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Sanctions on Iran will have a bearing on Iraq, too

Iran's economic situation is pretty similar to Venezuela's, which is experiencing one of the worst crises in South America.

The United States has turned up the heat on Iran by reimposing sanctions last month. But it is Iraq that is caught in the cross hairs. Both Tehran and Washington are Baghdad's strategic partners, and tensions between the two could potentially harm Iraq.

Iran's economic situation is pretty similar to Venezuela's, which is experiencing one of the worst crises in South America. Inflation is high in Iran and the local currency is getting battered. Its value in the black market is much weaker than the official rate - a sign of little confidence in the currency.

The economy is fragile, and the government instead of using diplomatic channels to wade through the crisis is more likely to go all out in defiance of the sanctions. What's worrisome is it could create trouble in the region using its influence in Iraq, Syria, Yemen and Lebanon via Hezbollah, and more importantly, threaten blocking the Strait of Hormuz, which is an important passageway for the countries in the Gulf. The US military has already said such an action would be immediately countered.

Since the withdrawal of the US from the nuke deal and subsequent start of the crisis, Iran is determined to limit the US influence in Iraq. A recent Reuters report noted that Tehran has given ballistic missiles to Shia proxies in Iraq, and is developing the capacity there with an aim to hurt Iran's ties with neighbours. Iran has denied the report.

Iraq, on the other hand, is finding it hard to form a new government. It is in fact a miracle that 16 political groupings have reached an agreement to create the biggest bloc in parliament that is capable of forming a government. Yet there are challenges that remain unaddressed. How the policies will impact Iraq in regional and international context, and of course how will it mould Iraq's relation with the US and Iran.

Iraq is caught in the middle, as it needs to maintain good relations with both countries. On one hand, the US is Iraq's main ally in its war against Daesh and on the other hand, Iraq depends heavily on Iran for imports and religious tourism. Iraq is the second largest importer of Iranian goods. The volume of trade between the two countries exceeds $12 billion a year. Also, Iraq earns significantly through the religious tourism between the two countries. Every year about 3 million Iranian pilgrims visit the shrines in Najaf and Karbala, the two famous Shia sites.

Moreover, shortage of water supply is changing Iraq's demography as well as the country's appearance. Many people have left their villages and moved to the capital in search of jobs. The nerves are tensed after a long spell of summer. Several protests have already erupted this year, and any political mistake at this time could lead to fresh ones or perhaps a new war.

Christiane Waked is a political ?analyst based in Beirut