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Iran expands economic influence on Iraq

WASHINGTON — Iran has dramatically expanded economic ties with Iraq, taking advantage of increased security there to extend its influence.

Iran ranks second behind Turkey among countries exporting goods to Iraq. Iran sold more than $2 billion worth of products in the first half of this year, a 33% increase over the same period a year earlier, according to Global Trade Information Services, which tracks trade data.

Iran's growing economic clout raises concerns because Iran uses business ties to further military and political goals, analysts say.

"This is part of an Iranian effort to exert influence over Iraq's Shiite government," says Anthony Cordesman, an analyst at the Center for Strategic and International Studies.

Iran's economic push comes as the United States makes an effort at establishing enduring economic, political and cultural ties while it draws down military forces. The number of U.S. troops in Iraq is under 50,000 now, and all troops will leave by the end of next year by agreement between the U.S. and Iraqi governments.

The Commerce Department recently led a delegation of executives from 14 U.S. companies to Iraq to try to encourage investment and trade. In the past, U.S. companies have announced a handful of large investments, including General Electric's $2.7 billion contract for power turbines and Boeing's $5 billion aircraft deal.

The United States also has been successful in selling military equipment. Iraq is preparing to purchase up to $13 billion in American arms, military equipment and training.

But American companies generally have been slow to enter the Iraqi market.

"They're holding back mostly because of this constant worry about security ... which is not stopping other people coming in," says Samir Sumaida'ie, Iraq's ambassador to the United States.

Iraq's oil sector is the most lucrative for foreign investors, but only two U.S. companies were among 16 foreign firms awarded recent contracts to develop Iraqi oil fields. Iran's exports range from food to machinery.

Iran is also supplying electricity to parts of Iraq. Last year, Iraq's government awarded an Iranian firm a $1 billion contract to help rebuild Basra, a city in southern Iraq.

Making money is only part of the objective, analysts say. Iran's economic strategy is tied closely to its political and military goals.

"The problem is a lot of these companies are affiliated with or run by the Revolutionary Guard," says Jim Phillips, a Middle East analyst at the Heritage Foundation. The Revolutionary Guard is a powerful institution that has military forces and runs businesses.

"This is not the Iranian private sector in action," Cordesman says.

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