Iraqi, Kuwaiti ports: From competition to partnership
Kuwait is investing heavily in the development of the Mubarak al-Kabeer Port, whose primary economic purpose is to serve the Iraqi market and beyond, perhaps even reaching European markets.
However, the port is risking losing its economic potential because of how the project is being implemented — without close coordination with Baghdad — which is stirring unfriendly political and popular positions in Iraq. The project will result in shrinking even further Iraq’s only already narrow outlet on the Arabian Gulf.
This is visible in the official and popular storms kicked up in Iraq because of the project. On the Iraqi side, the construction project of Al-Faw port, which began 9 years ago but doesn’t show much progress, risks being crippled further.
Iraq can kill Kuwait’s huge investments in its port project by enacting a law banning trade with the Kuwaiti port. The port really is not intended to serve Kuwait’s small market and it is located too far north of the Kuwaiti coast. Besides, there are ports on the southern shores of Kuwait that are better positioned to serve the local economy.
Therefore, if Kuwait is to play a role in this strategic corridor, it must consider Iraqi interests by providing concessions that would appeal to Iraqi business circles and would allay Baghdad’s fears and those of the Iraqi political parties that can easily stoke up popular passions.
It is difficult to come up with reasons that could compel Kuwait to place further impediments on Iraq’s narrow outlet on the Gulf unless the big picture is kept in mind. If Kuwait realises the great potential of this strategic commercial corridor, it could secure an important share of its future revenues but that would be difficult to achieve by forcing the Iraqis to cooperate.
There is a heavy legacy of differences between Iraq and Kuwait that can easily be exploited by some political parties. The most important one of these past confrontations is Iraq’s invasion of Kuwait and the subsequent blockade imposed on Iraq. Kuwait played a role in prolonging that blockade.
Add to that the substantial reparations Iraq paid Kuwait despite Iraqis maintaining that they should not be penalised for the actions of former President Saddam Hussein.
Iraqi Prime Minister Adel Abdul-Mahdi has issued contradictory statements hinting at the possibility of cooperating to develop the ports but he did not specify the details or terms of this cooperation.
There are many parties in both Kuwait and Iraq whose interests or political capital could suffer if such cooperation materialises, including regional parties, such as Iran and other countries.
In economic reality, commercial parties do not care where they get the best commercial facilities, infrastructure or tariffs. In Europe, for example, a German firm can elect to choose a port regardless of its location, whether in Germany, the Netherlands or Belgium.
If the differences between Iraq and Kuwait regarding port development are ironed out, traders and companies will choose the location with the least burdensome procedures, rules and conditions as well as the minimum import and export tariffs.
Opinions are divided about the prospects and the feasibility of Al-Faw port, which is being built at a very slow pace despite the project promising a capacity of 99 million tonnes of freight per year as well as dozens of berths, storage facilities and oil refinery and petrochemical enterprises.
The facilities of Mubarak al-Kabeer port on the eastern coast of Boubyan Island can put pressure on the Iraqi narrow corridor to the Gulf. So cooperation and integration can serve the interests of both countries if they heed shared economic interests and prioritise them over political slogans.
If the opinions of the relevant economic actors were to be surveyed, the establishment of a free trade area between the two countries would be the ideal option, even if that might not appeal to some political parties.
Many decades-old studies show that the development of strategic port facilities in the northern extremity of the Gulf would create a global trade artery that links the East to the West through road and rail networks freighting goods between Asian and European countries, Turkey and possibly Syria.
The Iraqi government reports that many of the projects at Al-Faw port have already been completed and that the digging of the port basin will start soon, although the Iraqi government has allocated only $340 million from this year’s budget towards the completion of the project. That amounts to 10% of the needed amount.
Iraqi officials have been floating the possibility of opening tenders to attract companies to invest in the port’s infrastructure, with revenues and co-management promised in return through long term contracts but widespread corruption and Iraq’s difficult business climate could hamper such plans.
Iraq has five commercial ports connected to the Gulf: Umm Qasr al-Shamali, Umm Qasr al-Janubi, Khor al-Zubayr, Abu Flous and Al Maqal. However, Al-Faw port is a major leap forward because of its location allowing access to the Gulf’s deep waters, which enables the docking of large vessels.
Analysts said cooperation between Iraq and Kuwait in port development would face many obstacles, given the insistence of Iraqi parties that want to seize the potential of the strategic trade corridor for themselves, as well as the manner in which Kuwait is approaching the issue, which hints that Iraq’s neighbour would block the project if it does not obtain what it wants from it.