Iraq's Shadow Trade Gives Iran an Economic Lifeline Amid US Pressure

Despite US pressure on Iran, Iraq's shadow trade continues to provide Tehran with economic lifelines. The country's close ties with Iran and its porous borders have allowed for the smuggling of dollars and goods between the two nations.

The official exchange rate in Iraq is set at 1,300 Iraqi dinars per dollar, but the parallel-market rate remains higher due to continued demand for hard currency outside formal channels. According to Ali Hamza, a former Iraqi banker, daily shipments of dollars go to Iran through several border crossings, most notably the Shalamcheh crossing between Basra and Iran.

The value of non-oil trade between Iraq and Iran has increased, with Iranian customs data putting it at over $7 billion in the first seven months of 2024. Meanwhile, Iraqi official statistics recorded about $3.1 billion in non-oil imports from Iran for all of 2024.