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Rudaw

Analysis

Border closure harmed economies of both Iran and Kurdistan

By Paul Iddon 5/1/2018
The border gate of Bashmakh is a main border crossing with Iran. Photo: AFP stringer
The border gate of Bashmakh is a main border crossing with Iran. Photo: AFP stringer

 

Iran reopened all of its three official border crossings with the Kurdistan Region in early January after previously closing them for three months as requested by the Iraqi government in retaliation for the Region's September 25 independence referendum. The three-month closure conclusively demonstrated that, whereby business trade is concerned, a state of interdependency exists between Erbil and Tehran. Therefore, the consequences of the closure were felt as much in Iran, arguably even much more so, than in Kurdistan. 

In the run-up to the aforementioned referendum, fears of a blockade on Kurdistan by its two large neighbours worried residents who vividly remember the desperate early-1990s when the region was economically strangled and starved by an international embargo on Iraq. The vulnerability of the region was tangible in the immediate aftermath of the referendum, when Baghdad imposed a ban on international flights to the region and demanded the Kurdistan Regional Government (KRG) hand over control of its airports and border crossings. Iran immediately supported Baghdad's punitive measures by closing its own borders with the KRG. 

Despite Turkish President Recep Tayyip Erdogan's bombastic rhetoric about closing off Kurdish oil exports through his country, Ankara did not implement any serious measures against Erbil after the referendum.

Three months after the referendum and the Region has not suffered the kind of blockade many reasonably feared could have befallen it. Tehran's relatively short-lived closure of the border proved counterproductive and actually ended up harming Iran's own border communities. 

In a highly illuminating interview with local Iranian outlet Barish News in late December 2017, Ali Dilmaghaniyan, the Deputy Chairman of Commerce, Industries, Mining and Agriculture of Urmia, outlined just how profoundly negative Tehran's border closure was to the country's frontier provinces. Iran's pursuit of its political goals against Kurdistan, he explained, "badly damaged the economic interests of the country." 

Dilmaghaniyan cited some statistics to illustrate his point. Iran's non-oil exports to Iraq alone, he explained, amount to 15 percent. This is worth approximately $5 billion, $2.5 billion of which is to the Kurdistan Region. "$5 billion is very significant for the country [Iran]," he noted. 

The average value of each ton of Iranian exports is around $350. In Iraq that same average is $500 per ton. "These are goods that cannot be exported to any other country except Iraq and Afghanistan," Dilmaghaniyan added. 

The vast majority of these goods are produced "by small and medium-sized enterprises" which "already had major problems beforehand, the closure of the borders exacerbated these problems." 

Iranian businessmen, particularly those from the country's West Azerbaijan Province, have tried from 2002 to 2017, to "gain a share in Iraq's market, but due to the political decisions made in Iran the market was essentially given to Turkish businessmen instead of our small and medium enterprises." 

Dilmaghaniyan argues that Tehran's readiness to toe Iraq's line on the Kurdistan Region in the immediate aftermath of the referendum harmed Iran's frontier provinces, which were already in relatively poor shape economically. 

"In spite of agreements reached between Iran, Iraq and Turkey over the referendum only Iran's land borders to Kurdistan were closed," he pointed out. "Turkey did not close any of its borders for even one hour." 

Not only did Turkey not close the border with the Kurdistan Region, but on Thursday KRG PM Nechirvan Barzani, in a meeting with Turkey’s new Consul General, stressed the development of ties between the KRG and Ankara.

Not only did Turkey not close the border but its exports to Kurdistan Region actually increased.

Rasoul Khezri, a member of the Iranian Parliament representing Sardasht and Piranshahr, was also quoted by the Islamic Consultative Assembly News Agency (ICANA) this month lamenting the fact that in the past Iranian exports to Kurdistan amounted to 19 percent of its total imports, while Turkish exports amounted to 30 percent and Chinese exports to 11 percent. Since the referendum, however, Chinese exports rose by 20 percent and Turkey's reached an enormous overall 70 percent while Iran has been left with a mere 11 percent. 

"We should not ignore the economic needs of the border communities by strictly adhering to Iraq's policy," Dilmaghaniyan suggested. "Iraq is not 100 percent aligned with any one country, but we closed the border without considering the economic consequences in order to help Iraq and that damaged the country and the border communities." 

He instanced Piranshahr, Sardasht, Oshnavieh and other cities whose main trade with Iraq and the Kurdistan Region "are in the fields of agriculture, industrial and chemical products." 

These industries were "severely damaged" since locals in those areas heavily relied on them and the large export market just over the border "for their livelihoods." 

"These people are already badly disadvantaged economically," Dilmaghaniyan reiterated. 

Even before the referendum the extent and importance of Iran's trade with Kurdistan was evident. Iranian businessmen and local trade organizations expressed a keen interest in increasing trade with their autonomous neighbour. The three-month closure, which wasn't even of all the crossings throughout its duration, was an apt reminder of how important the Kurdistan Region is for the local economies of Iran's frontier provinces. 

The recent protests across Iran were sparked by widespread discontent over corruption and the Iranian economy. Frontier provinces like Iranian Kurdistan, Khuzestan and other economically disadvantaged areas will continue to be flashpoints for similar upheavals and instability in Iran in the foreseeable future if Tehran hinders their ability to conduct business with the Kurdistan Region.

After all, any move by Iran to cut off trade with Kurdistan is actually an implementation of two sanctions by the regime: one against their intended target, Kurdistan and its largely import-reliant service economy, and the other against an unintended target, Iranian exporters who rely heavily on that very market to sustain their own economic well-being and survival.

 

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