Can Saudi Arabia compete as Iran flexes its economic muscles in Iraq?

Riyadh and Tehran's competition for influence in the Middle East has in recent years led to Tehran strengthening its allies in Damascus, Beirut and Baghdad.

By REUTERS
November 12, 2018 14:25
3 minute read.
Can Saudi Arabia compete as Iran flexes its economic muscles in Iraq?

People walk in the entrance of the Iran section of the Baghdad International Fair, in Baghdad, November 10, 2018. (photo credit: THAIER AL-SUDANI/REUTERS)

 
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While Saudi Arabia courted Iraqi leaders behind closed doors at the weekend, its arch-foe Iran made a more public showing by turning out at the Baghdad International Fair, a shop window for business in Iraq.

An entire hangar was set aside for some of the 60 Iranian firms participating. Vendors of steel, chemical products and carpets greeted prospective Iraqi customers with tea and sweets, exchanging pleasantries in Persian and broken Arabic.

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If the region's most bitter rivalry was expected to be on display - last year dozens of Saudi companies also took part - it was an indication of how that is playing out in Iraq. No Saudi firms attended this year.

Riyadh instead focused on high-level meetings, with Oil Minister Khalid al-Falih paying a visit to Prime Minister Adel Abdul Mahdi in Baghdad. The countries pledged to co-operate on oil and energy, while new Iraqi President Barham Salih made Gulf Arab states the destination for his first official trip abroad.

Saudi Arabia and other Arab states have sought to increase their clout in Iraq, and new US sanctions on Iran's oil sector might provide an opportunity. But Iran's influence in areas from politics to trade will be hard to counter.

Riyadh and Tehran's competition for influence in the Middle East has in recent years led to Tehran strengthening its allies in Damascus, Beirut and Baghdad.

In Iraq, Shi'ite militias, some backed by Iran, have been bolstered by their crucial role in defeating Islamic State, and became part of the security forces this year.

Meanwhile, Iran's place as a trade partner was made plain at the annual Baghdad fair, which opened on Saturday. Iran's ambassador attended and its diplomats toured Iranian stalls.

"Iranian materials are very important for Iraq," said Khalid al-Wali, an Iraqi businessman eyeing up an Iranian chemicals manufacturer as a potential supplier.

"Products coming from Iran are cheap. It's a big source for raw materials."

Arash, the chemical company's sales rep who asked for his surname not to be published, said it was the first time the firm had come to Baghdad.

"Iraq is an attractive market to us. It's right next door, and after years of war the country needs cheap supplies," he said. "We've decided to come for the full 10 days of the expo."

Outside the Iranian hall, a lone stall belonging to a company from the United Arab Emirates sold boilers.


Iraqi trade ministry sources said Saudi firms, which had numbered almost 60 last year, withdrew at the last minute. The amount of Iranian companies almost doubled.

MIXED BLESSING?

Saudi firms had a dedicated hangar in 2017, and Falih attended the opening ceremony, the first Saudi official to make a public speech in Baghdad for decades.

Riyadh's commerce ministry did not immediately respond to requests for comment.

Iraq and Saudi began taking steps towards detente in 2015 after 25 years of troubled relations starting with the 1990 Iraqi invasion of Kuwait. The 2003 US-led invasion of Iraq which toppled Saddam Hussein empowered political parties representing Iraq's Shi'ite majority, some close to Iran.

"The Iranian presence isn't hidden in Iraq. It's in various guises - trade, politics, religion," Abdullah al-Zaidi, a senior member of Iraq's Hikma movement, told Reuters last month.

"The Saudi presence is much smaller... the difference being that Iran supported the Iraqi (post-Saddam) government from the beginning."

After Washington restored sanctions last week, some Iraqis might see risk in importing Iranian products, but that seems unlikely to stop them, especially in border areas.

"Most of our goods are Iranian. We get them from the crossings and they're very cheap. There's little transport cost," said Dana Ali, a 56-year-old shopkeeper in the northeast city of Sulaimaniya.

In Baghdad, businessmen saw sanctions as a mixed blessing.

"Our company's not on the sanctions list, but it's made business more difficult in Europe - we had a contract with a British company which canceled recently," Hamed Shahinmehr, representing an Iranian petrochemicals company, said.

"That makes Iraq one of our best bets now."

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