Why is Qatar investing in Iraq?

Qatar investment in Iraq

Qatar plans to invest $5 billion in various sectors in Iraq in the coming years, as announced by Qatar’s Emir Sheikh Tamim bin Hamad al-Thani during his official visit to Baghdad. The visit resulted in the signing of memorandums of understanding (MOUs) to expand cooperation in investment and energy projects. Additionally, agreements were reached with Qatar’s private sector in energy, electricity, hotels, and hospital management. The discussions also addressed regional initiatives, such as supporting the development of the Gulf power grid interconnection project and linking it to the southern Iraq network.

Qatar holds a 25% stake in TotalEnergies’ $27 billion energy cluster project in Iraq, with Iraq’s Basra Oil Company owning a 30% share and the rest belonging to TotalEnergies. Qatar has expressed its commitment to supporting regional economies through commercial investments rather than direct financial aid, aligning with other Gulf states. The governments of Iraq and Qatar signed a joint Declaration of Intent for comprehensive cooperation in political, economic, energy, and investment fields.

Moreover, agreements were signed in the fields of air and maritime transport, and a memorandum of understanding was established regarding the abolition of visa requirements for holders of diplomatic passports. Several memorandums of cooperation in the energy and investment sectors were also signed, covering areas such as crude oil supply, liquefied gas supply, the establishment of a joint oil company, and the construction of a refinery.

The Qatari Emir emphasized the significance of his visit to Baghdad, underscoring the strong relationship between the two countries. Both parties discussed initiatives to strengthen relations among regional countries, including the electrical interconnection project. The Iraqi government confirmed the visit of Sheikh Tamim al-Thani to Iraq.

Iraqi-Qatari relations have improved in recent years, with GCC countries reopening their embassies and conducting official visits to enhance bilateral ties. Cooperation agreements were signed, including those related to the supply of liquefied gas and the development of infrastructure for gas reception stations, power stations, pipelines, and refineries. Qatar also pledged to develop residential cities, five-star hotels, and hospitals in several Iraqi governorates, as well as establish power stations in various Iraqi cities.

Iraq’s strategic project

Iraq has recently gained significant strategic and geopolitical importance due to the transport project which it is at the center of being unveiled.

Companies from the GCC and various other countries are showing keen interest in a $17 billion project to construct a 1,175 km rail and road link with Turkey, according to an Iraqi official. Nasser Al-Asadi, a transport advisor to the Iraqi Prime Minister, stated that the project, considered one of the region’s largest rail construction endeavors, has attracted applications from numerous companies in the GCC, Asia, Europe, and Africa. The project encompasses multiple subcontracts and has the potential to generate investments exceeding $100 billion.

Iraq’s Transport Minister, Razzak Al-Saadawi, announced that the feasibility study for the project, conducted by the Italian engineering services company PEG, has been endorsed by the cabinet. The project, which will be co-funded by Iraq and investors, involves the establishment of a high-speed electric freight and passenger train as well as a parallel motorway. It will originate from the under-construction Southern Iraqi Faw Port, anticipated to become one of the world’s largest container terminals, capable of handling 99 million tonnes per year.

The “Route of Development,” a $17 billion project, aims to connect the Grand Faw Port in Iraq’s oil-rich southern region to the Turkish border in the north. This ambitious initiative has the potential to become the region’s key transportation hub, potentially rivaling Egypt’s Suez Canal. The Iraqi parliament’s transport committee has stated that any country interested in participating will have the opportunity to contribute to specific aspects of the project, which is projected to be completed within three to five years.

Efforts are already underway to establish the commercial Grand Faw Port, situated at the northern tip of the Gulf. However, Iraq’s infrastructure has suffered severe damage due to decades of conflict, including the US invasion in 2003 and the subsequent war, as well as the battle against the Islamic State group, which controlled a significant portion of the country until late 2017.

While security measures and direct armed confrontations and bombings have decreased in recent years, political deadlock and uncertainty have hindered the reconstruction process in Iraq.

Economic troubles and instability remain 

Despite Iraq having a functioning government, it faces significant domestic challenges. One of the key issues is the problem of oil exports by the Kurdistan Regional Government in Irbil and the distribution of revenues with Baghdad. This disagreement led to the suspension of oil exports in March. Although an agreement was reached in April for joint marketing and revenue adjustments, politicians are now seeking major modifications, creating uncertainty for major oil buyers.

The country also grapples with serious economic problems, including a large fiscal deficit, the rising cost of public wages and pensions, and uncertainties surrounding oil production and prices, which impact budget projections.

Furthermore, the absence of influential figure Al-Sadr from politics is a potential source of disruption due to his ability to mobilize millions of followers.

Behind the appearance of normalcy, mainstream politicians remain discredited, the youth are frustrated, public services are inadequate, and neighboring countries continue to exert influence. It’s business as usual in Iraqi politics.

Iraq’s economy is burdened with a heavy debt, largely stemming from the international embargo following Saddam Hussein’s invasion of Kuwait in 1990. This legacy restricts the country’s economic potential and puts pressure on state finances, hindering poverty alleviation efforts.

The debt burden has further reinforced Iraq’s overreliance on oil, impeding the development of a diversified economy based on agriculture, tourism, industry, and commerce. Oil sales account for nearly 96% of government income, as revenues from other sectors remain limited. However, recent projects and the approved budget for 2023 signal positive steps toward economic diversification and infrastructure improvement.

Iraq’s parliament has allocated a significant budget of 198.9 trillion dinars ($153 billion) for 2023, prioritizing public wages, development projects, and infrastructure reconstruction. The investment from the Gulf region has the potential to bolster these positive trends and ensure effective utilization of funds.