Rising restrictions on maritime traffic and mounting regional tensions have pushed Iran to rely more heavily on neighboring Iraq as an alternative trade corridor. With shipping routes under pressure and access through the Strait of Hormuz facing growing uncertainty, policymakers and traders are increasingly examining whether Iraq can help compensate for disruptions in Iran’s southern ports and preserve the flow of essential imports and exports.
The challenge is significant. Iranian ports handle nearly 79% of the country’s imports and 73% of exports, making maritime trade the backbone of the national economy. Any interruption in southern shipping activity therefore carries serious economic consequences, from shortages of imported goods to delays in industrial production and export revenues.
Under these conditions, Iraq has emerged as one of the few realistic alternatives available to Iran. During the Iranian fiscal year 1403 (March 2024–March 2025), Iran’s total foreign trade stood at around $130 billion. More than $12.5 billion of that trade passed through Iraqi borders, giving Iraq a 9.6% share of Iran’s overall foreign commerce.
Iran and Iraq are connected through multiple border crossings stretching across West Azerbaijan, Ilam, Kurdestan, Kermanshah and Khuzestan provinces. Major crossings such as Tamarchin, Bashmaq, Parvizkhan, Khosravi, Mehran and Shalamcheh have become increasingly important as pressure on maritime routes intensifies.
At the same time, Iraq is attempting to strengthen its own position as a regional logistics hub. Umm Qasr Port in Basra remains Iraq’s largest commercial port and one of the country’s key gateways to the Persian Gulf. Meanwhile, the massive Grand Faw Port project is under development with plans for 90 berths, including terminals for containers, bulk cargo and oil shipments. The project is designed to handle around 2 million containers annually and could eventually reshape trade routes across the region.
Iraq is already Iran’s second-largest export destination. Out of Iran’s $57.84 billion in exports during the last fiscal year, nearly $11.94 billion went to Iraq, meaning more than 20% of Iranian exports were directed to the neighboring market. Imports from Iraq, however, remain limited and account for less than 3% of Iran’s import demand.
This imbalance reflects the structure of economic relations between the two countries. Iran mainly exports industrial goods, food products, construction materials and steel, while Iraq’s industrial sector remains underdeveloped. Yet the growing instability in regional shipping routes is forcing both sides to reconsider Iraq’s broader role not only as a consumer market but also as a transit corridor.
Main Barriers
Ali Emami, director general of logistics and support at Iran’s Trade Promotion Organization, says Iraq’s border crossings remain among Iran’s most important land trade routes, especially for exports. According to him, the main barriers to expanding bilateral trade are no longer physical infrastructure alone but procedural and regulatory obstacles.
He argues that trade expansion depends first on improving coordination between customs authorities and increasing the daily number of trucks allowed to cross the borders. Better cooperation among customs offices, standards agencies, health organizations, border guards and anti-smuggling authorities would also help reduce delays and improve efficiency.
Emami believes some of Iran’s import needs could increasingly be routed through Turkey and Iraq if pressure on maritime trade continues. Under such a scenario, goods could enter through Turkey’s Mediterranean port of Mersin, move into Iraq’s Kurdistan Region and then cross into Iran through the Tamarchin and Bashmaq border crossings.
Still, officials acknowledge that land transportation cannot fully replace maritime trade. More than 80% of global trade is conducted by sea, and Iran follows the same pattern. Existing road and rail infrastructure simply lack the capacity needed to absorb the massive trade volumes normally handled by ports. As a result, authorities may eventually need to prioritize essential imports over less urgent goods.
Strategic Relations
Yahya Ale Eshaq, head of the Iran-Iraq Joint Chamber of Commerce, describes relations between the two countries as strategic. He says both governments have already signed agreements aimed at increasing bilateral trade to $20 billion annually.
According to Ale Eshaq, recent progress in Iraqi transit regulations could support that target. Iraq has reportedly resolved several legal obstacles related to transit operations and formally communicated updated regulations to customs authorities. The implementation of TIR carnet rules, which allow cargo to move across borders with fewer inspections and guarantees, is also expected to accelerate trade flows.
Despite recent regional tensions, trade between Iran and Iraq has not experienced a major decline. Reconstruction and logistics upgrades at border crossings continue, while negotiations over using Umm Qasr Port as a transit option are also underway.
For Iran, Iraq is becoming more than just an export destination. It is increasingly viewed as a strategic economic lifeline capable of easing the pressure created by regional shipping disruptions and helping sustain trade during one of the most uncertain periods for Middle Eastern commerce in years.
