Tasking: I'd like following questions answered

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National overview            TOP

Iraq is an oil-rich state, created after the First World War from the three Ottoman provinces of Baghdad, Basra and Mosul. The country has a history of political oppression and instability, which has been exacerbated by its ethnic and religious divisions and regional rivalries. In 1968 a Baathist coup enabled the establishment of an authoritarian one-party state under Saddam Hussein. He entrenched his position over the following decade, officially taking power in 1979. Saddam survived rebellions, coup plots and international sanctions until March 2003 when a US-led coalition invaded Iraq and overthrew his regime. The coalition subsequently assumed responsibility for administering Iraq, promising that the country would be transformed into a democracy. Sovereignty was restored to the Iraqi Interim Government when the occupation formally ended on 28 June 2004. However, the hope that this would restore stability was not realised and a bloody insurgency developed. The insurgency that has ensued since then, mainly pursued by Sunni insurgents against Shia targets and the US-led coalition, has gradually diminished as new political institutions have strengthened their legitimacy and credibility. The first constitutionally-elected Iraqi government was elected on 15 December 2005 and its cabinet was formed on 21 May 2006. As a consequence, the insurgency, which once had the potential to throw Iraq into civil war, is now dying a slow death, albeit with armed groups retaining the willingness to launch attacks capable of causing large numbers of casualties. US forces withdrew from Iraqi cities in June 2009, and in February 2010 dropped below 100,000 for the first time since 2003. Violence in Iraq remained at low levels and sporadic around the country. Iraqis will vote for their second post-Saddam parliamentary election on 7 March 2010.

Diminishing insurgency            TOP

The government of Prime Minister Nouri al-Maliki has faced serious internal violence throughout its term and this violence is likely to persist for the foreseeable future as troop-contributing countries withdraw in 2009 and the government assumes greater responsibility for security. However, since the US launched its "surge" policy in mid-2007, bringing an additional 20,000 troops into Baghdad and Al-Anbar province, violence has been at a less intensive level than in 2006 and 2007. Political violence in Iraq is being driven by a complex mesh of sectarian and factional drivers with both Sunni and Shia insurgents posing a security challenge to the government. Attacks on the Multi-National Force (MNF) are declining due to conflict fatigue, local truces, coalition engagement activities and the withdrawal of elements of the force. The key problem since 2006 has instead been Iraqi-on-Iraqi violence. Initially, this primarily comprised sectarian attacks aimed at civilians, but increasingly attacks took the form of factional resistance to government security forces. Certain sections of the Sunni Arab community remain highly active insurgents, with attacks most prevalent in areas where a hard core of irreconcilable former regime elements and Islamic militants pay networks of unemployed Iraqis to perform attacks. Sunni Arab resistance is particularly prevalent in areas where Sunnis fear Kurdish or Shia dominance. There are also residual concerns that former Sunni insurgents who joined the anti-Al-Qaeda 'Awakening Councils' may return to violence should the government fail to integrate them successfully into the Iraqi political and security apparatus. While fears exist of violence surrounding the next parliamentary elections currently scheduled for March, the trend of attacks has continued to decline as stability proves increasingly resilient.

Strengthening central government            TOP

The federal government is demonstrating growing confidence and ability in the security sphere, but other aspects of governance remain weak. Some legislative 'benchmarks' set by the US government have been met (albeit far slower than was anticipated) and the Maliki government has made a valid attempt to draw in some Sunni Arab politicians to form a Shia-Kurd-Sunni 'unity' government. Despite these steps forward, the activities of the central government in Baghdad remains plagued by corruption and ruling authorities are still divided into nepotistic and sectarian cliques. In the near term, the government can neither reduce the country's dependence on oil export revenues, nor attract investment to its non-oil economy. The government is likely to baulk at inflicting economic pain on the population to correct structural problems in the economy. The legislative agenda is progressing slowly, with intensive and time-consuming committee work required to build consensus before each new step. Despite the growing assertiveness of Maliki, the central government is still challenged at the provincial and municipal level by strong and forceful local power brokers. Accordingly, even as the legislative process accelerates in Baghdad, the ability to implement policy and directives continues to represent a tall order for the government.

Growth of local democracy            TOP

Economic complications            TOP

Iraq will continue to be a complicated country with which to do business. Iraqis are emerging from decades of living under a paternalistic command economy and remain strongly reliant on the state. The debate over foreign direct investment in Iraq was glossed over in the constitution. Instead, rules concerning foreign investment will be left to the national and regional legislatures, which have until now failed to pass the necessary legislation. Iraqis remain nationalistic and opposed to foreign involvement in certain strategic industries. In the oil industry, for instance, the wording of the constitution keeps open the prospect of foreign ownership of upstream oil industry assets, but popular and even technocratic sentiment is currently against such a development. Economic liberalisation is also uncertain in the current environment. The government has offered the population little reason to feel secure about its economic future. Subsidised food, electricity, and fuel are staples of Iraqi economic life, yet these institutions face diminution as the Iraqi government seeks to increase fiscal discipline and reduce government subsidies as a mechanism for gaining International Monetary Fund (IMF) support and reducing foreign debt. A second pillar of the economic system, the government sector (with assumed 'jobs for life'), is also under attack, with government ministries hinting at near-term redundancies in Iraq's state-owned industries, a precursor to a wider rationalisation of the government sector. In response, Iraqi civilians have launched a number of protests against the reduction of government subsidies and the growing cost of living. The government is unlikely to risk further serious social turmoil to drive home reforms.

International assistance            TOP

As of November 2009, there are 117,000 foreign troops in Iraq, almost all from the US. These forces began withdrawing in August 2009, but the process is slow and key enablers (for example intelligence, special forces advisors and air support) will remain in place for several years. The US is now the only major force provider after taking over from UK forces in Basra in May 2009. Other parties such as NATO are unlikely to make an impact. Iraq requires considerable international assistance to close its borders to militant jihadists. In the economic sphere, Iraq's recovery is arguably less dependent on foreign aid than was considered to be the case between 2003 and 2005. International aid (excluding US aid) was not a critical factor in Iraq's reconstruction, and the Iraqi exchequer itself is not short of cash. Iraq has far more cash reserves than it can spend due to shortfalls in provincial and national spending capability. In terms of foregoing debt, USD66.5 billion of Iraq's overall USD120.2 billion foreign debt has been forgiven. The Paris Club cancelled USD42.3 billion, including Russia's USD12 billion. A number of non-Paris Club members have cancelled a total of USD8.2 billion, on Paris Club terms. A total of USD16 billion has been cancelled by commercial creditors, also on Paris Club terms. Iraq owes between USD56.6 billion and USD79.9 billion of remaining debt, including USD7.6 billion of outstanding Paris Club debt, between USD32.4 billion and USD55.4 billion of Gulf Co-operation Council (GCC) debt, and between USD15.9 billion and USD16.2 billion of other non-Paris Club debt.

US soldiers are seen at the archaeological site of Babylon south of Baghdad in June 2009, a week before they are due to pull out of urban areas. (PA Photos) 1187670

Defence            TOP

Military overview            TOP

The reconstitution of Iraq's military (disbanded by the Coalition Provisional Authority in May 2003) and security forces is the most critical factor in determining future security of Iraq as the Multi-National Force (MNF) does not have sufficient manpower to stabilise the whole of the country. Development of the Iraqi Ministry of Defence and particularly the Iraqi Army has been a relative success, with the Iraqi Army demonstrating the ability to successfully fight three major, near-simultaneous security operations in early 2008. Iraqi units led two of the three operations (Basra and Mosul) and took over after an initial period of US-led operations in Baghdad's Sadr City.

Military rebuilding            TOP

Iraqi police and auxiliary security forces            TOP

Politics            TOP

Political overview            TOP

Iraq has a 275-member parliament, the Council of Representatives. Laws are passed by a simple majority and parliament is quorate when at least 138 members are present. As a result, it requires between 70 and 138 votes to pass laws. The December 2005 election resulted in a parliament split between the following large groupings; the Kurdistan Alliance (53 seats); the Supreme Iraq Islamic Council (SIIC) and Dawa (approximately 80 seats); the Sunni Tawafoq movement (44 seats); the Sadrist bloc (30 seats); the nationalist Iraqiyah list (25 seats); and Fadhila (15 seats). There is likely to be considerable change in the parliamentary elections due in early 2010. In November 2009, parliament approved a new electoral law for the 2010 elections in which the number of seats in parliament was increased to 325, at a ratio of one seat per 100,000 citizens. Iraq was divided into 18 electoral districts, each receiving a number of seats equivalent to its population size.

Government in practice            TOP

Government formation following the election was predictably slow. It began with a false start as Ibrahim al-Jaafari was nominated by the Shia bloc as its candidate for prime minister, but the nominee lacked the confidence of a sufficient proportion of the new parliament to allow government formation to start. In April 2006 the deadlock was broken and Maliki, a member of the Dawa party, was instead selected by parliament as prime minister. Maliki formed a council of ministers in May 2006. The cabinet is built around the Kurdistan Alliance and SIIC/Dawa. In practice, the government rarely achieved quorum in parliament during 2006 and 2007, and was almost entirely pre-occupied with security matters. It was not until early in 2008, when attacks on the International Zone ('Green Zone') reduced drastically, that long-overdue legislation began to be passed. Legislative priorities like the Budget Supplemental for the ministries and provinces, the Provincial Election Law (considered to be a key for national reconciliation), the return of Sunni representatives to parliament and approved ministerial nominations were met in 2008.

Prospects for re-centralisation            TOP

There is considerable scope for re-centralisation and authoritarianism in post-Saddam Iraq. The first step along such a path would be the identification of a strong leader who was viewed as cross-sectarian (former prime minister Ayad Allawi represented an archetype of this kind of politician). Such a leader would need at least one dependable security organ. The Iraqi Army is quickly strengthening and maintains the confidence of the people due to its deep cross-sectarian roots in Iraqi society plus ongoing US influence over army units. Maliki has been increasingly successful in centralising security decision-making in his office, and it may be even easier for a more charismatic and forceful premier to extend his power in the future.

Economy            TOP

Economic overview            TOP

In structural terms, Iraq's economy continues to lack revenue diversity and is vulnerable to various types of economic shocks, including the oil price slump shock that began in mid-2008. Oil sits at the heart of the key economic issues. Oil revenues account for 70 per cent of gross domestic product (GDP) and 95 per cent of government revenues. Production reached 2.49 million barrels per day (bpd) in 2007-2008 (resulting in exports of 2.11 million bpd) but declined to around 2.32 million barrels as of February 2009 owing to the decision by the Organisation of Petroleum-Exporting Countries (OPEC) to cut oil production to boost prices. High oil prices between 2005 and the mid-half of 2008 were responsible for much of Iraq's oil smuggling. The economy is widely seen as the third and vital pillar of the joint strategy to stabilise Iraq, alongside security and political development. However, tensions between US and Iraq priorities are becoming increasingly apparent: while Iraqi leaders express mounting frustration that international donors have been slow in delivering promised funds. The former US administration of George W Bush was concerned at the Iraqis' lack of progress on economic reform, and the impending rundown of US aid funding casts a shadow over many Iraqi reconstruction projects.

Oil            TOP

The oil sector is slowly developing. The government has proved willing to use Saddam-era oil legislation until new hydrocarbon legislation has been passed. On the back of five years of ad hoc technical fixes involving foreign companies, six Technical Service Agreements were to be formally awarded in June 2008 but the deal collapsed and the drilling and well-workover projects are now being individually tendered. A second oil and gas licensing round, initially yielding only one sale, ended in June 2009 with the award of six oil fields and two gas fields. A third licensing round took place in December 2009, when the government held an auction and assigned exploration rights to 10 of its largest undeveloped oil and gas fields. The government wants to increase production to between 4.0 million and 4.5 million bpd from its current 2.4 million bpd capacity over the next four to six years by bringing in technology, expertise and capital from leading international oil companies.

A worker is seen in the Nahran Omar oil refinery near Basra. (PA Photos) 1187671

Institutional failure            TOP

The non-oil sector also continues to under-perform, particularly job-creating areas such as industry and agriculture. The failure of institutions ranging from the Iraqi government to the international donor groups is to blame; for instance, of USD13.5 billion of international donor money pledged to Iraq, only USD4 billion materialised in 2006. US government aid has focused primarily on large-scale infrastructure projects employing foreigners rather than local-level non-oil sector industries involving Iraqis. Slow disbursements of Iraqi government and international funds have combined with insecurity, corruption, absent foreign investment and flight of human capital to stall the further development of the non-oil sector. The result is that while a large number of working-age Iraqi males (including an estimated 440,000 former military personnel) may undertake some form of paid employment, almost all are underemployed (in part-time work with no long-term potential for instance) and are seeking additional paid employment. Meanwhile, the post-war educational system has suffered serious disruption, adding to the negative effect of over a decade of under-investment in education and deepening a skills gap that is likely to affect Iraq for many years.