Iran has been struggling to increase its oil and gas output recently, especially of natural gas from the South Pars Field, a joint field with Qatar, despite the fact that US sanctions make it almost impossible for Tehran to sell its output.
Though Iran is exempt from the so-called OPEC+ agreement to cut its production, renewed a few months ago, it has not been reaching even a quarter of its initial quota.
The “squeeze” policy of Washington towards Iran designed to reduce its oil exports to zero has left the country pumping roughly a quarter of a million barrels per day (b/d) of oil into the market (non-official figures put it at some 600,000 b/d), with little significance to global oil supply.
Tehran is also anxious as Iraq has started complying with the quotas agreed under the OPEC+ agreement, meaning that Baghdad can no longer be used to pour more crude into the market as a way of intimidating OPEC kingpin and Iranian rival Saudi Arabia.
At the same time, Iran is wary of an Iraqi shift towards its Gulf neighbours since new Iraqi Prime Minister Mustafa Al-Kadhimi came to power in May. Saudi Arabia has intensified its contacts with the Iraqi government, not only by bringing Iraq in line with the OPEC+ production cuts agreement, but also to lure Baghdad away from Iranian influence and back to its natural Gulf and Arab fold.
Since the US-led war on Iraq in 2003 and subsequent Anglo-American occupation of the country, Iran’s influence in Iraq has grown exponentially. Pro-Iran political groups and militias have dominated the Iraqi scene, raising serious concerns among the Gulf countries and in the Arab world as a whole.
There have been various attempts to court Iraq and to draw it away from Iranian influence, especially by the UAE and others, but Tehran has been able to outmanoeuvre these attempts. However, Iran is now in a weaker position, and it is suffering from the maximum pressure policy adopted by the US after President Donald Trump withdrew from the nuclear deal between Tehran and the world’s major powers in May 2018.
In this context, a Gulf and Arab overture to Iraq would be plausible and might bear fruit.
During his first visit to Washington as Iraqi prime minister last month, Al-Kadhimi heard from the Trump administration that he needed to decrease Iraq’s dependence on Iran and draw closer to the Gulf countries. Though the Americans renewed some of the exemptions from the sanctions against Iran that Iraq enjoys, they also told the Iraqis they needed to find an alternative to Iran’s influence in their country.
It has emerged that Washington has been facilitating negotiations between Iraq and Saudi Arabia on closer relations, including on electrical grid tie-ups with Riyadh and Kuwait that would reduce Baghdad’s dependence on Iran. Iraq has been experiencing problems with electricity recently, and recurrent blackouts were one of the main reasons behind the anti-government protests in the country over recent months.
Iraq imports electricity and gas from Iran to meet its mounting demand for power. But according to Iraqi and Saudi officials, an agreement on exporting Saudi power to Iraq is in the final phases, and there is also potential for Iraq to link its grid to neighbouring Kuwait.
In statements to the press during his visit to Washington, Al-Kadhimi said that “to expedite the linkup, US officials helped facilitate meetings in recent months between Iraqi electricity and energy officials and counterparts in Saudi Arabia, the United Arab Emirates and other states.”
The Saudis are also ready to increase their cooperation with Iraq in other respects. Trade between Baghdad and Riyadh currently stands at no more than $400 million a year, compared to the around $10 billion worth of trade between Iraq and Iran.
The imbalance will need billions of dollars in investments and joint ventures plus increasing trade to correct. Saudi Arabia has recently started talks on potential investments in the $2.2 billion Al-Ratawi project in Iraq, which aims to redirect the large quantities of natural gas that Iraq wastes through flaring gas released during oil extraction towards power generation.
This should also help Iraq lessen its gas imports from Iran. Saudi Arabia is also studying joint investments in solar energy within Iraq and exports of electricity from renewable projects in Saudi Arabia to supply Iraq.
Apart from the energy projects, the Saudis and Iraqis are also discussing the construction of a $1 billion, 100,000-seat sports stadium in Iraq to be funded by Saudi Arabia and built by some of its contractors.
The Iraqis also want Kuwait to delay or cancel the around $3 billion that Iraq owes Kuwait as reparations for the Gulf War in the early 1990s. Though the Kuwaiti position on the proposal is not clear, Saudi and Emirati efforts could soften it for the sake of “reclaiming Iraq” from Iranian dominance.
The Gulf courting of Iraq seems to be focusing on the economy, yet it is also being complemented by parallel efforts by other Arab countries to strengthen their ties with Iraq. Regular tripartite meetings between the leaders of Iraq, Egypt and Jordan since early last year have been another approach, the most recent being held in Amman late last month with Al-Kadhimi.
Previous summits were attended by Iraqi President Barham Saleh, and the first, in March 2019, was attended by then Iraqi prime minister Adel Abdel-Mahdi.
Iran is monitoring these efforts by Gulf and other Arab countries to strengthen their ties with Iraq with concern. An article in the Iranian English-language daily the Tehran Times concluded that these efforts, along with American ones, might not convince Iraqi officials to abandon their reliance on the relationship with Iran.
Yet, it said that “despite all the efforts made by the US and other Arab nations, Iran has no objection to Iraq expanding its energy relationships with the world.” The Iranian ambassador to Baghdad also said in an interview that “bilateral relations between countries are basically internal and related to the foreign policy of each country. We do not intend to interfere in an internal matter. Iraq is our friend and a brotherly country, and its leaders recognise their national interests better than anyone else.”
Of course, it is not wise to take such diplomatic language at face value. Tehran in fact is more likely to be truly anxious that this time around Gulf and Arab attempts to “reclaim” their brotherly country of Iraq from Iran could work.
*A version of this article appears in print in the 10 September, 2020 edition of Al-Ahram Weekly