/ “Getting rid of the rentier economy” and “looking for alternatives to oil” are headlines that have been at the forefront of statements by senior Iraqi officials for several years to enhance the state’s resources away from oil, whose prices and fluctuations in global markets have become a worrying concern for many countries where oil is the source. Its main source is to supplement the budget.
With the overthrow of the previous regime in 2003, Iraq’s doors were wide open to foreign investments in various sectors, and European, American, Asian, Iranian and Turkish companies were among the first to initiate this, while the Arab countries, specifically the Gulf countries, were late in entering the Iraqi market in search of investment opportunities, but the situation is It has changed in recent years.
According to a Reuters report, in the Green Zone in central Baghdad, an area protected from the legacy of the war years in Iraq, the finishing touches are being put on the luxurious Rixos Hotel with Qatari funding, which highlights the growing investment interest from the Gulf countries.
Oil and tourism
The government of Prime Minister, Muhammad Shiaa Al-Sudani, hopes to host leaders of the Gulf states and other delegations from the Middle East in the 470 luxurious rooms and suites of Rixos Baghdad when they arrive to attend the Arab League summit scheduled for next year.
The Iraqi government is seeking to attract more investment from the region for an economy damaged by decades of war and turmoil, but which benefits from record oil revenues, which helps stimulate demand for consumer goods from a rapidly growing population estimated at at least 43 million people.
Iraq, a member of the Organization of the Petroleum Exporting Countries (OPEC), has witnessed relative calm since the defeat of ISIS in 2017, despite sporadic acts of violence, including between the ruling Shiite factions and recent attacks from groups allied with Iran.
China, Iran, and Turkey currently represent Iraq’s largest trading partners.
However, the Gulf states, whose relations with Iraq have been complex, have pledged a series of investments as part of their efforts to develop soft power in a country where Iran enjoys unparalleled influence through a strong network of allies. This was achieved in part through a thaw in relations between Iran and Saudi Arabia.
Moataz Al-Khayat, Chairman of the Board of Directors of the Qatari Investment Holding Company, which is behind the Rixos project, said that this is the right time to invest in Iraq, pointing to the Iraqi government’s ability to build huge projects and attract international investors.
He added that Iraq enjoys greater security and discipline. He believes that Baghdad will be one of the most important Arab capitals in the next 25 years.
The Gulf states cut ties with Iraq after the late Sunni president, Saddam Hussein, invaded Kuwait in 1990, but the Shiite factions allied with Iran gained the upper hand when Saddam was ousted in a US-led intervention in 2003.
In 2014, then-Prime Minister Nouri al-Maliki accused Saudi Arabia and Qatar of inciting and financing ISIS fighters in the country, something both countries denied.
Iraqi-Gulf relations
But relations are growing as Baghdad seeks to turn Iraq into a place of cooperation between rivals in the region, as happened when hosting talks between Saudi Arabia and Iran in 2021 and 2022 that helped pave the way for a historic normalization of relations between them in March 2023.
Mahjoub Al-Zwairi, director of the Center for Gulf Studies at Qatar University, said that Saudi Arabia, Qatar and the UAE then began strengthening economic relations with Iraq in an attempt to distance Baghdad from Iran and bring it closer to the “Arab political environment.”
In May 2023, Saudi Arabia said it had allocated three billion dollars to invest in Iraq through the Kingdom’s Public Investment Fund, and later announced a multi-purpose project worth one billion dollars that includes offices, shops, and more than 6,000 housing units.
Qatari investments
The Emir of Qatar visited Baghdad in June 2023, where an investment company signed memorandums of understanding worth seven billion dollars to develop two new residential cities, five-star hotels, and deals to manage and operate hospitals.
Abdul Aziz Al Ghurair, Chairman of the Dubai Chamber of Commerce, said that Iraq is a huge country with great potential, and perhaps they realized there that their biggest and best partner must be from the region.
Exports from members of the Dubai Chamber of Commerce rose almost 96% in the first half of last year.
The Gulf states have also shown increasing interest in the Iraqi energy sector, which is a major area of influence for Iran, which currently supplies Iraq with up to 40% of its energy needs.
Last year, Qatar acquired a 25% stake in a deal worth $27 billion led by the French company Total Energies to develop oil production and capture the gas that Iraq is currently burning, while the Qatari Urbacon Holding Company signed a memorandum of understanding worth $2.5 billion to develop two power plants with a total production capacity of 2,400. MW.
The Emirati role
Last year, Crescent Petroleum, based in the UAE, signed three 20-year contracts to develop natural gas fields in the southern provinces of Basra and Diyala. Saudi ACWA Power intends to establish a solar energy farm with a production capacity of 1,000 megawatts.
Kuwait
Iraq is also working to connect its energy network to Kuwait, and in the future to Saudi Arabia.
Questions remain about Iran’s response to the growing presence of Arab Gulf states in Iraq, and the escalation of violence highlights the fragility of relative stability in the country.
Missile attacks
For more than four months, Iraq has witnessed almost daily missile attacks carried out by Iranian-backed armed groups on American forces present to help local forces prevent the resurgence of ISIS.
Last January, an Iranian ballistic missile attack on the Iraqi Kurdistan region killed a prominent businessman.
Many investors also have concerns about rampant corruption and cumbersome bureaucracy that makes every procedure difficult, from signing a contract to receiving payments, placing great importance on political connections and promises.
Al-Zuwairi said that he was not confident that investments coming from abroad in Iraq would help on the political and economic levels, and attributed this to the spread of corruption and political rivalry.
The Federal Supreme Court in Iraq ruled in September 2023 that an agreement to demarcate the maritime borders with Kuwait was unconstitutional, in a blow to the growing goodwill with Arab Gulf states.
GCC
The court’s decision is final, but the Gulf Cooperation Council described it as invalid. Parliament can ratify a new agreement, and Iraqi officials say that talks in this regard are ongoing.
A Gulf diplomat said, “We remain optimistic about work in Iraq, although there are fears that some in the region may seek to spoil it.”