While donor countries and organizations pledged $30 billion for Iraq’s reconstruction at an international conference held in Kuwait on February 14, Iran – which portrays itself as Iraq’s closest ally – made no financial commitments. Iranian Foreign Minister Mohammad Javad Zari attended the summit, but he presented no plan by Tehran to take part in the Iraqi rebuilding process – indicating that the Islamic Republic may play a negligible role in Iraq’s postwar reconstruction and economic recovery.

According to Seyyed Reza Qazvini Ghorabi, an Iranian analyst of Iraqi affairs, the United Arab Emirates pledged $6 billion to Iraqi rebuilding. Other significant pledges included $5 billion by Turkey, $4.7 billion by the International Monetary Fund, $2 billion by Kuwait, $1.5 billion by the Arab Fund for Economic and Social Development, and $1.5 billion from Saudi Arabia, among others. According Ghorabi, Iranian representatives “for certain reasons” did not disclose the size of Tehran’s pledge to the Iraqi government.

Tehran’s secretiveness may signal the relatively small size of Iran’s commitment, or perhaps the Iranian government feared that pledging billions of dollars to Iraq might trigger a backlash back home. After all, many Iranians who protested against the regime in December and early January chanted slogans against their government’s generous financial and military support to foreign state and non-state actors at the expense of domestic priorities. 

Furthermore, Iranian companies also seem reluctant to publicize their presence in Iraq or their role Iraq’s reconstruction. On February 5, 2018, Ebrahim Rezazadeh, former Islamic Republic trade attaché in Iraq, said “some Iranian investors, for certain reasons, are not particularly inclined to participate at this conference [in Kuwait, or for that matter in] investing in Iraq.” Rezazadeh further explained Iranian contractors and engineers who were active in Iraq did not receive their payment.

While Iranian companies scale down their operations in Iraq, Arab countries are seeking to gain a foothold in the Iraqi market. Asghar Zarei, an Iranian expert of Middle Eastern affairs, believes that the Arab effort is a part of a political strategy. “Saudi Arabia,… is pursing its goals by investing in individuals and political currents in this country,” he claimed.

Iran’s problems in the Iraqi market are reflected in Iraqi import statistics. Last August, Mohammad-Reza Moradi, an Iranian analyst, warned that Iran was lagging behind other competitors in the Iraqi market. According to Moradi, Iran’s exports to Iraq are limited to $6.1 billion, or about 10 percent of Iraq’s total $65 billion imports. In comparison, 22 percent of Iraq’s imports are from Turkey.

The Islamic Republic has succeeded to consolidate the dominant Shiite rule over Iraq and expand its political influence in the country. But the postwar reconstruction of Iraq requires different capabilities, which the small and largely inefficient state-controlled Iranian economy lacks. In the long term, this may undermine Tehran’s military and political gains in Iraq.