Section II: Social, Economic and Political Realities in Iraq
2.1 Overview: legitimate grievances on the rise
A fragile state in peril
Notwithstanding five years of international involvement in Iraq and proclamations of
security and prosperity, the Iraqi people are progressively becoming disillusioned and
frustrated with the economic hardships and political upheavals. Conflict and civil strife
have paralysed the Iraqi state and stability remains fragile; despite enormous expenditures,
performance falls far short of official goals. Iraqis increasingly oppose foreign interference,
expressing their distress for their country’s lack of economic and political autonomy. A
number of domestic and external factors hinder Iraq’s stability and contribute to legitimate
grievances – from crippling poverty, mass displacement and unemployment to corruption
and the foreign exploitation of Iraq’s natural resources. Crucially, these grievances are an
integral part of the broader debate on Iraq’s sovereignty and future independence.
The lack of national unity is weakening Iraq
At present, frustration at powerlessness and a lack of national unity is further weakening
the Iraqi state. Given how failing policies are maximised by extremists to promote their
radical agendas, it is imperative to overcome this impasse of negative perceptions and
grievances. Ignorance must be overcome; genuine efforts must be made to understand the
local realities in Iraq and the various dynamics and interests at play.
Iraqis’ needs must be prioritised
National, regional and international proclamations must translate to collective, affirmative
action resulting in a substantial and sustainable impact on the lives of ordinary Iraqis.
Vitally, Iraqi voices must be heard and the people of Iraq ought to have a greater stake in
decisions and actions directly affecting their lives. With the support of the international
community, Iraqis must be allowed to take the lead in their country’s reconstruction and
the peacemaking process. Implementing policies consonant with the needs and aspirations
of the Iraqi people would contribute significantly to the country’s unity, stability and
prosperity. In turn, this will foster trust and lead to closer economic and political
partnership with members of the international community.
"God who gave us life gave us liberty. Can the liberties of a nation be secure when we have
removed a conviction that these liberties are the gift of God? Indeed I tremble for my country
when I reflect that God is just, that his justice cannot sleep forever. Commerce between master
and slave is despotism. Nothing is more certainly written in the book of fate than that these
people are to be free. Establish a law for educating the common people. This it is the business of
the state and on a general plan.”
Thomas Jefferson
The bleak reality of life in Iraq
Social facets: Poverty, unemployment and mass displacement
Conflict-torn Iraq is ravaged by poverty and its people are increasingly frustrated with
failed promises and policies unresponsive to their pressing needs. Infrastructure is old and
dilapidated, and investment is inadequate. Proclamations of aid provision and improving
services, especially in southern Iraq, have failed to translate into action. The scale of the
challenge is considerable and improvements will require sustained levels of investment: the
World Bank estimates that Iraq needs to invest USD20 billion over ten years simply to
upgrade the country’s power sector.
Economic aspects: Debt and the oil political debate
Iraq’s enormous debt poses a direct impediment to the country’s security and stability. A
stagnant and highly indebted economy will create further friction and public
disillusionment, allowing radical elements to exploit these grievances and garner support.
Furthermore, corruption and mismanagement of Iraq’s USD40 billion worth of oil revenues
is eroding public confidence in the Iraqi government.
As Iraq’s economic potential dissipates, the debate on the country’s resource sovereignty
builds up and opposition to foreign investment rises.
Political landscape: Power devolution and factional aspirations
Formerly a highly centralised state with restricted representation and limited
accountability, the Iraqi government is now facing an immense challenge: to develop and
empower provincial bodies, be responsive to the needs of local communities and to
promote a sense of national unity, especially amongst the warring factions.
The way forward: building the foundations of a stable and prosperous state
Addressing basic needs of Iraqis is a priority
Building the capacity of the Iraqi government to capitalise on the country’s invaluable
resources, enabling economic growth and prosperity, is a priority for the Iraqi leaders and
their international partners. Particularly, Iraq’s most vulnerable groups must be supported
and primary medical care and shelter should be provided. A new, effective way to deliver
humanitarian aid must be put in place, aiming at improving the lives of ordinary Iraqis in a
substantial and sustainable manner at both the local and national levels. Humanitarian
action must be recognised as an essential instrument promoting stability and security in
Iraq.
“The people are hungry in the land of fortunes. The ongoing situation corrupts everything, we
feel lost and very anxious.”
Student, 23
Baghdad, May 2008
Building a healthy and sovereign Iraqi economy
A conciliatory decision based on a set of agreed principles regarding Iraq’s debt obligations
must be reached without delay: Iraq’s creditors would contribute to alleviating the
country’s financial burden and setting the foundations of a healthy economy. Promoting
prosperity in Iraq requires not only a flourishing economy but also a sovereign economy;
Iraqis must have a principal stake in their future and be able to manage and maximize the
potential of the country’s natural resources. An economic partnership between the Iraqi
government and its international partners seeking to build capacity and develop Iraq’s
invaluable resources, as guided by the interests of the Iraqi people would crucially
encourage closer cooperation and trust between Iraqis and the developed world.
Building a representative, functioning Iraqi state
With the support of the international community, Iraqis must take the lead in decisions and
actions directly affecting their lives and their country’s future. Formulating policies
consonant with the needs and aspirations of the Iraqi people and implementing structural
reforms seeking to devolve power to the local communities in a fair manner and strengthen
the private sector would contribute to improving the overall social and political situation as
well as and to promoting national unity.
2.2 Iraqis facing a humanitarian emergency: misguided priorities and policies are giving rise to public disillusionment
Ill-advised planning and investment are fuelling poverty and unemployment
Despite Iraq’s richness in natural resources generating huge oil revenues, millions of Iraqis
suffer from crippling poverty and escalating violence. The effects of five years of
international and civil war have taken their toll on the Iraqi population, creating an
ongoing humanitarian crisis. Since the US invasion in 2003, the Iraqi economy has suffered
from a lack of long-term planning and low levels of investment. Despite an initial high level
of goods consumption, by 2006 the economy had stagnated, with inflation soaring to 70
percent at its peak. A study by the World Food Programme and the Iraqi Ministry of
Planning’s Central Organisation for Statistics and Information Technology found that
54 percent of Iraqis were living on less than USD 1 a day.
Strategic errors, such as de-Baathification and inadequate investment in state industries,
which were previously significant employment providers, have also led to high levels of
unemployment. In 2007, the UN spoke of Iraqi unemployment at between 25 percent and
40 percent, warning that the weak economic environment translates into a failure to absorb
shocks. Currently, various sources report that unemployment, especially amongst Iraq’s
youth, can reach up to a staggering 70 percent. With the formal economy having declined
and failed to diversify, an unregulated economy has taken root in its place.
“There are no opportunities for young people. There is nothing you can do to secure your future.
Unemployment is a disease the government must treat.”
Student, 21
Baghdad, May 2008
Limited funds for humanitarian projects
While Iraq is receiving development aid from various donors, humanitarian organisations
report low level funding for their activities due to the assumption that, because of the
country’s affluence in natural resources, Iraq remains a rich country. Accordingly,
humanitarian programmes have been unable to meet the targets. For instance, a shortage
in funding forced the World Food Programme to suspend food deliveries for half of 2006,
falling far short of its goal to provide essential food supplies for all target beneficiaries.
Striving to survive: Mass displacement, food crisis and a lack of basic services
At the beginning of 2008, 4.4 million Iraqis had been forced to flee their homes due to
escalating violence, with an estimated 2.5 million internally displaced persons (IDPs) and
1.9 million Iraqis thought to be living in neighbouring countries. Many of the refugees
have difficulties accessing basic services, shelter, food and employment. IDPs are
considered to also put pressure on local services where they settle, and UN-HABITAT has
reported an increase of makeshift and slum areas in Iraqi cities. Recently, attacks were
reported on IDPs by host communities who blamed them for overcrowding, crime and
prostitution, and in some areas, notably Basra and Diyala, armed militias have been
restricting the movement of IDPs.
Lack of security has also interrupted food supply and access to an estimated four million
Iraqis. In 2005, the World Food Programme reported that 15.4 percent of the population
required food assistance whilst in 2006 an estimated 43 percent of children between six
months and five years old were suffering from some form of malnutrition. Regrettably,
levels of food insecurity and malnutrition rose between 2006 and 2008. The Public
Distribution System, which provides rations to millions, is only partially functioning. If
efforts to revive the Public Distribution System fail, many more could be facing hunger
during the second half of 2008.
“Living standards have deteriorated. There is poverty and chaos.”
Student, 21
Baghdad, May 2008
Furthermore, basic health and medical care are under strain due to continuing violence,
understaffing and low resources. In 2006, only half of all hospital equipment was
functioning. Between 2003 and 2006, more than one third of doctors left Iraq (12,000 of
34,000), while over two thousand were subject to kidnappings and murder. Similar
problems have affected teachers and education systems, further fuelling local grievances.
Unsafe water and unsanitary conditions are also a grave reality for Iraqi households. The
consequences were evident when a severe bout of cholera broke out in September 2007.
Sewage and water treatment plants are providing unreliable service due to a lack of
necessary equipment and chemicals, looting and a shortage of qualified staff to conduct
maintenance and repairs. Estimates suggest that just over 20 percent of homes in Basra
receive piped drinking water. Forced migration is also placing a strain on capacity in
certain areas.
Addressing basic needs of Iraqis must be a priority
Conflict-torn Iraqis are increasingly disillusioned with failing promises and policies
unresponsive to their pressing needs. Frustration of economic hardships, unemployment
and powerlessness further weaken the Iraqi state, allowing space for radical elements to
garner support and promote their irrational agendas. Addressing local grievances in Iraq
and regaining the trust and confidence of the Iraqi people requires formulating a strategy
which understands and responds to their real concerns and needs.
Investment and Resources
Proclamations of aid provision and improving infrastructure and services, especially in
southern Iraq, must translate into immediate action. The magnitude of the challenge is
considerable and improvements require sustained levels of investment: according to the
World Bank, Iraq needs to invest USD20 billion over ten years simply to upgrade the
country’s power sector. Given Iraq’s richness in natural resources that generate significant
revenues, the challenge is primarily to unlock both those financial and human resources in
order to deliver better public services. A capital surge and a job surge are vital in this
development effort.
Capacity building and consolidated action
The priority for Iraqi leaders and their international partners is to build the capacity of the
Iraqi government to fully exploit the country’s invaluable resources and thus enable
economic growth. In particular, Iraq’s most vulnerable groups must be supported and
primary medical care and shelter should be provided. Thus far, however, disjointed action
by various international humanitarian agencies undermines confidence of both donors and
recipients in the ability of the Iraqi government and the international community at large
to prioritise needs and activities. All humanitarian action must be consolidated in a new
effective manner, aiming at improving the lives of ordinary Iraqis in a substantial and
sustainable manner at both the local and national levels.
“Iraq is now being used by neighbours and powerful countries as a battleground.”
Retired
Baghdad, May 2008
2.3 Iraq’s debt cancellation: uneven efforts hinder economic stability
and raise public concerns
Paris Club initiative cancelling Iraq’s debt: locals perceive a new form of dependence
The magnitude of Iraq’s huge economic obligations was revealed after the fall of Saddam
Hussein’s regime. With Iraq’s debt having accumulated at the time to over USD 120 billion
–most recent estimates refer to a staggering USD 140 billion debt with accrued interest –
and posing a direct threat to the country’s stability, the Paris Club comprising 19 of the
world’s richest countries, initiated a series of financial services including debt restructuring
and debt cancellation.
In efforts to allow reconstruction and economic development to take place in Iraq, the
Paris Club Agreement of 2004 provided for a three-stage plan to reduce Iraq’s debt by 80
percent: the first stage was to immediately cancel 30 percent of its debt to each Paris Club
country, whereas the second and third stages involved the implementation of International
Monetary Fund (IMF) programmes ensuring further debt cancellation.
US urging Iraq debt to be wiped in return for implementing IMF reforms
Notably, with US President Bush urging European and Arab leaders to write off debts owed
by Iraq in return for the latter implementing IMF programmes, over the past three years the
country’s debt has been reduced by USD 66.5 billion.
A total of USD 42.3 billion debt owed by Iraq to Paris Club members was cancelled with the
US writing off all of Iraq’s debt, amounting to USD 4.1 billion.Furthermore, according to an estimated total of USD 8.2 billion whilst commercial creditors have written off a total
debt of USD16 billion.
In February 2008, Russian Finance Minister Alexei Kudrin and Iraqi Foreign Minister,
Hoshyar Zebari, signed a bilateral agreement to forgive 93 percent of Iraq’s debt to Russia,
which is USD 12 billion out of the total debt currently standing at USD 12.9 billion. The
first stage of the agreement, which is in line with the Paris Club Agreement of 2004,
involves the cancellation of 65 percent of the debt to be written off, with the remaining
USD 4.5 billion to be cancelled in two subsequent stages subject to further negotiations. It
is foreseen that Iraq would pay Russia the remaining seven percent of the debt, including
capitalization of interest for the period 2005-2008, making the first payment in early 2009.
Following efforts to reduce Iraq’s external debt, the country’s economic partnership with its
former creditors has shifted considerably. For instance, Russia and Iraq have signed a
memorandum of trade and economic cooperation, paving the way for Russia to fully
participate in all projects and tenders to be held in Iraq, and to invest up to USD4 billion
in the country including on long-term joint projects in the oil and natural gas sectors.
Iraqis’ concerns over IMF-style reforms
However, the implementation of IMF-style economic and political reforms as envisaged in
the Paris Club Agreement of 2004 and advocated by US President Bush in exchange for
external debt cancellation has raised public concerns. Importantly, such reforms allow
international actors to penetrate Iraq’s oil market and to make use of its invaluable oil
reserves.
The public increasingly perceives this as an exploitation of their resources; many Iraqis
have expressed their distress and have called for their country’s economic and political
autonomy. The reforms imposed by international actors and the IMF are widely
regarded as giving rise to a new form of economic reliance. Instead of moving from debt
obligation to economic dependence and foreign exploitation, Iraqis would prefer to have
held negotiations with Iraq’s creditors to reach an agreement alleviating the country’s
financial burden. With satisfactory progress under an IMF programme required for the final
20 percent of the Paris Pact debt relief, the Iraqi public considers that it is progressively
losing ownership of its resources, its economic prosperity and the country’s future.
Arab countries perpetuate Iraq’s debt
Regrettably, the efforts of the Paris Club members to resolve Iraq’s debt issue were not
supported by the Arab countries, particularly Kuwait and Saudi Arabia. Notably, Saudi
Arabia represents one of Iraq’s largest creditors.
In addition to the external debt, the issue of Iraq’s reparations to the Gulf countries
following the Iraqi invasion and occupation of Kuwait has been a major impediment to the
country’s economic stability. The number of compensation claims submitted by individuals,
government entities and companies following Iraq’s occupation of Kuwait reached
approximately 2.7 million, totalling over USD 350 billion.
The United Nations Compensation Commission (UNCC) approved a total of USD52 billion;
the current outstanding compensation to be paid to Kuwait and Saudi Arabia by Iraq
through the UNCC amounts to USD28 billion. The refusal of these oil-rich Arab countries
to cancel the multi-billion dollar debt has not only been hindering Iraq’s economic growth
but has also thwarted good neighbouring relations. In light of the vital role of Iraq in
regional security and stability, the rebuttal of its wealthy neighbours to forgive most of its
debt and the perpetuation of a politically and economically weak Iraq is detrimental to all
of its regional countries.
It is feared that if Iraq is required to meet its substantial debt obligations to these
countries, the country’s economy will effectively collapse and its society will disintegrate,
hence leaving political space for another extremist leader to fill. In this context, the Iraqi
public has grown increasingly critical of its neighbours refusing to begin negotiations in
order to forgive part of the debt owed to them.
“…we have to think very broadly in the international community of everything we can do to
help Iraq get to a position of stability and security. So while debt relief may have no immediate
linkage for the day after tomorrow on violence, it’s still very important to do because it helps
chart a long-term potential for prosperity in Iraq.”
US Ambassador Ryan Crocker, 3 May 2007
How to promote a healthy and sovereign Iraqi economy?
Iraq’s enormous debt poses a direct impediment to the country’s security and stability. A
stagnant and highly indebted economy will create further friction and frustration, allowing
radical elements to exploit these grievances and garner support. Amid public concerns and
criticisms over Iraq’s debt cancellation in return for the implementation of IMF-style
reforms, and the refusal of neighbouring countries to hold negotiations with the Iraqi
government on this issue, a conciliatory decision must be reached without delay.
Visible results
Iraqis must feel that their welfare and security are put at the forefront of efforts.
International financial assistance must have a more visible, substantial and nonexploitative
impact on the lives of ordinary Iraqis. By forgiving all or most of the country’s
external debt following negotiations and based on a set of agreed principles, Iraq’s
creditors would contribute to alleviating the country’s financial burden and setting the
foundations of a healthy economy. Importantly, this will send a clear and strong message
that Iraq’s creditors, including its neighbours Kuwait and Saudi Arabia are not acting out of
sectarian interests but, instead, actively seek to bring stability in Iraq and the region.
Iraqi ownership
Promoting stability and prosperity in Iraq requires not only a healthy and flourishing
economy but also a sovereign economy. Ownership should be given to Iraqis; they must
have a principal stake in their future and be able to manage and maximize the potential of
the country’s resources. As part of the efforts to promote Iraqi ownership, the Iraqi
government and its largest creditors should hold negotiations in order to reach an
amicable, genuine agreement regarding the country’s debt obligations. Debt cancellation in
return for the implementation of Western-style reforms is widely viewed by Iraqis as an
imposed policy seeking to exploit Iraq’s oil and other resources without prior negotiation.
Conversely, the refusal by Iraq’s neighbours to forgive its debt has been perceived as a
deliberate action to hinder Iraq’s reconstruction and the prosperity of its people. It is vital
that Iraq’s neighbours and international partners project their efforts and proposed action
in Iraq in a constructive manner, considering the needs and priorities as expressed by the
Iraqis themselves. Thus far, the US and its partners have primarily embarked on aggressive
tactics, increasingly regarded as repressing the Iraqis.
Build trust
The policy debate and strategic actions must shift, aiming at altering negative perceptions
and building trust between the Iraqis and the regional and international partners. Iraqis
must also begin viewing international partners as allies and ensuring that creditors’ debt
cancellation plans are a genuine effort to promote economic development and stability in
the country. Agreeing terms and targets for fiscal responsibility as part of an overall plan to
forgive Iraq’s external debt will help promote Iraqi ownership and will accordingly be
viewed to the benefit of the Iraqi people.
2.4 Iraq’s invaluable natural resources: economic potential dissipates
and political independence falters
The great potential of Iraq’s resources lost to mismanagement and corruption
Even with its land being vastly underexplored, Iraq currently holds the world’s third largest
oil reserves reaching 115 billion barrels. With approximately only 10 percent of Iraq’s land
explored until now, experts anticipate that the country’s proven oil and natural gas reserves
would multiply considerably and oil reserves are expected to exceed 200 billion barrels of
high-grade crude. The high quality of Iraq’s petroleum ensures reduced costs to produce
and refine, and thus attracts a great number of international oil companies and other
investors. The costs of oil extraction remain among the cheapest globally and are estimated
at USD1.50 per barrel.
Basra is of particular interest to national, regional and international players as well as to
extremists as the province holds 80 percent of Iraq’s oil reserves and is home to the
country’s only deep sea port and trade routes to the Gulf. Access to and control of Basra’s
oil and gas resources would provide parties with significant economic and strategic power.
Following discussions between Deputy Prime Minister Barham Saleh and UK Prime Minister
Gordon Brown, the Iraqi-owned and independent Basra Development Commission was set up
to promote measures for investment and economic development in southern Iraq.
Following Iraq’s invasion and occupation of Kuwait, the UN imposed economic sanctions
against the Iraqi regime with the subsequent Security Council Resolution 661 (1990)
prohibiting all countries from purchasing Iraqi oil and selling Iraq only food and medicines.
The Resolution further obliged Iraq to channel 30 percent of revenues generated from the
sale of Iraqi oil through the UNCC in order to compensate for damages and losses incurred
during Kuwait’s occupation. The obligation has now been reduced to five percent but with a
larger revenue base, corresponding to approximately USD 220 million on a monthly basis.
Despite this obligation through the UNCC, currently more than 90 percent of the Iraqi
government’s direct revenue depends upon oil exports.
Iraq’s missing oil
Iraq is indeed a wealthy country; annual government revenues exceed USD 40 billion.
According to the US State Department’s Iraq Weekly Status Report, oil exports generated
USD 41 billion in 2007, enough to fund the budget of the entire year. Nevertheless, Iraq’s
potential for economic primacy is currently lost to corruption and oil smuggling. Notably,
the Oil Ministry Inspector General revealed that Iraq lost USD 4.2 billion in revenues
through oil smuggling in 2005 alone. In May 2007, The New York Times publicised the
conclusions of a draft report prepared by the US Government Accountability Office with the
assistance of government energy analysts, reinforcing suspicions that corrupt officials,
smugglers and criminals control considerable parts of Iraq’s oil industry. In particular, it
was reported that since 2003 between 100,000 and 300,000 barrels a day, valued at USD5
million to USD15 million, were unaccounted for in Iraq. Officials fear that a large fraction
of the proceeds of smuggling refined oil products end up in the hands of insurgent groups.
In addition to this discrepancy, there are increasing concerns about how the central
government is spending its considerable oil revenues. Recently, The Washington Times
reported that the Iraqi government has invested billions of dollars generated from oil sales
in US Treasury securities instead of investing the earnings into vital reconstruction projects
that would help restore stability. Notably, in 2006, Iraq’s Oil Ministry spent a mere 3
percent of its USD3.5 billion capital budget whilst the entire government spent only 22
percent49. More recently, a report prepared by the US Government Accountability Office stated that
only 4.4 percent of Iraq’s USD 10 billion budgeted for capital projects in 2007
had been spent in the first eight months. President’s Bush Administration disputed the
report, arguing that the spending was at about 24 percent.
Amid failings, corruption and budget mismanagement, the performance falls further and
further behind official goals, with Iraqis increasingly becoming frustrated and discouraged
by the Iraqi government and its international partners. Following five years of international
involvement and efforts, public disillusionment is rising dramatically as strategies fall short
of promises for prosperity and stability.
Dominance disputes and strategic shifts
Iraq is not a poor country: its richness in oil and natural gas resources presents the country
with an invaluable opportunity to (re)gain economic power and a large potential for
strategic and political primacy. Various actors at the different levels recognise this
immense opportunity and have sought to promote their economic and political interests.
The exploitation and management of Iraq’s oil has become a central element of the
political landscape.
Intense debates and negotiations over the provisions regarding the development of
petroleum resources have dominated Iraq’s political scene, especially since July 2007 when
the Iraqi cabinet endorsed the draft oil law. Iraq’s central and Kurdish region governments
have been at odds over the future of oil-rich Kirkuk and other disputed territories, as well
as over the validity of the oil deals the Kurds have already signed with foreign companies.
Notably, the Kurds made unilateral moves in their three-province region; since 2004 the
regional government has signed more than twenty deals to explore for and develop oil and
gas. Undoubtedly, Iraq’s oil and gas resources have become a source of contention,
further challenging stabilisation and reconstruction efforts in the country.
Al Qaeda capitalising on Iraqis’ oil worries
In recent years, Al-Qaeda leaders Osama bin Laden and Ayman al-Zawahiri have been vocal
regarding the importance of preserving oil as a great economic power. Bin Laden has called
for Muslim societies to become more economically autonomous and to prevent foreign
powers from controlling this invaluable resource. With international actors seeking to
explore for and exploit Iraq’s oil, bin Laden and al-Zawahiri have called for attacks on oil
infrastructure. Interestingly, this indicates a shift in Al-Qaeda’s strategy and tactics
favouring “a more protracted attritional conflict characterized by disruptive attacks on
economic and critical energy production infrastructure”.
Regional and international players have also sought to promote their economic interests by
linking Iraq’s oil to the country’s external debt obligations. In particular, creditors, such as
China, have been eager to forgive Iraq’s debt owed to them in return for access to bids for
oil exploration contracts. Also, the four US and UK oil giants have been keen to return into
Iraq, from which they were excluded with the nationalization in 1972. Considering Iraq’s
underexplored land that is expected to yield large additional oil reserves, offering the
opportunity to foreign countries and investors to obtain major oil deals would worth
hundreds of billions of dollars in profits in the next decades.
Balancing foreign investment and resource sovereignty to rebuild Iraq’s economy
Iraq’s oil potential is immense with predictions referring to billions of dollars in profit for
the oil giants involved in the exploration for and exploitation of this resource. Key
provisions of the draft Iraq oil law allow international companies to enter this exceptionally
lucrative industry.
The Governor of the oil-rich Basra province, Mohammed al-Waili, has welcomed foreign
investments in oil and gas development. Furthermore, the independent Basra Development
Commission seeks to address constraints and make tangible improvements in investors’
opportunities as well as undertake action in pursuit of a vibrant private sector.
Conversely, there have been increased concerns over foreign interference and exploitation
of Iraq’s oil and natural gas resources. The draft oil law favours Production Sharing
Agreements (PSAs) - a favourite of international oil companies - guaranteeing companies to
control the extraction and development of Iraq’s oil for a 30-year period.
Members of Parliament, Iraq’s oil workers and civil society groups have opposed this
measure and called for specific arrangements to be made ensuring that the interests of the
Iraqi people are protected. Concerns were also expressed by six Nobel Peace Prize Laureates
who fear that the proposed law will lead to poor contract terms for the Iraqi people,
pointing out that “it is immoral and illegal to use war and invasion as mechanisms for
robbing a people of their vital natural resources”.
Notably, in January 2008 it was rumoured that highly confidential negotiations were being
held between Parliamentarians and representatives from American oil companies, with the
latter offering up to USD 5 million to members in exchange for their vote in favour of the
proposed oil law.
Resource sovereignty
Opposition to foreign investment is an integral part of the broader debate on Iraq’s
resource sovereignty and economic and political independence. Iraqis are becoming
disillusioned with failed promises, economic hardships and what is increasingly perceived
as foreign interference through oil exploitation and imposing IMF regulations.
Crucially this has been capitalised by insurgent groups and Al-Qaeda leaders who repeatedly
urge Muslims to concentrate their campaigns against the “stolen oil”. With foreign
investment and Iraq’s resource sovereignty currently at odds, it is imperative that Iraqi
grievances on poverty and autonomy are properly addressed and a genuine economic
partnership between Iraqis and international actors is promoted.
“The oil law has an enormous far-reaching long-term effect, enshrining the idea that the oil
revenues of a country are to be shared equitably with all Iraqis. That is a very significant
development. Long term it is hugely important both to the economic revival of Iraq and to keep
the country together as one.”
General David Petraeus, 20 June 2007
Foreign investment promoting economic growth
International leaders and organisations must help build the capacity of government
institutions and the necessary infrastructure in order to foster prosperity and economic
development in Iraq, which will benefit the Iraqis, their neighbours and beyond.
Foreign investment must be viewed as a security and development instrument transferring
know-how and promoting sustainable growth; the Iraqi government must develop a
regulatory framework setting standards requiring foreign companies to look for reliable
Iraqi partners, thus generating jobs and developing indigenous technical and professional
capacity. An economic partnership seeking to develop Iraq’s rich resources and guided by
the interests of the Iraqi people would crucially encourage closer cooperation and trust
between Iraqis and the developed world.
Tackling corruption and building capacity
Public confidence in the Iraqi government is progressively being lost to corruption and
mismanagement of oil revenues. Iraqi government institutions both at provincial and
central government levels must work together as partners, with the support of the
international community, to reduce corruption in the oil sector, improve fuel availability
and counter attacks on oil infrastructure. Building capacity is vital for the Iraqi government
and its international partners to regain the trust and confidence.
2.5 Power dynamics from local to national levels: shaping Iraq’s political landscape
Giving voice to the Iraqi people: Policies to reflect public aspirations
In the context of Iraq’s multifaceted challenges and rising public disillusionment, it is vital
that national and international policies curb the spread of extremists’ influence and at last
make a real contribution to winning the hearts and minds of the Iraqi people. Formulating
policies consonant with the needs and ambitions of the Iraqi people would contribute
significantly to the country’s unity, stability and prosperity. In turn, this will foster
confidence and a closer partnership with members of the international community.
With the support of the international community, Iraqis should take the lead in their
country’s decision and peace-making processes. Giving voice to the Iraqi people and
allowing them to have greater stake in decisions and actions directly affecting their lives
and their country’s future is an integral component of a functioning and stable democratic
state.
“We cannot win this war on terrorism. We can’t lose it either – this is at heart a battle of ideas,
a battle for political power to be held by Iraqis. We can help lower the violence to a level where
Iraqi politicians and Iraqi citizens will be able to make decisions for themselves, but we can’t
win it for them. No military officer would tell you we could, but we won’t lose this battle.”
Richard Armitage, Interview in Middle East Policy, Fall 2005
Formerly a highly centralised state with limited representation or accountability at the local
level, the Iraqi government is now faced with an immense challenge: to develop a bottomup
approach, empower provincial bodies and be responsive to their needs and aspirations.
Holding free, countrywide elections is central to building grassroots democracy and
providing the foundations for national unity and stability. Iraqi provincial elections will be
held on 1 October 2008, while national parliamentary elections are expected to be held in
late 2009 or early 2010. In preparation for the parliamentary elections, in May 2008, the
Iraqi cabinet issued instructions to the planning ministry to make the census account for
the Iraqi people before September 2009, in time for the parliamentary elections. The last
census held in Iraq was in 1997, but it did not include the Kurdistan region or Iraqis living
abroad.
The empowerment of Iraq’s civil society is central to building local capacities and
developing a representative, functioning state. Civil society organisations are a well-suited
means of promoting grassroots participation and represent a platform for Iraqis to express
their concerns and influence decisions and activities. Notably, Iraq has a growing civil
society with more than 2,500 registered NGOs. In addition, over 250 newspapers and
magazines have been launched since 2003. Certainly, these efforts need to be further
supported by the political leadership of Iraq as well as the international community.A strong civil society, social and gender quality, and a free and vibrant press are all vital
instruments in promoting security and stability in Iraq.
“You can have operational successes, but what sustains those is progress on the political front.
It is reconciliation; the coming together of various parties and sectarian groupings in Iraq. What
happened in Anbar was political: the military action capitalised on a political sea-change, where
the tribes changed from being on the fence or tacit support for al-Qaeda to active opposition.
That is an enormous political change. That enabled military operations to have the support of
the population."
General David Petraeus, 20 June 2007
Power devolution: Local and factional involvement in Iraq’s political processes
Structural reforms seeking to devolve power to the local communities in a fair manner will
not only ensure that the Iraqis can participate in the decision-making process but also help
to improve the overall social and political situation, and promote national unity. The
Provincial Powers Law is widely perceived as a key component of the efforts promoting
power devolution. The law manages to outline the practical mechanisms of local
government, providing a blueprint for a more accountable political system and affording
local areas with greater protection from arbitrary central rule. Furthermore, it allows the
governor and provincial councillors control over local security and public service provision
and permits them to pass local laws, provided they do not oppose national legislation. It
is, however, argued that in some respects the Act represents a retreat from the substantial
political decentralisation outlined in the 2005 National Constitution, as it allows the
national government to dismiss provincial governors and senior officials, and places the
budget under central control.
The law has been welcomed by the US administration as an important step towards national
reconciliation and a more balanced government. It is hoped that local elections to be held
later in the year will dampen political violence among Iraq’s Sunni Arabs who, following
their boycott of the last provincial elections, have been severely under-represented even in
those provinces where they enjoy a majority, such as the Ninevah province.55 By facilitating
local involvement in Iraq’s political processes, it is anticipated that the law is likely to
weaken popular support for the partition of the country into separate regions.56 The law was
approved by the Council of Representatives through a number of compromises between
political groups, many of whom favoured greater political autonomy.
Notably, two other pieces of legislation were being negotiated and passed at the same
time. The 2008 budget secured the acquiescence of the Kurdish alliance in return for the
allocation of 17 percent of national expenditure to the Kurdistan budget. Meanwhile, the
Amnesty Law satisfied one of the most important Sunni political demands - the release of
Iraqi prisoners, an estimated 80 percent of whom are Sunni.
The amnesty, which excludes those convicted for a variety of crimes, including terrorism,
murder, rape and drug trafficking, has also been welcomed by the Sadrists, who claim to
have been victimised by national security forces. Still, the fragility of the consensus
regarding the Provincial Powers Law has become all too apparent as this was passed with a
majority of only one vote, which was provided by the Parliamentary speaker. The Islamic
Supreme Council of Iraq, which favours decentralisation objected to 21 of its provisions
including the supremacy of federal over local law, the central government’s control of the
budget and its right to dismiss provincial governors and officials. The law was
subsequently blocked by the ISCI representative and the veto was lifted only after the party
was promised the opportunity to renegotiate its terms at a later stage.
The forthcoming provincial elections are expected to reconfigure the balance of power in
Iraq - the Sadrists and the Awakening Council are predicted to make substantial gains at
the expense of the Islamic Supreme Council of Iraq and established Sunni parties.
However, while the current terms of the Provincial Act will strengthen the centralist
ambitions of the Sadrists, it is argued that the local Awakening Councils will find their
demands for autonomy constrained. Despite hopes that it will reconcile the country’s
different groups, there are also fears that the forthcoming elections may provoke an
increase in intra-sectarian violence, especially between the rival Shia factions of the Mahdi
Army and the ISCI.
“On the political track, aiming for a legitimate, democratic Iraqi government was essential, but
the United States was far too slow in mobilising Iraqi political
development among the Iraqis is hampered by the lack not only of security but also of a stable
infrastructure program that can reliably deliver gas, electricity and jobs."
