Iranian President Ebrahim Raisi (Raeesi) and visiting Iraqi Prime Minister Mustafa al-Kadhimi announced cancellation of visa requirements between the two countries for air travel as well as a determination to bolster relations including economic ties and development of railroad corridors at a presser after their meeting in Tehran on Sunday. 

This was Raisi's first meeting with a foreign leader after he took office in early August. Iran's new president has had minimal contact with heads of foreign governments, since he has held only judicial and religious posts in his career.

In fact, a full visa waiver agreement was in the works during the Rouhani administration and his cabinet had approved the deal on June 12. The Iraqi government had not yet finalized the deal when Raisi assumed office and then it agreed only to visa waiver for air travellers. 

The Iraqi prime minister who arrived in Tehran Sunday morning for a one-day visit was welcomed by Raisi at Tehran's Islamic Summit Conference Hall. At the press conference following their meeting, Al-Kadhimi who was accompanied by several ministers of his cabinet thanked Iran for helping Iraq fight the Islamic State (ISIS) and expressed hope for expansion of relations between the two countries. He is the first foreign leader to meet Iran's new president.

Raisi said he had discussed monetary and financial matters with the Iraqi prime minister. Over $6 billion of Iranian money is frozen in Iraqi banks due to US sanctions. Payments for Iran’s gas and electricity imports by Iraq go to a special account in the state-owned Trade Bank of Iraq. Iran can only use the money for humanitarian commodities. Although the US has allowed Iranian gas exports to Iraq by issuing sanctions waivers, the Iraqi side says payment for the gas is impossible due to banking sanctions Washington has imposed on Iran.

Iraq is dependent on Iran for more than 30 percent of its power generation. In early September Iranian officials confirmed that Iran's gas exports to Iraq had been reduced from 49 million qm per day to 41 million due to Iraq's failure to pay its debts.

The reduction in Iran's gas exports has resulted in a 5.5 mw drop in Iraq's electricity production. On September 5 Iraq finalized a $27 billion investment deal with the French energy giant Total to boost domestic gas production, which could potentially reduce their reliance on Iran's natural gas and electricity supplies.

Raisi also said Al-Kadhimi's announcement of cancellation of visa requirements and an increase in the number of Iranians allowed to travel to Iraq to visit Shiite shrines for an upcoming Shiite religious gathering in Karbala on September 28 was "good news".

Iraq is the second biggest importer of Iranian goods with $2.8 billion after China, Hamid Zadboum, head of the Iranian Trade Development Organization said August 27.

Due to the pandemic, Iraq said this year it would only allow 40,000 foreign pilgrims for the ceremonies -- including 30,000 from Iran and 10,000 from the rest of the world -- for the ceremonies. Before the pandemic millions from around the world flocked to Karabala for the rites which mark the end of the 40-day mourning period of Muharram for Imam Husayn, the grandson of the Prophet Mohammad who was killed in a battle in 680 AD. Iraq had to increase the cap for Iran from 30,000 to 60,000 after appeals from the Iranian authorities.

Pundits say Al-Kadhimi's visit to Iran may also be aimed at securing Iran's support for him in the upcoming Iraqi elections and the Iraqi government's mediation between regional powers Iran and Saudi Arabia. Iraq has hosted three rounds of direct talks in Baghdad between Iran and Saudi Arabia since April. A fourth round is expected soon.

The Iranian side may also be interested in discussion of issues related to shared rivers and the presence of armed Iranian Kurdish groups in northern Iraq which Tehran wants Baghdad to restrict. The Revolutionary Guards launched several attacks on the positions of Kurdish militants in the border area since Thursday.