IRANIAN COMMERCIAL ACTIVITY IN BASRAH

C O N F I D E N T I A L SECTION 01 OF 02 BASRAH 000062 SIPDIS DEPARTMENT FOR NEA/IR E.O. 12958: DECL: 6/22/2018 TAGS: ECON EINV ELTN ENRG EPET ETRD PARM PBTS PGOV PREL, IR, IZ SUBJECT: IRANIAN COMMERCIAL ACTIVITY IN BASRAH BASRAH 00000062 001.2 OF 002 CLASSIFIED BY: Won Lee, A/Director, U.S. Regional Embassy Office, Basrah, Department of State. REASON: 1.4 (b),(d) ¶1. (C/REL MCFI) SUMMARY: Iranian investment in Basrah province appears to be limited as Tehran focuses on influencing Basrah's political and security environment. Basrawis suspect Iranian front companies exist, but given their clandestine nature and the use of Iraqi intermediaries have difficulty identifying them. Iranian imports - fruits and vegetables, building materials, and household goods - are widely available in Basrah, but compete with more desirable Chinese products. Basrawis continue to report lethal aid smuggling at the Shalamcha border crossing facilitated by Badr Corps affiliated border agents. Interior Minister Jawad al-Bolani reportedly closed Shalamcha for three months, making it likely that smugglers will temporarily use the non-monitored areas. End Summary. ¶2. (C/REL MCFI) Iranian investment in Basrah province appears to be limited. According to a wide-range of Basrawi sources, Tehran is more focused on influencing Basrah's political and security matters. When it came to investment opportunities, sources claimed the Iranians were more likely to look at Karbala and Najaf. Basrawis also suspect there are several Iranian front companies in the city, probably in the form of small to mid-sized travel agencies or merchandise shops. They admit, however, it is nearly impossible to identify front companies because Iranians are not crossing the border to open up business ventures, but instead use Iraqis as intermediaries. ¶3. (C/REL MCFI) Iranian imports, however, are widely available in Basrah's markets and likely represent the normal amount of trade for a city on the border of a neighboring country. Sources claimed that such goods are not smuggled, but enter Iraq at established border crossing points, like Shalamcha. Saudi Arabia and Kuwait's closed borders leave Basrawis little choice other than to accept Iranian products. Sources, however, also report that Chinese products competing with Iranian made-goods are just as available, slightly cheaper and more desirable for their higher quality. ¶4. (C/REL MCFI) According to Basrawis, the most common Iranian products on the market are: - beverages: bottled sodas and juices - cooking oil - wheat - fruits: melons, grapes, apricots, oranges - vegetables: beans, chickpeas, tomatoes and tomato paste(Iraq was a tomato exporter, but is entirely reliant on Iranian exports now) - plastic household products - rugs, sheets, mattresses - some washing machines - electrical wiring and circuit boxes - cement and bricks - steel: especially construction rebar - exports of Peugeot cars - tires (especially for semi-tractors) - evaporative coolers, which failed to sell due to Basrah's humidity. SMUGGLING AT SHALAMCHA -------------- ¶5. (C/REL MCFI) Several Basrawis expressed their concern that lethal aid smuggling is continuing at the Shalamcha border crossing. We have heard complaints over the past year that Department of Border Enforcement (DBE) officers with ties to the Iranian-founded Badr Corps routinely facilitate smuggling through Shalamcha. Iranian trucks loaded with weapons concealed in the bottoms of vegetable crates or in refrigerators will park at designated loading zones. Instead of transferring the goods from Iranian trucks to Iraqi vehicles for further shipment, DBE agents exchange the Iranian plates for Iraqi ones and allow the vehicles to pass. Inspections are infrequent according to several sources, unless there is a Coalition presence, and DBE agents usually announce them in advance to forewarn smugglers. ¶6. (C/REL MCFI) On June 14, Interior Minister Jawad al-Bolani BASRAH 00000062 002.2 OF 002 ordered Shalamcha to be closed to all vehicles and goods for three months, though the crossing remains open to pedestrians. According to sheikhs in southern Basrah, Iran retaliated to the closure by cutting off Iranian-generated electricity to the province. ¶7. (C/REL MCFI) COMMENT: The porous and poorly guarded Iraq-Iran border has been a problem for a considerable time. Iraqi Security Forces commanders in the province recognize the danger, but lack the manpower necessary to adequately cover the border. With Shalamcha closed, lethal aid smuggling is likely to temporarily move to unmonitored areas and then return once the checkpoint is reopened. End Comment. WLEE