Key Highlights:
- After 1990, Arar border opened for the first time
- Two countries cut ties following Saddam Hussein’s invasion of Kuwait
- Saudi Arabia agreed to contribute $3 billion to an investment fund for Iraq
Saudi Arabia and Iraq, the two Middle-East countries are expected to increase trade as the Arar border opened last year for the first time since 1990 after the two counties cut ties following Saddam Hussein’s invasion of Kuwait. Now, Saudi & Iraqi traders will get new market opportunities to expand their businesses. Historically, Saudi Arabia exports more to Iraq than it imports from the country.
In 2020, Saudi’s imports from Iraq totalled USD 11.1 million while exports to Iraq totalled USD 671.2 million. Aluminium & its articles are the top commodities, which Saudi Arabia imports to, and export from Iraq.
Iraq is the second-largest producer in the OPEC oil organisation, outranked only by Saudi Arabia. Saudi Arabia exports to Iraq are higher than imports as Saudi goods are majorly shipped to Iraq in order to meet the country’s demand. Saudi Arab’s exports to Iraq showed a rising trend during 2016-2020.
Saudi Arabia majorly imports goods under the aluminium category from Iraq, which registered a rise in value during 2020 as compared to the previous year. Other Saudi’s top imports from Iraq include sugar, organic chemicals, electrical machinery & equipment, machinery and cereals.
Aluminium and its articles are the top categories which Saudi Arabia exports to Iraq. Other Saudi’s main exports to Iraq are dairy products, preparations of cereals, electrical machinery & equipment, plastics & articles and pharmaceutical products.
Arar Border Is Crucial for Trade
In November 2020, Saudi Arabia and Iraq opened the Arar border crossing for trade, for the first time in three decades. Arar was closed in 1990 after the two countries cut ties following Saddam Hussein’s invasion of Kuwait. Iraq has also opened a new border crossing with Saudi Arabia through its Najaf province, hoping for greater cooperation and trade exchange.
Iraq has 11 land border crossings with neighbouring countries, in addition to other crossings in the Kurdish region. The 9 crossings are Arar and Jumaymah with Saudi Arabia, Zurbatia, Al-Shalamjah, Al-Mandhariyah, Al-Shayeb and Mandali with Iran, Safwan with Kuwait, Trebil with Jordan, and Al-Walid and Rabia with Syria. Iraq also has 4 unofficial land crossings in the Kurdish region: Three with Iran and one with Syria. There are also a number of other “unofficial” border crossings in the country.
Saudi $3 Billion Contribution to Iraq Investment Fund
Saudi Arabia agreed to contribute $3 billion to an investment fund for Iraq, thus the two OPEC member states had turned a new era in bilateral trade relations. Iraq maintains ties with both Saudi Arabia and Iran, regional rivals who back opposing sides in Middle East conflicts including Yemen. In July last year, Saudi Arabia and Iraq signed investment agreements on sports and energy.
The historic opening of the Iraqi-Saudi border is an ‘investment gateway’ that will strengthen economic relations after 30 years of sealed land borders between the two nations. It allows the resumption of vital trade and helps boost the Iraqi economy in terms of:
- Ease of Trade: The traders of Saudi Arabia and Iraq can now directly buy and supply goods.
- Transportation of Goods: The transportation of goods will revive trade exchange between Saudi Arabia and Iraq.
- New Opportunities: The companies in Saudi Arabia and Iraq can explore new business opportunities.
The opening of the Saudi-Iraqi border is mostly likely to benefit small and medium-sized enterprises (SMEs) when doing business in a restriction-filled country like Iraq. It is a significant development and points the way to greater Saudi-Iraqi engagement, trade and investment in the future.
