Iraq News Now

Iraq’s relations with its Gulf Arab neighbors have been fraught with tensions and misunderstanding over the past two decades, but things have slowly improved since 2018. The government of Iraqi Prime Minister Mohammed al-Sudani has capitalized on the progress made by the two previous Iraqi governments. On February 9, Emirati President Mohammed bin Zayed al-Nahyan hosted Sudani for a visit to the United Arab Emirates, marking the Iraqi prime minister’s first visit to a Gulf Cooperation Council member state. The invitation Mohammed bin Zayed personally extended to Sudani demonstrated the importance attached to the visit as well as Abu Dhabi’s interest in expanding ties with Baghdad. For his part, Sudani wrote an article in an Emirati newspaper ahead of the visit in which he held the UAE up as a model for rebuilding Iraq and thanked Abu Dhabi for participating in the fight against the Islamic State in Iraq and the Levant and supporting Iraq’s postconflict reconstruction. Following the visit, Baghdad and Abu Dhabi issued a joint statement vowing to boost trade, encourage Emirati investment in Iraq, and cooperate on climate and regional stability issues. Additionally, on February 18, Iraq and Saudi Arabia signed their first memorandum of understanding in 40 years, pledging to share intelligence and cooperate on security matters.

A History of Tensions

Iraq and the GCC states have historically had a complex relationship. Iraq was not accepted as a full member of the GCC due to its revolutionary and socialist political system, which was different from those of the Gulf monarchies with close ties to the United States. In addition, Iraq was preoccupied with its war against Iran, limiting its ability to prioritize engagement with the GCC’s founding members. It was, however, granted observer status, though that was revoked following Iraq’s invasion of Kuwait. Yet for the GCC, Iraq served as a crucial bulwark against what it viewed as Tehran’s expansionist agenda, as far back as the Iran-Iraq War, leading it to bankroll Iraq’s war machine. Nonetheless, Iraq’s 1990 invasion of Kuwait ruptured Iraq-GCC relations and reinforced the belief among GCC states that a militarily strong Iraq could pose a major threat to regional security. After the 2003 U.S.-led invasion of Iraq empowered the Shia majority, which, in the eyes of GCC states, was tantamount to handing the country to their Iranian rival, these two GCC threat perceptions regarding Iran and Iraq folded together, generating a level of wariness toward Iraq that continued for much of the past two decades.

Displeased with Iraq’s post-2003 governing system, the GCC states disengaged from Baghdad and backed Sunni organizations and the Kurdistan Regional Government as a counterweight to growing Iranian influence. Funding from GCC states, especially Saudi Arabia, allegedly contributed to the rise of Sunni insurgent groups that contributed to destabilizing the country. This, combined with GCC states’ financial support for Saddam Hussein’s regime during the Iraq-Iran War, led Shias, particularly Shia politicians, to view the GCC states with skepticism. But in Iraqi Kurdistan, investment from GCC states had a different outcome, strengthening the economy and fostering a strong diplomatic and commercial relationship between GCC states, including the UAE, Saudi Arabia, and Qatar, and the KRG. On the national level, however, internal politics, a deficit of trust, and instability thwarted any efforts to improve ties between Baghdad and GCC states.

The dramatic emergence of ISIL in 2014 was a double-edged sword for Iraq-GCC relations. On the one hand, it served as a wake-up call about the need for cooperation and helped oust Prime Minister Nuri al-Maliki, whose sectarian policies were seen as a key cause of both ISIL’s rise and the rift between Baghdad and the GCC states. Haider al-Abadi, who was thought to be less close with Iran and was backed by the United States, became prime minister in October 2014 following months of protests against Maliki’s government. However, the threat from ISIL also paved the way for Tehran to build up its network of armed and political proxies in Iraq and Syria.

These developments forced the Saudis to reassess their overall regional strategy to counter Iran’s expansionism. Policymakers in Riyadh concluded that the costs of disengaging from Iraq were too high. Saudi Arabia and the UAE were likewise aware of the threat posed by groups like ISIL. The unseating of Maliki opened a window of opportunity for Iraq’s Gulf neighbors to move away from their traditionally standoffish approach and begin a cautious, fragmented process of engagement with Iraq. This slow approach was adopted due to a lack of confidence in the new prime minister in Baghdad. However, by pursuing a balanced regional policy and strengthening ties with Saudi Arabia and other GCC states, Abadi proved forceful and steadfast. The GCC states also offered security assistance to Iraq and joined the U.S.-led coalition against ISIL, helping to foster confidence between the two sides.

Restoring Diplomatic Ties

This cautious rapprochement laid the foundation for reengagement between Saudi Arabia and Iraq. In 2015, Riyadh appointed Thamer al-Sabhan its first ambassador to Baghdad in 25 years. However, the ambassador’s comments on the role of Iran and Shia militias in Iraq temporarily set back the relationship, with Iraq calling for the ambassador’s dismissal. Nevertheless, with U.S. support, Iraqi-Saudi diplomacy picked up steam again after the kingdom replaced Sabhan in 2016.

Saudi Arabia and the UAE have also hosted senior Iraqi delegations, including prime ministers and presidents (although Saudi Crown Prince Mohammed bin Salman and Emirati President Mohammed bin Zayed al-Nahyan have yet to reciprocate by visiting Baghdad). Moreover, Saudi and Emirati outreach has gone beyond formal diplomacy. Riyadh and Abu Dhabi each hosted Iraqi Shia cleric Muqtada al-Sadr in 2017. In 2022, Mohammed bin Salman hosted Ammar al-Hakim, the head of Iraq’s Wisdom Movement coalition, who is thought to be close to Tehran. These developments point to shifts in the Saudi and Emirati political calculus regarding Iraq as they saw the value in contesting Iran’s political influence in the country.

Iraq-UAE Economic and Energy Ties

To strengthen ties and take advantage of investment opportunity, GCC countries have also engaged on the economic front. The UAE has particularly focused on infrastructure projects in Iraq. Although initially most of the Emirati investment was in the Kurdistan region, improved relations with Baghdad and improved security conditions have encouraged the UAE to gradually extend investments to the rest of the country. Baghdad and Abu Dhabi signed multiple agreements to promote economic cooperation and investment in 2021. The UAE announced that it would invest $3 billion as part of postconflict reconstruction efforts. Furthermore, Abu Dhabi Ports Group signed a contract with the General Company for Ports of Iraq to explore investment prospects and improve cooperation in the maritime and transportation sectors. Additionally, the Emirati energy company Masdar signed a deal with the Iraqi Ministry of Electricity to build five solar projects in Iraq as a part of the country’s efforts to address power shortages and climate change. These deals were followed by an agreement between the two countries to safeguard investments made by both countries against any noncommercial risks, such as nationalization, expropriation, judicial seizures, and the freezing of investments and assets, reducing the overall risk for investments. The UAE has also expressed interest in supporting Iraqi agriculture and tourism. An Emirati agricultural technology company signed its first agriculture investment deal with the KRG in 2022 to assist farmers in using technology to increase production and manage water efficiently for irrigation.

In February, the Iraqi Oil Ministry awarded three 20-year contracts to develop oil and natural gas fields in Basra and Diyala provinces to Crescent Petroleum, an Emirati company that has long operated in the Kurdistan region. On top of the new opportunity for deepening economic ties, the UAE’s investment in both Kurdistan and the rest of Iraq may contribute to the resolution of the long-running dispute between Erbil and Baghdad over hydrocarbon exportation rights. Crescent Petroleum is the first energy operator with stakes in the Kurdistan region to be allowed to invest in other regions of Iraq, an unprecedented development in relations between oil companies working in the Kurdistan region and Iraq’s federal government, which used to blacklist them.

Crescent Petroleum’s project in Diyala province, home to a large contingent of the Iranian-backed Popular Mobilization Forces, is also a sign that pro-Iranian forces may finally accept Gulf Arab engagement in Iraq because it serves their political interests. By welcoming foreign investment, groups with ties to Tehran can refute claims made by their rival Sadr that they are holding back Iraq’s economy. With Iraq’s provincial council elections scheduled for November, pro-Iranian factions hope to be seen as capable of delivering for the people.

Iraq-Saudi Arabia

Slow, but steady, progress has also been made in Saudi-Iraqi ties in recent years. Saudi Arabia has emphasized increasing economic relations, as part of Vision 2030 diversification goals and as a means of building trust with Iraq. Saudi and Iraqi investors have exchanged multiple visits to explore investment opportunities. Saudi Arabia has announced targets to register around a hundred companies in Iraq. In March, the head of Iraq’s National Investment Commission, Haider Mohammad Makkiya, visited Riyadh, where in a meeting with Saudi officials he stressed the importance of “strengthening economic and investment relations with regional and global countries, including Saudi Arabia.” Additionally, Saudi officials have visited Baghdad to promote economic, as well as diplomatic, ties. In February, Saudi Arabia’s foreign minister met with senior Iraqi officials, including Sudani, to discuss economic cooperation, trade, and collaborating on initiatives to address the effects of climate change.

Through the Arar border crossing, there has been a steady rise in trade between Saudi Arabia and Iraq. According to a Saudi Press Agency report in January 2022, trade had reached $4.7 billion in the previous five years, with Saudi Arabia predominantly exporting dairy products and Iraq exporting aluminum and steel scraps. However, trade remains limited as Iraqi and Saudi trucks cannot enter each other’s territory.

The most anticipated project is an electricity interconnection between Saudi Arabia and Iraq scheduled to be completed by 2024. Saudi Arabia is expected to export 1 gigawatt of electricity to Iraq in the first phase of the project via a 270-mile line running from Arar to Baghdad. A separate planned power project, connecting Iraq to the GCC electrical grid, could provide 1.8 gigawatts of electricity by 2025 from the al-Wafra station in Kuwait to the Al-Faw station in southern Iraq. The GCC-Iraq line is being funded by Kuwait and Qatar, with a budget of $220 million, and the GCC Interconnection Authority signed five contracts in February with the companies implementing the project. Both projects are part of Iraq’s efforts to diversify energy sources in particular to ease its heavy dependency on Iranian gas for power generation and meet increasing public demand.

Taking Relations to the Next Level

Sudani’s predecessors laid the groundwork for strong diplomatic and economic ties with Iraq’s Gulf neighbors, and he now appears poised to take relations to the next level. This rapprochement is a result not only of the recognition by all parties that hostile relations have benefited no one but also of the Iraqi public’s growing demands for an independent and responsive government. Popular attacks on pro-Iranian political parties and anti-Iranian chants by protesters have forced the Shia political elite to revise their approach to both governance and regional policies. Sudani appears to be capitalizing on this popular support, and, as such, he has been able to demonstrate some independence from the groups that put him in power and an ability to maneuver and maintain a balanced regional policy. For instance, when Iraq hosted the Arabian Gulf Cup soccer tournament in January, Sudani challenged Iran over the name of the cup and refused to apologize for using “Arabian Gulf” instead of “Persian Gulf.” The prime minister also waived visa requirements for fans from GCC states to attend the soccer matches in Basra. This provided an opportunity for social interactions and was a confidence-building measure between the two sides. At the same time, Sudani’s government has signed notable agreements with both the UAE and Saudi Arabia, suggesting that Baghdad recognizes that maintaining strong relations with its Gulf Arab neighbors is essential for both political stability and economic growth.