In recent years, domestic and foreign investment in Iraq declined because of the struggle of that country with LIH (banned in Russia — approx. ed.). In addition, the external debt in the amount of $ 40 billion, corruption and budget deficits are not conducive to attracting investment.
Iraq has suffered from severe financial crisis of the mid-2015, which caused the closure of about six thousand projects. The government’s strategy to attract foreign investment has undergone changes in order to prevent further deterioration of the economic situation. When the government have not heard the answer from the foreign capital in its call to invest in Iraq, it changed strategy. The basic principle was to provide numerous exemptions for certain countries to attract companies in these States to invest in various sectors of the Iraqi economy.
Iraq welcomes Russia
In his interview to Russian newspaper adviser of Iraqi Prime Minister for economic Affairs Mazhar Mohammad Saleh said that “Iraq is open for Russian investments in various sectors of the economy.” He pointed out that mutual investments between the two countries are the best way for the development of economic relations. Saleh added that Russian companies can invest in housing, transport communications, the modernisation of Iraqi industry and infrastructure. Then they will be able to benefit from the Iraqi government provided benefits.
With the new easing is expected to gradually rising interest of Russian companies in infrastructure projects in Iraq. Iraqi sources expect that the investment volume will reach two billion dollars at the end of the first half of this year. And this figure will only grow.
Already last year, Russian businessmen expect the growth of Russian investments in Iraq in the case of improving the situation of the Iraqi external debt. However, after the introduction of these benefits by the Iraqi government, it was expected that Russian companies will cease to pay attention to the Iraqi debt following a very impressive offer temptations. It was stated that Russian companies are showing great interest in investing in Iraqi oil fields.
Benefits mentioned by the Advisor to the Iraqi Prime Minister, represent a Golden opportunity for Russian companies to come to the Iraqi market and invest without any difficulties with the receiving party. It is possible that these measures will become the new way that running the Iraqi government after the failure of previous arrangements to attract investment. Benefits for Russian companies and businessmen include exemption from taxes. Discounts on customs tariffs on the import of commodities, goods and equipment in Iraq reaches about 50 %. Russian companies are also freed from the obligation to use the Iraqi labor force, which was confirmed by the decree of the Prime Minister of Iraq Haidar al-Abadi. It is worth noting that Iraqi laws require that Iraqi citizens was not less than 50% in the share of the labor force of any foreign investment project.
Experts believe that entering the Iraqi market, Russian companies will be a good alternative to Western organizations, which left the country after the deterioration of the security situation and the beginning of the fight against “Islamic state”. On the other hand, this will put an end to the domination of some American and European companies that have put forward their conditions to Iraq in exchange for continuing their business. In addition to this, services of Russian companies are considered to be cheaper to service their Western counterparts, despite the difference in quality. At the same time, it is known that Russian companies operate in all circumstances. Thus, their activities will not affect the deterioration of the security situation, so that the witness was Iraq during fighting with ISIS.
Meanwhile, other experts believe that Russian companies are not competitors for American and European companies in the sphere of industry, communication and housing construction. Therefore, the Iraqi government should reconsider their views on the agreements concluded and to offer companies more prepared to work in such strategic projects, presented by Russian companies.
More politics than Economics
The economic goal of inviting Russian companies and provide the benefits observed with purely political intentions. As observers believe, relief for Russian companies in the current situation is a political message from Iran to Washington.
Tehran is considered a major figure in the Iraqi economy and the decision-making process in this country. Iran owns one of the largest Iraqi state-owned trading companies, while the total volume of trade between the two countries reached 12 billion dollars in 2013 and 2014. Iran is also a major role in the Iraqi theater of operations through funding and formation of a loyal militia groups (milesia — approx. TRANS.).
Alternating each other, the Iraqi authorities included in the strategic economic and logistical partnership with Iran through infrastructure and energy projects, trade monopoly on strategic goods, while the seizure of Iranian goods in local markets, according to some experts reached 80%.
It is well known that Iran controls all of the future directions of Iraq, thus shaping the course that would meet the interests of Iran, not Iraq. In light of recent global changes and sharp statements by U.S. President Donald trump against Iran, whether by reason reject the first nuclear agreement or due to the presence of Iran in Syria, which is planned to be stopped, Iran is committed to contribute to the Russian-American rapprochement. It gives Russia certain opportunities in Iraq through consolidating its strategic position. Cooperation with Russia to ensure the minimization of possible damages from trump. And this is not to mention the deepening of Russian-Chinese-Iranian Alliance against the United States.