Iraq Braces for Economic Fallout from Heavy Reliance on Iran amid Escalating Conflict
While Iraqi authorities and political parties maintain a publicly cautious and reserved stance, behind closed doors, concerns are mounting over what many see as Iraq's overreliance on Iran in critical sectors such as energy and trade.
A political source speaking to Asharq Al-Awsat revealed that, although officials are holding back from public commentary, there is a growing consensus among political actors that Iraq could face significant disruption regardless of how the conflict unfolds. 'There's an unspoken recognition that many things will change after this war,' the source said.
Already, early signs of strain are surfacing. Iraq's Ministry of Trade unveiled a new contingency plan this week to safeguard food security amid fears of disrupted supply chains.
Spokesperson Mohammed Hanoun stated the plan aims to 'ensure continuity of essential supplies without significant price hikes,' through the buildup of strategic reserves and strengthened market oversight to prevent hoarding or price manipulation.
Security services, meanwhile, reported the arrest of 660 individuals accused of exploiting regional instability. More visibly, daily life is beginning to feel the pressure: consumer activity is slowing, prices of some goods are creeping up, and travel logistics have grown more complex.
With Baghdad International Airport temporarily closed, Basra has become the only functional air entry point. According to sources, the cost of returning to Iraq by land via Jordan has soared from $70 to $250 per passenger.
Experts warn that Iraq's economic fragility and its deep entanglement with Iran leave it acutely vulnerable. Dr. Siham Youssef, a professor of international economics, explained that Iraq's heavy dependence on oil exports - comprising over 90% of state revenue - offers little cushion in times of geopolitical upheaval.
While global oil prices have risen by 8% to 12%, Youssef cautioned that any benefit could be wiped out by rising transportation costs, insurance premiums, or damage to infrastructure.
Compounding the issue is Iraq's reliance on Iranian gas for electricity production. If the conflict interrupts Iranian gas flows, Iraq may face severe power shortages, rising costs, and mounting pressure on an already stretched budget.
Shipping risks are also increasing, with Iraq's ports located dangerously close to potential conflict zones. Youssef noted that international shipping and insurance firms may soon classify Iraqi ports as 'high-risk,' leading to surging logistics costs. Additionally, the closure of Iraqi airspace threatens not only civil aviation but also the loss of overflight revenues.
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