Iran-Iraq

=Snapshot= Iran and Iraq have a long and complicated history in which factors of economic, religious and military nature are often intertwined. The two countries fought the longest conventional war of the 20th century between 1980 and 1988 when Saddam Hussein invaded Iran after the Iranian Islamic Revolution.

Iraq and Iran have developed extensive economic ties since the fall of Saddam Hussein in 2003, with trade between the two states increasing tenfold between 2003 and 2010, according to Iranian officials. According to the United States Institute of Peace, Tehran has wielded substantial political influence in Iraq since 2003 and enhanced its 'soft' power in the economic, religious and informational domains. They also claim that Iran provided support to Shia insurgent groups and militias within Iraqi borders.

After visiting Iran in October 2010 and meeting with president Mahmoud Ahmedinejad and Ayatollah Ali Khamenei, Iraqi Prime Minister Nouri al-Maliki described the two countries’ relationship as "strategic", saying "we ask Iran and our neighbors to support our reconstruction and to boost economic and commercial co-operation, which will help improve stability in our region."

=Iranian political influence in Iraq=

UPI reports speak of Iran's "ceaseless efforts" to dominate its western neighbour politically and economically since 2003. Prior to US withdrawal from Iraq, Iran had been waging a clandestine war against US interests in Iraq and poured billions of dollars into building up a vast patronage and intelligence network in the country, giving them significant political influence. This trend was said to have accelerated since the withdrawal of American troops from Iraq in December 2011. By uniting Iraq's three major Shiite political factions, the Islamic Supreme Council of Iraq (ISCI), the Dawa (Islamic Call) party and the Sadrists, Iran hoped to translate a Shiite demographic majority into political influence.

This influence has been achieved with mixed success. Between 2003-2005, Iran helped assemble a Shia Islamist bloc, the United Iraqi Alliance, encompassing all three major Shia factions. The alliance won 128 of the 275 seats in the December 2005 Iraqi parliamentary elections, with senior Dawa leader Nouri al-Maliki selected as Prime Minister. The provincial elections in January 2009, however, were seen by US state organs to demonstrate the Iraqi public's rejection of Iran's political influence. Maliki's nationalist State of Law party made some gains, but the other two Shia political factions, the ISCI and the Sadrists, suffered setbacks.

George Friedmann of US global security consultancy Stratfor said that "the possibility of Iraq becoming a puppet of Iran cannot be ruled out, and this has especially wide regional consequences."

=Cross-border fields and energy cooperation=

Oil fields in border regions have long been a point of vital interest for both Iraq and Iran. After decades of contentious relations while Saddam Hussein was in power, culminating in the Iran-Iraq war from 1980-1988, Saddam's fall in 2003 provided a new opportunity for Iran and Iraq to re-embark on the issue of their shared frontier. Iraq and Iran have 23 joint oil fields in border regions, including the Badra field and the Majnoon field, which geologists consider to belong to the same structure as Iran's Azadegan.

The unitisation of these frontier fields, or agreement between entities on how to divide geological structures divided by a border, has the potential to create bilateral tension, according to US diplomatic cables. Meetings between Iraqi and Iranian officials in 2009 helped negotiations on this issue gain some momentum, and as of March of that year the Iraqi Ministry of Oil was attempting to develop a model unitisation agreement to exploit the cross-border fields. In May 2010, Iraq and Iran agreed on a Master Development Plan (MDP) for the development of five shared, unnamed oilfields in the border region. Iran and Iraq have different legal and contractual systems to develop their oil and gas fields, but the MDP could be a step toward bringing shared field development onto the agenda, according to Iranian press sources.

Iraq and Iran have also increased cooperation in the natural gas sector. In May 2011 the two sides signed a provisional agreement that would allow Iraq to import 25 million cubic meters (mcm) of Iranian natural gas per day and use it to power electric plants north-east of Baghdad. Then in July 2011 Iraq, Iran and Syria signed a $10 billion deal in which the three states agreed to construct a natural gas pipeline from southern Iran through Iraq and extending to Syria; Iranian officials have indicated that the pipeline would eventually extend to the Mediterranean Sea through Lebanon. Under the deal, Iraq would initially receive about 20 million cubic meters of natural gas per day.

='Reserve wars' and OPEC quota issue=

Both countries are members of the Organization of Petroleum Exporting Countries (OPEC) which supplies about 40 percent of the world’s oil. Estimates of proven reserves are a sensitive issue among OPEC member states, as reserves are a main consideration behind the production quota each member is entitled to.

Iraq and Iran have a history of conflict over the OPEC quota. During the Iran-Iraq war of the 1980s, Iraq demanded an output quota equal to Iran's. As of late 2012 Iraq was still exempt from a quota as it recovered from years of war. After Baghdad signed landmark agreements with international oil firms in 2009 to dramatically raise its oil output, Iraq and Iran began a series of 'reserve wars' in which each side successively revised up its proven oil reserve estimates. In late 2010, Iraq raised its proven crude oil reserve estimates to 143.1 billion barrels, a rise of 25 percent. Weeks later Iran said its own oil reserves now stood at 150.31 billion barrels, a 9 percent rise over the previous estimate.

If Iraq succeeds in its planned oil production increase from 2.7 million barrels per day (bpd) in December 2011 to to 12 million bpd by 2017. the increased oil supply could cause global oil prices to drop. OPEC could then be forced to slash other member states' quotas, thereby reducing their global market share, to accommodate Iraq's new capacity and temper the drop in oil prices. In this case, Iran could be the hardest hit, according to industry analyst Samuel Ciszuk. He notes that Iran barely managed to break even fiscally on oil prices at 2010 levels, and permanent loss of its global market share could be a heavy blow. According to the International Business Times, Iran and Iraq's successive claims of higher reserves are a politically motivated attempt to build up a long-term defense of their respective OPEC quotas. Issam al-Chalabi, a former Iraqi Oil Minister, told Reuters news agency that both Iraqi and Iranian claims of higher reserves were "unreliable" and unsubstantiated by proper evidence.

Despite this warring period, UPI reported in early 2013 an emerging alliance between the two countries within OPEC, highlighting that an Iran-Iraq agreement, creating a strategic zone that produces at least one third of the world's oil supplies, could have immense geopolitical implications.

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