At first glance, managing and developing ties with Iraq’s neighbours seems to be only one among the many challenges that Baghdad’s new Prime Minister, Mustafa Al-Kadhimi, is facing. However, as Iraq struggles amid economic turbulences, political divisions and the resurgent terrorist threat posed by Daesh, Kuwait and Saudi Arabia’s involvement in the country appears increasingly important.

Kuwait

Among the members of the Gulf Cooperation Council (GCC), Kuwait continues to be the most concerned about the volatile security situation characterising neighbouring Iraq and is keen to avoid that the consequences of such insecurity spill over the border into Kuwait. In particular, Kuwait’s government fears that Baghdad’s fragile institutions are unable to ease Iraq’s Sunni-Shia sectarian tensions amid economic turbulences. Among other factors, sectarianism was key in the escalation of violence that favoured the rise of Daesh in the region. Kuwait City is particularly worried about the terror group’s efforts to re-emerge once again as a powerful foe. Daesh had already targeted Kuwait’s Shia population in the past and radicalised the country’s Sunni youth. The terrorist group’s strategy is to polarise Kuwait’s society along sectarian lines. The fear of attacks and of Daesh-prompted sectarian chaos did much to explain Kuwait’s decision to host and support US-led forces fighting the group in Iraq and Syria.

Beyond the military dimension of the threat, Kuwait has demonstrated its interest in investing in the stability of its northern neighbour. Kuwait’s resilient economy and geographical proximity to Iraq make the country an ideal candidate to coordinate support for Baghdad. Indeed, already in 2018, Kuwait organised and hosted an international conference to raise funds to rebuild Iraq’s economy and infrastructure following Baghdad’s devastating conflict against Daesh. As a result, Kuwait’s leadership managed to secure some $US30 billion in credit facilities and investment to support Iraq.

In another effort to support Iraq economically, Kuwait played a crucial role in negotiating the September 2019 deal between Baghdad and the GCC Interconnection Authority for a GCC-financed transmission line that would supply 500 megawatts of electricity per hour from the GCC to Iraq’s southern port of Faw, via Kuwait.

It is important to take into account that the recent global collapse of oil prices, triggered by the outbreak of the COVID-19 pandemic, has strained Iraq-Kuwait ties. Last May, Kuwait was reportedly blackmailed by Iraq in order to obtain financial aid and investments to offset the sharp decline in Baghdad’s oil revenues.

However, to date, Kuwait has been able to maintain cordial ties to all Baghdad’s political parties. This is facilitated by the fact that most factions inside Iraq recognise the Kuwait government’s legitimate interest in Iraq’s stability. Kuwait’s interest in preserving stability across Iraq was underscored as recently as August 2020 when Kuwait’s Foreign Minister, Ahmed Nasser Al Mohammad Al Sabah, called his Iraqi counterpart, Fuad Hussein, to condemn Turkey’s drone strike which killed three Iraqi troops north of Erbil, in the country’s autonomous Kurdistan region. Notably, Kuwait’s firm condemnation came despite Ankara’s and Kuwait City’s recent efforts to improve bilateral ties.

Saudi Arabia

Riyadh’s efforts to establish closer ties to Baghdad must be understood within Saudi Arabia’s wider strategy to contain Iran’s regional influence. Iraq has long been a focal point of geopolitical competition which opposes Iran to the US and its allies — chiefly Saudi Arabia and the United Arab Emirates — as the killing of Qasem Soleimani in Baghdad made clear. From Saudi Arabia’s perspective, Iraq’s weaknesses in the security sector, the economy and the energy industry, are the main causes of Baghdad’s vulnerability to Tehran’s influence.

Saudi Arabia’s decision to reopen its border with Iraq in 2017, closed since 1990, constituted the first landmark event in Riyadh’s diplomatic outreach to Baghdad. This was followed by fully re-established diplomatic ties between the two countries in 2019. Since then, Riyadh has committed to new investments in Iraq’s economy, while opening trade channels and exchanging official visits with the country. Saudi Arabia’s Crown Prince, Mohammed bin Salman Al Saud (MbS), is also looking to strengthen the GCC’s institutional interest in the country. For instance, it was Saudi Arabia to spearhead the aforementioned Iraq-GCC grid-connection agreement and to enlist Kuwait’s support to make the deal operational.

More generally, Saudi Arabia-Iraq energy cooperation is facilitated by the fact that Baghdad’s leadership views the diversification of Iraq’s energy sources as crucial to strengthening the country’s sovereignty. Meanwhile, for several years large parts of Iraq have been dependent on electricity supplies from Iran, giving Tehran significant leverage over Baghdad. MbS is keen to weaken the Iran-Iraq energy bond. Since the restoration of diplomatic relations between the countries, high-level Iraqi and Saudi officials have extensively discussed energy issues. Looking ahead, Saudi Arabia also has plans to expand its role in Iraq’s energy industry, via the state corporation ACWA Power. Additionally, Riyadh appears interested in cross-border road development, petrochemicals, agriculture and other infrastructure.

Saudi Arabia is also attempting to improve its standing among ordinary Iraqis with a particular focus on the country’s Shia population. The July 2017 meeting in Jeddah between MbS and Iraq’s influential Shia leader and cleric, Moqtada Al Sadr, demonstrates such efforts together with the intention of establishing a solid dialogue with the Iran-hostile front within Iraq.

Another success in improving Saudi Arabia’s social standing in Iraq came in March 2018, when Riyadh’s national football team travelled to Basra for a friendly game with the Iraqi local team, the Lions of Mesopotamia. Following the event, which successfully attracted cheerful crowds, Saudi Arabia’s King Salman bin Abdulaziz promised to donate a new football stadium to the Iraqi people to be built in Baghdad.

To date, Kuwait’s interest in the stability of its northern neighbour and Saudi Arabia’s efforts to reduce Iran’s influence in Baghdad have both produced positive dividends for Iraq, and supported the country’s struggling economy in particular. However, to continue to benefit from Saudi Arabia’s engagement in the long-term, it will be important for Iraq’s leadership to avoid alienating Iran. Tehran continues to retain important stakes inside Iraq and could retaliate militarily and economically in case its interests are threatened. Iraq-Kuwait economic cooperation is likely to continue and deepen in the coming months. Despite this, ongoing turbulences in the international oil market have already strained ties between Baghdad and Kuwait City. The longer crude prices remain low, the more bilateral ties could suffer from future oil-related issues.