors make investments in regions along the Iranian border, either in the north of Iraq, the Kurdistan region or in central and southern regions.