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Why Trade Sanctions Against Iran Are Increasingly Hard For Iraq To Comply With

MARY LOUISE KELLY, HOST:

Now to Iraq, where U.S. Secretary of State Mike Pompeo visited last week. While he was there, Pompeo pressed Iraqi leaders to comply with U.S. trade sanctions against Iran. But Iran is, of course, Iraq's neighbor and one of its biggest trading partners, which makes the sanctions a very tough sell, as NPR's Jane Arraf reports from Baghdad.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED SINGERS: (Singing in foreign language).

JANE ARRAF, BYLINE: Iran's national anthem plays in a Baghdad hotel ballroom just after the Iraqi anthem. Hundreds of Iranian and Iraqi business people crowd around round tables covered in white tablecloths. There are flags from the two countries next to bowls of flowers. They've come to hear Iran's foreign minister, Mohammad Javad Zarif.

(APPLAUSE)

ARRAF: Just a few days after U.S. Secretary of State Mike Pompeo arrived in Baghdad to press the Iraqi government on implementing U.S. trade sanctions against Iran, Zarif showed up with a trade delegation of dozens of Iranian companies.

MOHAMMAD JAVAD ZARIF: (Through interpreter) Between Iran and Iraq, there are historic ties. And today, those ties are even stronger. No one can break them.

ARRAF: He offered to allow Iraqi business people to enter neighboring Iran without visas to increase duty-free zones and to invest more in Iraq's oil and gas industry. The U.S. sanctions reimposed last November are targeted at Iranian oil, banking and shipping. The White House says they're aimed mostly renegotiating a deal that limits Iran's nuclear program.

Iraq and Iran do $12 billion a year in trade. Iraq has told the U.S. it needs Iranian electricity and natural gas and can't find other sources as quickly as the U.S. wants. It has asked for and received waivers for those imports. Iranian business people here say they're getting around the trade ban.

REZA NATEGHI: Let me tell you one thing. No problem. We will find it, same as that we have done last sanction.

ARRAF: That's Iranian Reza Nateghi, the manager of Solico, a major Iranian food conglomerate. Food isn't supposed to be targeted by the trade ban, but because it forbids money transfers to Iran, it affects all companies.

NATEGHI: How you want to transfer your money? How you want to receive? How you want to send your money, even for shipping? No any bank will accept to transfer your money.

ARRAF: You can find his company's products in almost every Baghdad supermarket. A company official says they employ 1,500 Iraqis at the food processing plant and distribution centers. Nateghi says the sanctions will slow their expansion but won't stop it.

(APPLAUSE)

ARRAF: Near the back of the room, a businessman in a suit with no tie - Iranian style - enthusiastically applauds one of the speeches. He's Iraqi, but he works for an Iranian construction company. He asks that his name not be used, like others, in case Iranian officials don't want them discussing business. His company has infrastructure projects in the south of Iraq.

UNIDENTIFIED BUSINESSMAN: (Foreign language spoken).

ARRAF: He says they'll find workarounds to the trade ban majority. Some of those grew out of more than a decade of sanctions against Iraq before the 2003 invasion. In a trading office in Erbil, investment banker Shwan Ibrahim Taha says his firm, Rabee Securities, deals only with the legal banking system. But he says, in Iraq, that system is overshadowed by the thriving business in informal money transfers.

SHWAN IBRAHIM TAHA: The illegitimate banking system in Iraq is much bigger than the legitimate banking system and is more capable, more agile.

ARRAF: Back in Baghdad, businesspeople mill around picking up photos of themselves taken by the conference photographer as the Iranian foreign minister finishes up his speech. Then he's off on a trip that will take him to the north and south of Iraq. He has business to take care of. Jane Arraf, NPR News, Baghdad. Transcript provided by NPR, Copyright NPR.


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