Iraq-Iran Trade Routes Thrive Under US Economic Pressure

Iraq has become an essential trade link for Iran as the US ramps up economic pressure on Tehran. The two countries share a 1,600-kilometer border with multiple formal crossings and informal routes. Iraqi Prime Minister Ali al-Zaidi has pledged to bring Iranian-backed armed groups' weapons under state control by September 30.

US authorities have documented the use of Iraqi banks and currency-exchange mechanisms to move dollars to Iran and its allied armed groups. In December 2023, the US Treasury accused Al-Huda Bank of using access to US dollars to support the Islamic Revolutionary Guard Corps-Qods Force and Iranian-aligned Iraqi armed groups.

The Central Bank of Iraq has set the official exchange rate at 1,300 Iraqi dinars per dollar, but the parallel-market rate remains higher. Ali Hamza, a former Iraqi banker, said daily shipments of dollars go to Iran through several border crossings, most notably the Shalamcheh crossing between Basra and Iran.

Iraqi markets carry Iranian products, including agricultural goods, dairy products, iron and steel, household goods, ceramics, and other consumer and industrial items. The value of non-oil trade between Iraq and Iran reached over $7 billion in the first seven months of 2024, according to Iranian customs data.