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Iraqi-Jordanian Agreements Stir Up Questions Regarding Baghdad’s Interests

In May 2017, the Future of Iraq Task Force, chaired by former American Ambassador to Iraq, Ryan Crocker, considered that “the restoration of trade routes between Iraq and Jordan [was] working to strengthen the Jordanian economy and thus stabilize Washington’s vulnerable ally”.

Jordan suffers from a worsening economic crisis. Over the years, following the fall of Saddam Hussein’s regime in Iraq, Amman’s problems have increased due to the disruption of the Iraqi “artery” that can be considered the key to reviving Jordan’s economy.

Jordan was once considered Iraq’s life force, after the international community imposed economic sanctions on the country from 1991 to 2003. Now, Iraq is considered Jordan’s life force instead. However, security tensions and terrorist attacks on the common border have blocked this force, causing heavy losses to Jordan.

After Isis took control of the border crossing near Trebil in July 2015, the only border crossing between Iraq and Jordan, the border between both countries was closed off. This reduced the total of Jordanian foreign exports, during the year 2016 by 8.9%, to about $6.1 billion. Imports dropped by $6.2 to $19.22 billion, according to official Jordanian statistics.

“The losses of the truck sector exceeded $1.2 billion in Jordan because of the closure of the border with Iraq and Syria,” said Mohammed Khair Al-Daoud, head of the Jordanian Truckers Association.

After the restoration of the western regions of Baghdad, bordering Jordan, from Isis’ control, Jordan and Iraq entered into talks in 2017 that lasted about 8 months. The opening of the trade crossing between both countries came in August of the same year under US guarantees.

The Future of Iraq Task Force stressed that “the cessation of cross-border trade that is important to Jordan’s economy impedes investment and development projects that contribute to the enhancement of wealth, employment, and stability in the region.” According to the Iraqi Business Council, Iraq’s total private investment amounted to $12 billion.

The most prominent of these projects is the project to invest in International Road No. 1, which starts from the southern Iraqi ports and links to the commercial line inside of Jordan.

US President Donald Trump’s administration believes that investing in the international highway in western Iraq serves two main purposes, “to develop the economies of Jordan and the Anbar province and to move the Iranian-backed forces away from the border with Jordan and Saudi Arabia.”

After 2003, Iraq suffered from political isolation from its neighbouring Arab countries, and Jordan became the road to restoring these relations as it was the first Arab country open to Iraq.

The Reform and Reconstruction coalition of Iraq, led by former Prime Minister Haidar al-Abadi, who is hostile to Iran, sees “the relationship with Jordan as a gateway to better relations with the region,” said coalition member Haidar al-Mulla.

In November 2004, the Jordanian-Iraqi High Committee was formed, headed by the Prime Ministers of both countries, to develop a free zone at the border crossing. This forgotten agreement was re-established by Adel Abdul Mahdi and Omar al Razzaz in order to establish a 24 km joint trade zone when they met in the desert region on the border, marking the start of work on the venture on February 2nd.

However, Baghdad has little political benefits in this agreement, while Jordan sets to achieve great economic benefits. This is confirmed by economic analyst Salah al-Hammash, who said that “Jordan is set to achieve greater economic benefits than Iraq, so Baghdad needs to reduce its losses as much as possible”.

In 2006, Iraq and Jordan signed a deal of understanding that allows Amman to purchase preferential Iraqi oil at $18 below the international price. In 2012, former Iraqi Prime Minister Nuri al-Maliki announced that Amman was given 100,000 barrels of crude oil as a “gift”. Offering oil as gifts to Amman has been a political tradition of Iraq, put into place by Saddam Hussein’s regime.

As part of Washington’s efforts to neutralize the conflicts in the region, Iraqi President Barham Salih visited Amman on November 16th, 2018, and discussed strategic economic agreements with King Abdullah II. The discussions included talks of reviving the agreements surrounding the extension of an oil pipeline from Basra to the Jordanian port of Aqaba, rehabilitating the road between Amman and Baghdad, and establishing a joint industrial zone on the border.

Iraq and Jordan reinstated an interesting agreement in April 2013, one that dates back to the Iran-Iraq war of the 1980s, to build an oil transport pipeline from the southern Basra fields to the Jordanian port of Aqaba. The cost is estimated at $18 billion, with a length of 1,700 KM and a transport capacity of one million barrels per day at a cost of $5 per barrel.

The agreement also states that Iraq will supply 10 thousand barrels of Kirkuk oil per day to the Zarqa refinery at a preferential price of about $16 per barrel, less than the terms stated in the 2006 agreement.

Jordanians consider this agreement a life jacket for the Kingdom that will save it from its economic crisis. To that end, King Abdullah II made a rare visit to Baghdad, the first in 10 years, but one that was preceded by Jordanian Prime Minister Omar al-Razzaz’s, and the signing of 17 economic and security agreements.

However, in a statement sent to 7Dnews, the Oil and Energy Committee said that “the transfer of oil from the Kirkuk fields to the Jordanian Zarqa refinery represents a waste of money and Iraqi wealth”.

In addition to the oil agreement, Jordan obtained excellent trade agreements, including the lifting of the customs tariff on 371 Jordanian industrial and agricultural items entering Iraq in exchange for a 75% decrease in customs on goods imported by Iraq through the Jordanian Aqaba port.

MP Saad Shaker, a member of the Investment and Economy Committee in the Iraqi Parliament, said that “these agreements with Jordan have not been properly studied from an economic point of view, so we see them as harmful to the Iraqi economy, especially as they are anti-local production and will eventually lead to the shutdown of Iraqi factories and workshops”.

Iraq has about 242 government factories, most of which are on hold or disabled, or produce nothing of value. “This economic agreement with Jordan brings nothing to Iraq and harms local production because of a lack of competition,” said Ali al-Saadi, president of the Iraqi Federation of Industries.

Al-Saadi points out that “there are about 50 thousand small industrial projects in Iraq that economically benefit around 6 million people” and that these agreements “will disrupt these projects”. He added that “Jordanian traders import cheap Chinese products and export them to Iraq as Jordanian to benefit from the difference in cost production”.

Based on the data that points to economic damage, MP Shaker said that “the Iraqi parliament will have the chance to review the terms of the agreement to ensure the continuation of the Iraqi industry and economy.”

However, Haidar al-Mulla sees this agreement as a way of moving past Iran’s hegemony. He said that “Iraq is looking for a new electric power supplier. Iran, for example, cut off electricity from Iraq last year, so Jordan is one of the possible alternative outlets.”

According to the joint Iraqi-Jordanian statement, one of the agreements between Baghdad and Amman is that Jordan would provide Iraq with electricity within two years.