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In his fortified office in central Baghdad, oil minister Hussein Shirastani keeps a handwritten spreadsheet of Iraq’s oil production. Etched in red and black ink, the simple graphs mark the number of barrels a day that officials are getting out of the ground against the global oil price. Both have been trending upwards. No other lead indicator has recently done likewise – except for violence. Shirastani’s rudimentary drawings are in turn closely monitored by other leaders in what amounts to an Iraqi government these days – a gathering of factional chieftains, who have not passed a law in almost a year and are yet to form an administration nearly seven months after a national ballot. All the lawmakers know that if their fortunes, and indeed those of Iraq, are to change, it will have a lot to do with the one sector of the economy that is doing comparatively well.
As the US steadily disengages militarily from Iraq, little else in the country it has occupied for more than seven years seems to be doing what was expected of it. In some ways, not much else has to; Iraq has bet the farm on oil being the key driver of its growth.
Oil provides Iraq with 90% of government revenue and 80% of foreign earnings. The two rounds of oil auctions conducted in 2009 appear to have broken the back of cultural resistance to foreign investment and were both considered to have been successful and transparent processes.
As had been spelled out in the agreements, which opened up the fiercely guarded sector for the first time, the expertise of global oil companies is introducing efficiencies into the moribund sector. New hardware is being imported to replace drilling rigs and turbines that would easily find a home in a museum. The rehabilitation work has led to Iraq extracting from the ground steadily more barrels than ever before. The daily rate reached 2.32 million barrels in August, which is around 10% of stated optimums – and is slowly increasing most months.
“The only real economic question about the future of Iraq is what type of petro-state it will be downstream,” says a senior UK diplomat in Baghdad. In the deep south of Iraq, that hypothetical question is already being answered.
“We will be the next Dubai,” says Munadhal Khanger, a member of Basra’s advisory council. “I had a Lebanese investor in today, who wanted to build a hotel on the Shat al-Arab (the main waterway through the heart of town). I told him that it had to be at least 10 storeys tall. The land is very valuable now, and we can be very selective about who gets to develop it.”
BOOMTOWN BASRA
Basra, unlike central Iraq, is booming. For more than 30 years, its citizens predominantly Shi’ites and poor citizens were high among Saddam Hussein’s most persecuted charges. The oil revenue that the lakes of black gold under their feet delivered went straight to the central government coffers, and very little ever came back to them.
Basra’s waterways were choked with a putrid, toxic legacy that will take decades to fix, and its old and over-burdened infrastructure had not gone close to servicing the city’s needs either before the 2003 invasion or in the chaotic years since.
After Baghdad fell, Basra was a no-go zone, a foreboding place where foreigners were readily killed or kidnapped, and economic progress was repelled as a form of foreign subversion. In the past six months, though, shop fronts have emerged from bullet-pocked ruins, new money has flooded into town, and a long overdue clean-up has begun.
“This is the best of times for Basra,” Khanger says. “There is a confidence here that has been brought by all this money. This is the first time we have seen it being distributed equally, and it’s because of this that the militias have left the streets. It is only going to get better here. The people are going to be rich.”
Iraq’s potential as an economic powerhouse is not in doubt – even among the invasion’s detractors. It does, after all, sit on top of the world’s fourth-largest proven oil reserves, a supply so bountiful that it could produce upwards of eight million barrels a day for the next century.
And there is no shortage of buyers for old energy. China’s get-in-at-any-cost approach to the two oil auctions and the upcoming bid for three gas fields on October 20, is testament to its enduring viability as a buyer. BP, Shell and the Russians are also heavily committed, despite a low per barrel fee that only kicks in once efficiencies in extraction rates are achieved without Iraqi efforts.
Reservations, however, remain deeply rooted in aspects of statehood that are being ignored, or even diminished as the US military departs. Standards of governance are high among the concerns, as is the commitment of the ruling class to key tenants of a functional state, such as strong institutions, a rule of law, accountability and transparency in decisions. All areas have shown critical deficiencies, say Iraq’s lawmakers and western embassy officials alike.
Aamer Hakim, who heads the largest Shia political bloc in the bid to finally form a functional government, readily acknowledges that the country’s politicians are letting the country down.
“Not enough steps have been taken,” he says of the stalemate over who becomes prime minister. “We need to bring harmony; we need to be capable of building a state. We need bridges with the regional environment; [we need] to build institutions, stick to the constitution, commit to a rule of law and respect authority.”
Hakim’s bloc, the Islamic Supreme Council of Iraq (ISCI) has been a key player in the stagnant political process. The list he took to the election includes the vehemently anti-US Sadrists and is backed largely by devout Shia Muslims and the Iranian clerics they revere. ISCI is regularly accused of being a stalking horse for Iranian interests. But they are not alone.
“Everyone has a patron here,” Hakim says. “It is the way business is done. “We have long suffered under the consequences of quarrels that we have little means to influence. We don’t have much control about what is going on.” Then, speaking perhaps after the fact, he adds: “We don’t want to be Lebanized.”
'LEBANIZATION' FEARS
More than 20 years after the end of its civil war, Lebanon remains a brittle state, with a tenuous claim on sovereignty and few means to stop the neighbouring states that have long used it as an arena for their own agendas. There are fears that a similar plight awaits Iraq unless the society and its leaders take nation-building steps. “The first rule is to adhere to the principles of democracy,” says former prime minister and the winner of the popular vote in the March 7 election, Iyad Allawi, in an interview with Emerging Markets. They include implementing principles of a government based on real partnership, a process of strategic decision making, the foundations of a road map, reconciliation and institution building.”
Throughout the two administrations since the end of US and Coalition Provisional Authority rule, institutions, like the finance, defence and interior ministries, have been used to prosecute the agendas of the blocs that run them. Power has been enforced by unusually strong ministers, who have used them as fiefdoms rather than instruments of state. There have been persistent claims that foreign influence has been prosecuted through several institutions, particularly the interior and finance ministries, which have both been run by politicians who are heavily backed by neighbouring Iran.
Allawi, who has travelled widely across the Arab world since the election, says foreign meddling must be reined in. “I am adamant that this should stick to Iraq and not be hijacked by foreign powers,” he says in reference to the tussle for the prime minister’s chair. “Let them give me a good reason why Allawi should not be allowed to lead the country.”
Iran has placed a ban on Allawi, who stood on a secular ticket and attracted much of his support base from Iraq’s minority Sunni heartland. The Sunnis were disenfranchized after the fall of Saddam and have been struggling for a voice ever since. Iraq’s feuding politicians seem well aware that the Sunnis hold the key to much of Iraq’s future, but have so far found no solutions for them.
RISING VIOLENCE
Much of the recent violence, which has trended sharply upwards during the past six months of torpor, has origins in the same areas of Iraq that were ablaze throughout 2006–07, such as Mosul, Diyyala, Anbar and western Baghdad.
Though al-Qa’ida and affiliated Islamic groups account for the lion’s share of the bloodshed, there is increasing evidence that former Sunni militants who were encouraged to down weapons and join the political process have again become disillusioned and are joining the battle.The Sons of Iraq, the largely Sunni band of rebels credited with ousting al-Qa’ida in 2007, are first among this group.
Their programme is in ruins and there is a strong belief among rank and file that the incumbent prime minister, Nour al-Maliki, will not deliver on promises to integrate them into government bureaucracies that ministries are already struggling to fund because of the absence of decision making caused by the political crisis.
“They have lost a lot of faith in the political class,” says one of Maliki’s key lieutenants, Haidar al-Abadi. Asked what would happen if the Sunnis were again disenfranchised, seven years after they lost the unchecked power base they held under Saddam, al-Abadi said: “That would be a very dangerous descent. It would lead to uncontrolled groups taking advantage of the chaos again.”
The US military says its time as ruler in Iraq is over. The 49,000 troops it maintains there are largely confined to barracks, or to mentoring roles. Generals say that even if large-scale chaos were again to erupt in Iraq, it would be unlikely that the remaining US troops would join the fray. US government interests are now being driven by the large US Embassy in Baghdad.
But there’s a problem, according to al-Abadi. “It is clear that the Iraqi politicians don’t fear the Americans,” he says. “This is a key reason for us remaining in this predicament.”
Across the political spectrum there has been an almost schizophrenic reaction to the US disengagement: a sense of pride that the invaders are leaving, while at the same time a resentment that the country remains brittle and unstable.
“Iraq is still under Chapter Seven obligations,” says Allawi, in reference to the United Nations resolution after the first Gulf War that prescribed what its leaders must do before fully returning to the international fold.
“The UN, Europe and the US have a moral responsibility, let alone a legal responsibility, for what is happening in Iraq. And so does the government here.”