Iran could be deprived of spoils of war

As ever, improvement of relations with Washington remains the key for real success for Iranian companies in the Middle East, even in Damascus and Baghdad.
Sunday 24/03/2019
A balancing act. Syrian President Bashar Assad (R) walks alongside Iran’s First Vice-President Eshaq Jahangiri (L) in Damascus, January 29.         (AFP)
A balancing act. Syrian President Bashar Assad (R) walks alongside Iran’s First Vice-President Eshaq Jahangiri (L) in Damascus, January 29. (AF

Iran and its allies prevailed in the military conflicts in Syria and Iraq but the regime in Tehran now faces the very real prospect of being deprived of the spoils of victory: Will Damascus and Baghdad risk Washington’s wrath by ignoring US sanctions against Iran and allow Iranian companies to take part in the post-war reconstruction of Syria and Iraq?

There are no straightforward answers to the question and there are significant differences between the readiness of Damascus and Baghdad to economically engage with Iran. A flurry of diplomatic activity, culminating in Syrian President Bashar Assad’s February 25 visit to Tehran and Iranian President Hassan Rohani’s March 11 visit to Baghdad, provides insights into these differences and opportunities and challenges faced by Tehran.

Disregarding Washington’s policy of countering “Iranian expansion and regional influence,” last September, the Damascus International Fair hosted 15 countries and 236 companies, including 54 Iranian companies, offering to participate in Syria’s reconstruction.

Tehran followed up by sending an economic delegation headed by Iranian Vice-President Eshaq Jahangiri to Damascus on January 28. Beyond signing memorandums of understanding to circumvent US banking sector sanctions and ease financial transactions between Iranian and Syrian companies, Jahangiri expressed Tehran’s interest in “connecting the Persian Gulf to the Mediterranean by railroad.”

Assad, on February 25, during his first visit to Tehran since the beginning of the war in Syria, emphasised: “Iran and Syria must constantly expand economic relations in order to neutralise conspiracies of the enemies of the nations of both countries.”

It is yet to be seen whether Damascus lives up to its declared intentions or will limit Iran’s participation as a gesture of goodwill to Washington. Iran’s contribution to Syria’s post-war reconstruction appears to be limited to Iranian contractors, in particular, Khatam al-Anbia Construction Base of the Islamic Revolutionary Guard Corps, planning to build 200,000 housing units in Syria.

The Iraqi government, which is much more dependent on Washington’s support, treads even more carefully than Damascus. Baghdad appears willing to maintain trade relations with Iran, yet tries hard to accommodate Washington. Baghdad’s balancing act has resulted in mixed performance of Iranian companies in different sectors.

Seyed Hamid Hosseini, chairman of the Iran-Iraq Chamber of Commerce, last July reported Iran’s share of Iraq’s import market was limited to 20%, while China boasted a 23.5 % share. In general, however, Hosseini was optimistic about the prospects for increasing Iran’s annual $8 billion non-oil exports to Iraq, which are exempted from the US sanctions.

The less optimistic Iranian Oil Minister Bijan Zanganeh, at a February 5 news conference, complained: “Our monthly natural gas export to Iraq exceeds $200 million for which they don’t pay [under the pretext of adhering to US sanctions]… Iraq also owes us $2 billion for electricity imports… [Baghdad] has many a way to help Iran all of which we suggested to the Iraqis, but they did not accept it.”

The joint communique issued by the governments of Iraq and Iran during Rohani’s visit to Baghdad, declares the intention of the two countries to expand economic relations and even extend a railroad from Shalamcheh in the Iranian province of Khuzestan to the Iraqi city of Basra.

But how can such objectives be achieved when the Iraqi government uses the pretext of US sanctions to evade its debts to Iran? The difference between Zanganeh’s account and government communiques, therefore, appears to be one between declaration of intent and actual behaviour and the gap between the two is likely to persist. Iran’s non-oil exports to Iraq may on the other hand increase as predicted by the chairman of the Iran-Iraq Chamber of Commerce, since they are not subject to the US sanctions regime.

None of this bodes particularly well for Tehran’s plans to take advantage of the post-war reconstruction of Syria and Iraq. As ever, improvement of relations with Washington remains the key for real success for Iranian companies in the Middle East, even in Damascus and Baghdad.

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