BASRA, Iraq—The Iranian consulate here dominates a section of this oil-rich city’s skyline. An enormous Iranian flag can be seen from half a mile away, ringed by a welter of radio towers and satellite dishes. The walled compound houses three large villas and six smaller buildings. It’s protected by well-trained Iranian and Iraqi troops. On a recent visit, I stopped my car and stepped out to take a few photos. Within seconds, a dozen men in tracksuits rushed out of adjacent houses and stores and surrounded me, handguns drawn. My translator assured them that we were journalists. The men, unsmiling, ordered me to hand over my camera and then methodically erased every picture I had taken since arriving in Basra four days earlier. They shoved us back toward our car and slammed the doors. Leaning into an open window, one of the guards told us to leave the area and not return. He was speaking Farsi.
The American officials left in Iraq see the Iranian consulate as a provocation. Washington has evidence that it is “actively involved” in funneling money and weapons—including sophisticated missiles and rockets—to the Shiite militias battling U.S. forces throughout southern Iraq, according to a top American military officer who asked to remain anonymous. U.S. officials worry about a future alliance between Iraq and Iran, two Shiite countries that have frosty relationships with nearby Sunni monarchies. In a worst-case scenario, Iran’s hard-line leaders would radicalize Iraq’s government, co-opting it into their shadow war with the United States.
But Iraqi business and political leaders in Basra, the country’s economic engine, aren’t interested in religious dogmas. Mostly, they’re grateful for the encroachments by Iran, which they view as their last ally in the city’s escalating fight against Baghdad and neighboring Kuwait. Basrawis, as the city’s residents are known, feel increasingly alienated from both.
On one side, they complain that they’re getting a raw deal from Prime Minister Nuri Kamal al-Maliki. The province sends roughly $50 billion each year to Baghdad from oil and natural-gas sales, accounting for 75 percent of the Iraqi government’s total revenue, but it is supposed to receive just $1 billion per year in return, barely 10 percent of the money given to Kurdistan, the country’s other oil-rich region. Even then, the province actually gets only a tiny fraction of that tiny fraction: Baghdad, which wields veto power over local infrastructure projects, has allowed Basra to spend 3 percent of its allowance. The province can’t do anything meaningful with its own money.
The ties between Basra and Tehran come down to oil and cash.
On the other side, Basrawis are growing anxious about Kuwait. Leaders here believe that their neighbor is trying to block Iraq’s ability to export oil through the Persian Gulf by building an enormous $1.1 billion seaport that will make it physically difficult for large tankers to reach the Iraqi port of Um Qasr. They also think that Kuwait is using horizontal drilling technology to burrow under the border between the two countries and suck oil out of Iraq’s reservoirs. It’s a charge that both Kuwaitis and Americans here say is baseless, but it nevertheless galls the local government. “Day after day, Kuwait violates our sovereignty to steal Iraqi oil,” Fareed Ayoubi, the head of the Basra provincial council’s oil and energy committee, said in an interview. “Baghdad is ignoring that, and America is ignoring that. Iran is the only one listening to our concerns and talking about helping.” Locals say that, by failing to halt the port project and the theft, Americans have thrown them under the bus.
Feeling menaced by Kuwait, abandoned by Baghdad, and betrayed by Washington, Basrawis are blazing their own path. Led by Gov. Khalef Abdul Samed, they are trying to create a self-governing region modeled on northern Iraq’s quasi-independent Kurdistan. That status would allow local officials to sign their own oil deals and spend money largely as they see fit. “We consider Baghdad to be the central obstacle to our hopes of bringing prosperity to Basra,” says Ayad Hussein Emera, Samed’s chief of staff. “We want to free ourselves from their grasp.” Two-thirds of the provincial council recently voted to hold a binding referendum on Basra’s future. Maliki has refused to sign off on the measure, so Samed (whom Maliki handpicked for the post) is leading weekly protests demanding the plebiscite.
If Basra breaks away from Baghdad—and even if it doesn’t—Iran seems poised to become the province’s new best friend. Its consulate is the nerve center of a sprawling effort to expand Iran’s political and economic influence, from supporting local charities to building hotels and banks. Iran has also won points in Basra by taking a hard public line with Kuwait, deriding the oil-rich Persian Gulf state as an American stooge.
That last point is the biggest worry for U.S. policymakers. Oil contracts are the ultimate zero-sum game—they either go to Western firms or they don’t. Losing out on those incredibly lucrative deals (regardless of whether Iranian companies win them) would be a major blow to U.S. and European oil interests. The growing ties between Basra and Tehran aren’t motivated by any shared Shiite religious ideology. Instead, they come down to something much more prosaic: oil and the eye-popping sums of revenue it generates.
This article appears in the October 22, 2011 edition of National Journal Magazine.