July 6, 2011 / 6:58 PM / 8 years ago

Iran seeks to raise trade with Iraq to $10 bln this year

* Iran eyes Iraq’s energy sector for business

* Iraq needs foreign investment to help rebuild after war

By Khalid al-Ansary

BAGHDAD, July 6 (Reuters) - Iran aims to boost trade and investment with neighbouring Iraq to $10 billion this year as it looks to further strengthen economic ties, especially in the oil sector, an Iranian official said on Wednesday.

Relations between the two countries, which fought an eight-year war in the 1980s, have improved since the ousting of Saddam Hussein in the 2003 U.S.-led invasion and after a Shi’ite-led government came to power in Iraq.

Shi’ite Iran is now Iraq’s second-biggest trading partner after Turkey.

“The big Iranian companies have the ability to engage in trading and investment in Iraq in oil, gas, petrochemicals, agriculture, heavy industries, electricity and religious tourism,” said Hassan Kazemi Qomi, head of the Iraq-Iran economic development committee and Iran’s former ambassador to Iraq.

“Trading between Iraq and Iran reached $6 billion last year... We’re looking to make it $10 billion this year and $20 billion in the coming five years,” he said.

Despite U.S. and U.N. sanctions on Iran due to its disputed nuclear programme, trade relations with Iraq have flourished.

Iran has invested in building power plants, schools, hotels and brick factories as part of Iraq’s reconstruction efforts. Iranian exports to Iraq include construction materials, petrochemicals, industrial and medical equipment and food .

Iraq’s cabinet approved a $365-million contract with Iran last Wednesday to build a pipeline to move gas from Iran to Iraq for power generation. The five-year deal will generate 2,500 megawatts for Iraq, which has a chronic electricity shortage.

On Wednesday Iraq signed agreements with Iran covering health, communication, finance, education, and culture.

“These agreements (MOUs) are the starting point to bolster relations between the two brethren countries,” Iraqi Prime Minister Nuri al-Maliki said at a news conference with Iranian Vice-President Mohammad Reza Rahimi.

“I encourage Iranian businessmen and investors to invest in Iraq in all fields,” Maliki said.

At an economic forum in Baghdad on Wednesday, Iranian businessmen expressed a keen interest in investing in Iraq’s vital oil industry.

“We are very, very eager to get involved in energy projects in Iraq. We have knowledgeable engineers in the oil business,” Hameed Ridha, commercial manager of the Shahed Oil and Energy Group, told Reuters. “We are very anxious to get involved in(building) refineries.”

Iranian businessmen said one hurdle in trading with Iraq was that deals were mainly done in U.S. dollars and euros, making it difficult for Iran, which is under international sanctions.

Iraq, which has been slow to rebuild since the 2003 U.S.-led invasion, needs investment in virtually every sector.

“We were isolated from the outside world. What we see is that they (Iran) are (more) developed in making cars, construction materials and other industries,” Salah Mehdi, owner of al-Dammam construction company, said. (Editing by Serena Chaudhry and Michael Roddy)

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