In the three-day visit, which intended to continue and deepen the strategic relations of the two neighbors within the framework of prioritization of neighbors in the foreign policy of government of President Pezeshkian, Tehran like the past years pursued economic ties and pushed for their expansion as the top agenda of the Iranian delegation in meetings with Iraqi officials.
As the two countries have set an aim to reach annual $20 billion trade volume in the shortest possible time, this western neighbor of Iran is the top destination of Iranian exports with its $150 billion market.
In this regard, according to Davoud Gudarzi, the secretary of the Iraq desk at the Iranian Trade Development Organization, the volume of Iran's exports to Iraq reached more than $12 billion in 2023, making Iranian share of exports in the Iraqi market 21 percent.
In the meantime, according to Baghdad's plans, in the strategic documents related to the country's development prospects to reduce economic dependence on oil revenues, looking at Iraq as only a consumption market should transform into economic partnerships that are in line with this trend. This issue seems to have been taken into consideration by the officials of the Islamic Republic, especially given the unprecedented visit of Pezeshkian to Basra province.
Connecting Faw port to Turkey
At present and perhaps over the past decade, the Iraqis have focused on advancing a major transit project, dubbed Development Road, under an economic development strategy according to which Iraq will become the ground bridge for passenger and goods transit from the Persian Gulf to Europe through Turkey.
Iraq is a paradoxical example of a country that, on the one hand, has a strategic location that connects Asia, Europe, and other countries in the Middle East and North Africa, but on the other hand due to lack of development, has not been able to keep up with the important logistical role it could theoretically play.
One of the reasons for this gap is uniterest and limited capability of Iraq to develop its port system over years. Over the past decade, the country concentrated on removing this fault especially with focus on heavy investment in Faw port in Basra province south of the country.
The strategic project of Grand Faw Port, which the Iraqis say will be one of the largest ports in the West Asian region, is planned to both expand the country's maritime trade operations and through diversification of the economy to some extent assuage the pressures on the shaky Iraq economy by accepting 36 million of container cargo and 22 million tons of other miscellaneous materials.
Currently, the export of oil and its derivatives through the port system of Iraq is mainly carried out from the port terminals of Khor Al Amya and Umm Qasr Port, which alone are not enough to meet the growing demand for oil exports and imports of goods. Other ports such as Basra Port and Abu Flous Port are secondary ports that can only receive small cargoes. In addition, not all ports have the ability to host giant cargo ships due to lack of depth and equipment like gantry cranes.
A project under development for long years
Efforts to develop Iraq's maritime sector have been discussed since 1919, when British forces studied the feasibility and importance of building the Grand Faw Port. But these plans ended in 1920 after the Iraqi revolution against British colonization. A second attempt was made in 1968 to build a large port in Ras Al-Bisha region, but this plan was also dismissed due to political instability and lack of funds.
In 1997, the Iraqi Ministry of Transportation again conducted a study on the costs and benefits of such a project. Iraq went so far as to negotiate with Russian companies, but the economic and political conditions at that time did not allow the launch of this project.
In 2010, then Iraqi Prime Minister Nouri al-Maliki announced a major project to build Faw port, but the instability and financial burden of the war against ISIS terrorist group put the project on the back burner. Therefore, this project, which started in 2013, did not make much progress until 2019.
Under Prime Minister Mustafa al-Kadhimi, the Iraqi Ministry of Transportation signed a contract worth $2.625 billion with the Korean company Daewoo for the construction of this project in 5 phases, the first phase of which is supposed to be completed by 2025. Under current PM Mohammad Shia al-Sudani, the contract value was announced $5 billion.
Although the General Company for Ports of Iraq (GCPI) expects the costs of the "Development Road" project to reach about $17 billion, it is optimistic that the revenues from the Grand Faw Port project will reach about 6 trillion Iraqi dinars (about $4 billion) by 2038. This figure will mean a significant increase in Iraq's non-oil revenues.
According to the Iraqi budget for next three years, the Iraqi oil revenues are expected to reach $90 billion, and the non-oil income is only $13 billion.
This port will be built in an area of 54 square kilometers and has the capacity of 90 berths, which is about 14,523 meters long and is registered as the world's longest breakwater in the Guinness World Records.
Two industrial areas, residential projects and travel and tourism areas are also being built around this port.
The project also includes an advanced plan to build one of the world's largest underwater tunnels, 2,444 meters long, which will lead to the shallow port of Umm Qasr and will also create new communication routes to improve connections to other parts of Iraq to Basra.
Last February, Iraq completed the construction of about 60 percent of this submerged tunnel, according to Reuters.
By implementing these plans, the Iraqi government hopes to see positive effects on the improvement of the economic and living conditions of Basra province, which is also known as Iraq's corruption capital.
Basra province, as the main gateway for goods entering the country and also the main supplier of Iraq's budget through the oil sector, is one of the poorest provinces in Iraq despite such potentials, and a large part of its residents suffer from the unemployment crisis. According to the estimates of Iraqi economists, in 2018 the unemployment rate in this province reached 20-25 percent among the entire adult population and about 30 percent among the youths.
However, the first major challenge in the implementation of this port agreement occurred when, in the midst of a disagreement between the contractor company and the Iraqi government over the depth, length and cost of the port, in 2020, director of Daewoo in Iraq committed suicide, or was murder, according to some reports.
Data show that Daewoo's bid for the project was more expensive than Chinese companies' bids. Also, some Iraqi political factions considered this project to be in conflict with the country's strategic economic and development interests due to its conflict with China's Road and Belt Initiative.
Still, the development of the port took special priority under al-Sudani, with some calling it the project of Iraq's future.
In January 2023, Iraqi authorities reported completion of 40 percent of the Five Berths project for Faw port and progress in completing other related projects.
It should be noted that Iraq, simultaneously with the development of Faw port as the only deep-sea port in the country, is examining the possibility of building a rail route, known as the Dry Channel, which is intended to be a 1,200 km-long electric train, to connect Faw port to Turkey and then to the European railway network.
On May 29, Farhan al-Fartusi, the director of General Company for Ports of Iraq, highlighted the significance of Faw port, adding that this project is the starting point of Development Road and is inseparable from it. It passes Al Diwaniyah, Najaf, Karbala, Baghdad, Mosul to the Turkish border, he said.
Al-Fartusi added that the basis of the Development Road is a quadrilateral trade alliance including Iraq, Turkey, UAE, and Qatar.
He added that the connection of the Persian Gulf to the Mediterranean, Europe, and Caucasus will economically assist the participating and non-participating counties.
Faw port's opportunity for Iran
It is said that many Turkish companies are involved in the construction of this port, which will play an important role in the geopolitics of energy and trade in the region.
On the other hand, the official news agency of Iraq in April 2024 quoted the PM as saying that Baghdad had reached an agreement with the DP World for the joint management of Faw port. Iraq is hopeful that this tunnel will make a shorter transportation corridor between Middle East and Europe and help Baghdad increase its revenues from transportation.
In fact, with the opening of Grand Faw Port and the launch of the Development Road, a new trade route will emerge, which is expected to be a competitor and even an alternative to the Red Sea-Suez Canal route, as it will reduce the time of transportation between China and Europe by 20-25 days. Also, since the canal is deeper than the Suez Canal, it can accommodate larger cargo ships.
Furthermore, since Iraq is not directly part pf the India-Middle East-Europe Corridor (IMEC) announced at the G20 meetings last year, Baghdad hopes to share and integrate the Development Road project with China's Belt and Road Initiative.
Currently, the loss of the Russia-Ukraine line that forms the northern corridor of China's Road and Belt Initiative and the instability in the middle corridor that arose after the US withdrawal from Afghanistan seem to push China to seek new safe routes through the Persian Gulf and therefore regional actors are competing to engage as much as possible in this project.
In the past years, Iran has also tried to use its geopolitical position to become an important actor in North-South and East-West transit corridors.
In the meantime, Iraq hopes to link Iran to its south-north corridor and Faw port by completing the Basra-Shalamcheh railway, which is about 30 kilometers long. That's why Iraqis see Iran's East-West corridor as a complement to the FAW-Ceyhan corridor project. Therefore, Faw port project can be a supplement adding to the importance of Iran's big port of Chabahar project. Actually, the construction of a massive rail network can connect the Far East and Asia through Iran to Iraq and from there to Europe.
At the same time if Iraq accepts the route and rail corridor from Basra to the Syria borders, the Iranian railways will be linked to the Syrian and Lebanese ports on the Mediterranean coasts.
No comments:
Post a Comment