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Conflict affects Iraqi imports from UAE

: Sunday, July 06 - 2014 @ 15:28

The rise of extremist ISIS in Iraq has not only resulted in loss of lives and property, but has also affected the flow of goods.

After Iran, UAE is the largest trade partner of Iraq in the region, but supply chains have broken in the past few weeks, especially trading though road transport.

Though UAE was mainly exporting items such as food, textiles, building materials and auto parts to the autonomous Kurdistan province, but Baghdad was also receiving a substantial share of the exports.

Businesses are in a wait-and-watch mode, as the extremist group, Islamic State of Iraq and Syria, started its armed conflict few weeks back and took over cities such as Tikrit, Mosul and areas bordering Syria under its control.

Kurdistan Regional Government has put up a strong defense and has successfully halted ISIS march into the north of Iraq – a Kurd majority area. On the other hand, ISIS is just 80 kilometres away from the Iraqi capital Baghdad.

Politically, it’s an explosive situation but the economic impact of the crisis is no less.

Until last year, Iraqi economy was considered as the fastest growing Arab economy – at the rate of 9-12 per cent.

Dubai Exporters’, an organization that maintain statistics on trade, says: “Dubai had long established trade routes in Iraq. Total exports of AED35 billion had been recorded with an average annual growth of 43 per cent.”

Iraq is a major trade partner for the UAE and ranks 12th among countries importing from the UAE. The two countries, whose bilateral trade in 2012 stood more than $13 billion, have also signed a free trade agreement.

The UAE has organized several trade shows in Erbil – capital city of relatively stable Kurdistan. With a population of about 1.4 million, Erbil is the fourth largest city in Iraq after Baghdad, Basra and Mosul.

Even last month, the UAE’s Ministry of Economy led a delegation of businessmen and officials to Erbil.

As the ISIS now controls most of the western Iraq, majority of roads between Baghdad and Erbil are under the extremist group’s control.

It is too early to factor magnitude of the impact on Iraqi imports, but the good news is that Iraq’s oil sector is largely unaffected by the ISIS onslaught, says global research firm IHS. Once the situation cools down, the trade is expected to resume as governments in Baghdad and Erbil are not short of cash.

In a statement to TRENDS, Jamie Webster, director of downstream research at IHS Energy, says: “The ISIS attacks are not necessarily directed toward oil infrastructure, they are more sectarian in nature.

“To impact crude oil production or exports out of Iraq, ISIS will need to show a substantive shift in its attack focus, bypassing Baghdad and heading far South to attack key infrastructure.

“Such an offensive move will require substantial fuel, and will be difficult to sustain as the Sunni-based enabling forces (cooperating groups) that allowed ISIS to move so quickly in its early June attacks, will not be present in the Shia-controlled regions between their current positions and key oil infrastructure,” says Webster.

As long as Iraqi oil remain safe, the trade will come back on track once the ISIS-led conflict is resolved.

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Sunday, July 6- 2014 @ 15:28 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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