Iraq to Send Delegation to the U.S. for Exemption from Iran Sanctions

Iraqi government and central bank officials state that the economy of their country is so closely linked with Iran that they will ask the U.S. to exempt Iraq from some of Washington's sanctions against Iran. After withdrawing from the JCPOA and resuming sanctions against Iran, the U.S. warned that any country that does not comply with these sanctions will face severe consequences. According to Reuters, the Iraqi government is in a difficult position. The country imports many essential goods from its ally Iran while also being an important U.S. ally that receives military and security assistance from the U.S. The request for exemption from some of Iran's sanctions marks a significant change in the political tactics of Iraqi Prime Minister Haider al-Abadi. Initially, he stated that Baghdad would comply with all sanctions against Iran, which led to severe criticism from his rivals. Iraqi officials told Reuters that a delegation from the Iraqi government will go to Washington to propose the request for exemption, but they did not specify when this trip would take place. An official from the Central Bank of Iraq said, 'The government intends to discuss the exemption request with the U.S. very soon.' An official from the Iraqi Prime Minister's office declined to comment on the matter. A U.S. State Department official stated that the U.S. is negotiating its policy towards Iran with all its allies and friends around the world. He added, 'We have sent the message to all countries that the President of the United States is fully committed to the complete implementation of sanctions. Iraq is a friendly and important ally of the U.S., and we are committed to ensuring the stability and security of that country.' Iraqi officials are concerned that full compliance with sanctions against Iran will lead to severe shortages of essential goods. In the current sensitive political climate, such shortages could lead to chaos and instability. Iraq's imports from Iran include a wide range of goods such as food, agricultural products, household appliances, and auto parts. The value of imports from Iran over the 12 months ending in March this year was about six billion dollars, accounting for approximately 15 percent of Iraq's total imports in 2017. Additionally, the two countries have numerous energy contracts, with a volume of 12 billion dollars last year. Iraqi officials stated that each ministry has been asked to prepare a list of essential items vital for the country's economy, and Iraq will request exemptions for the import of these items. The first wave of U.S. sanctions against Iran, which came into effect this month, targets the trade of gold and other precious metals, the automotive industry, and the purchase of U.S. dollars. The second wave of sanctions, which targets Iran's energy industry, will come into effect on November 4. Al-Abadi has stated that he will comply with the prohibition on transactions in U.S. dollars, meaning that Iraqi banks cannot pay the government or Iranian institutions in dollars. Given the large energy contracts and other significant trade agreements between the two countries, this will be the most challenging issue. Another official at the Central Bank of Iraq said, 'The EU's position on Iran has encouraged us, and if they continue to trade with Iran in euros, why shouldn't we do the same?' U.S. sanctions are particularly sensitive for international private companies that deal with the U.S. However, according to a Western diplomat in Baghdad, most Iraqi private companies have no activities or investments in the U.S. and do not trade in dollars. Therefore, they can continue trading with Iran without any issues. An Iraqi Ministry of Trade official stated that the state energy sector, construction industry, and automotive industry will be severely affected by reduced trade with Iran. However, the most important point is that even if the Iraqi government complies with some sanctions against Iran, full implementation will be very difficult. Many Iraqi traders, especially in the current situation where the value of the Iranian currency has decreased, prefer to trade with that country.