New Plans between Iran and Iraq: Trade in Dinars and Establishment of Economic Zone

Iranian officials announced a joint proposal to replace the dollar with the dinar in economic exchanges with Iraq, establish an economic zone along the borders of the two countries, and expand trade between them through barter. This news comes as previous significant economic plans between the two countries, such as replacing the route through Turkey for exporting Kirkuk oil with a route through Iran, have recently been canceled and reversed. Reports indicate that Iraq has resumed oil exports from Kirkuk through Turkey, a move welcomed by the United States. Regarding the new decisions, Iraj Masjedi, Iran's ambassador to Baghdad, stated on Sunday, November 18, that 'given the problems arising in banking transactions in dollars, the joint proposal is to use the Iraqi dinar or to conduct imports and exports through barter.' According to Tasnim News Agency, Mr. Masjedi emphasized that the current volume of trade between the two countries is $12 billion, and the target of $20 billion is achievable. This was also mentioned by Hassan Rouhani, the President of Iran, during the visit of the Iraqi President to Tehran on Saturday. Mr. Rouhani also stated that Iran and Iraq have agreed to create a free trade zone between the two countries to establish joint industries in this area. A significant portion of Iran's exports to Iraq consists of natural gas, which is currently under pressure from U.S. sanctions. The United States has only exempted Iraq from recent sanctions on gas imports from Iran for 45 days. However, Barham Salih, the President of Iraq, stated that Baghdad continues its negotiations with the U.S. regarding Iran's sanctions and that the United States should consider the special conditions of his country in this regard. The Iraqi President visited Iran on Saturday, just one day after the resumption of oil exports from Kirkuk through Turkey. Iraq took control of Kirkuk oil last fall after a vote for the independence of the Kurdistan region and tensions in relations with Erbil, and since then, oil exports from this region had been halted. Reuters at that time referred to Kirkuk oil as 'the prize for Iran's intervention in the Iraq crisis' and reported that Baghdad and Tehran were negotiating the construction of a pipeline from Kirkuk to central Iran to export Kirkuk oil through Iran and the Persian Gulf. The failure to realize these plans and the resumption of the Turkish route led to Heather Nauert, the spokesperson for the U.S. State Department, welcoming this development on Friday and assessing it as another significant step in the United States' efforts to reduce Iranian oil exports. However, as reported by Reuters, oil exports in Kirkuk resumed on Friday at only 50 to 60 thousand barrels, which is not a significant number in the oil market. Until last year, exports from this region sometimes reached 300,000 barrels per day. Iraq has also been importing gas from Iran since the second half of last year. Under two separate contracts, Iran is supposed to export 25 million cubic meters of gas daily to Baghdad and another 25 million cubic meters to Basra. Aside from the economic relations between Iran and Iraq, the issue of the Islamic Republic's 'interventions' in this country has drawn protests from U.S. officials. Recently, U.S. Secretary of Defense James Mattis stated that NATO and U.S. forces should provide sufficient skills and training to the Iraqi army so that ultimately this military force stands on its own instead of relying on Tehran. In response, the leader of the Islamic Republic, in a meeting with the new Iraqi President, called for the 'preservation' of the Popular Mobilization Forces (Hashd al-Shaabi), which are Iranian-backed Shiite militia groups in Iraq. Meanwhile, Munqith Dagher al-Mousawi, director of the Iraqi research institute 'Al-Mustaqila,' published the results of a survey in the American newspaper Washington Post, showing that the popularity percentage of the Islamic Republic among Iraqi Shiites has decreased from 88% in 2015 to 47% in 2018. In this survey, the percentage of people who consider Iran a threat to Iraq's national sovereignty increased from 25% in 2016 to 58% in 2018. The halt of Iranian electricity exports to Iraq this summer led to widespread protests in the southern regions of the country, and the Iranian consulate in Basra was attacked and set on fire by protesters. In August, Saudi Arabia offered Iraq to provide very cheap electricity instead of importing electricity from Iran.