Kuwaiti Government Increases Business Relations with Iran

Under the deposed regime of Saddam Hussein, Iraq borrowed from the emirate an estimated USD $16B to pay for the eight year conflict with Iran. Although there has been discussion in the Kuwaiti National Assembly to forgive some of this debt, many ministries have declared they will oppose any government proposal to reduce or outright forgive this debt on Iraq, which owes Kuwait an additional USD $25B for war reparations for Saddam’s 1990 invasion.

A recent visit to by the Iraqi vice president Adel Abdulmahdi for talks with the Kuwaiti government resulted in a number of awkward and difficult discussions, prompting His Highness the Amir to call on the assembly and the government to cease insults. The Amir went further sending a strong message that talks with the fledgling Iraqi government were not to undermine the emirates foreign policy objectives nor relations with neighboring Arab states, including Iran.

Following successful bilateral cooperation and negotiations with Iranian officials in Tehran, Iran will begin to export gas and water to Kuwait based on several agreements that were recently inked between both sides . The visiting Kuwaiti delegation met with senior Iranian officials including ministers of foreign affairs, commerce, energy, economic affairs and finance. Kuwaiti officials were successful in establishing ways to boost cooperation with Iran in several strategic areas of importance to the state.

In fact Kuwait and Iran have signed several agreements in the interests of economy, commerce, customs, power, and importing water from Iran. On the importation of gas from Iran, the primary part of the agreement was finalized and only few matters remained to be addressed through further negotiations.

A government owned Iranian company has also announced plans to construct a 350-mile pipeline to export natural gas to Kuwait. “The result of the negotiations is very satisfactory and for this purpose the parties intend to establish a joint venture company,” Managing Director of the National Iranian Gas Company Reza Kasaeizadeh said in a statement.

The announcement of the proposed deal comes as the United States is trying to mobilize international support for harsher sanctions on Iran over its alleged nuclear weapons program. The Iran energy sector that is so vital to the country’s economy is often mentioned as a possible target of the sanctions. Analysts said Kuwait may have chosen to work with the National Iranian Gas Company, which is owned by the Iranian Ministry of Petroleum, because it had been snubbed on a similar project by Saudi Arabia. According to Dr Christian Koch, Director of the International Studies Gulf Research Center, one reason Kuwait has been looking at Iran is because Saudi Arabia has not allowed a gas pipeline from Qatar to Kuwait to proceed since such a pipeline would go through Saudi maritime territory. “Kuwait and Saudi Arabia have also not resolved their dispute over the Dorra gas field,” he added. But Koch said he was skeptical this gas pipeline project would actually develop, particularly since similar deals on water have not materialized.

Meanwhile Washington has been pressuring its allies on the southern side of the Gulf to curtail their business dealing with Iran. This could be tricky, according to Jane Kinninment, an editor with the Economist Intelligence Unit. “The Emirate Of Dubai has close economic links with Iran, which is its single largest trading partner,” said Kinninmont. There are also up to half a million Iranian expatriates based in Dubai, many of whom are senior business figures.

Bahrain, where the US Navy’s Fifth Fleet is based, is in discussions with Iran about the possibility of importing natural gas, which Bahrain needs for its aluminum smelter plants. Iran’s nuclear program has increasingly become a major source of tension between the US and Iran. While Teheran, which holds the world’s second largest oil and gas reserves, claims the program is solely for power production, Washington says the energy program is being used as a screen to develop nuclear weapons.

The US has been pushing for stricter sanctions backed by the United Nations Security Council, following a report by the International Atomic Energy Agency (IAEA) in February 2010 outlining Iran’s long history of clandestine nuclear weapons development. Sanctions backed by the Security Council would add to those imposed by the US and include all member states in the United Nations, but require both China’s and Russia’s support as permanent members of the Security Council and veto power holders.

Both China and Russia have extensive business ties with Iran. A failed deal for a planned nuclear plant in Bushear involved Russia offering Iran to provide and retain the plant’s fuel but was rejected for unclear reasons by Iran. Used nuclear fuel is the basis for producing the weapons grade or refined uranium required in a nuclear weapon.

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