The Pre-War Situation
As recent events have shown, Kirkuk remains one of the outstanding issues in Iraqi politics. Not only does it have a national dynamic between the Kurdistan Regional Government (KRG) and Baghdad, but a local one between Kurds, Arabs, Turkmen, and Christians who live there and are all arguing over who has the right to control it. How did it get that way? A portrait of Kirkuk and Tamim province immediately after the U.S. invasion helps explain at least a part of the story.
In the weeks just before the war began in March 2003 hundreds of Kurds were being driven out of Kirkuk by Saddam’s forces. The goal was to prepare for the American invasion and suppress the Kurds who were expected to help them. This followed a long trend of Baghdad trying to change the demographics of the area. Saddam’s Anfal campaign that started in the 1980s, and his Arabization policy that displaced around 150,000 Kurds, Turkmen, and Assyrian Christians were the most famous examples, but the Iraqi government had been trying to move Arabs into Tamim since at least the 1950s. It’s believed that up to 350,000 Kurds and Turkmen were forced to leave as a result. The population was also changed by the fact that Kirkuk was the hub of the northern oil industry that attracted workers from around the country.
This has led to all kinds of claims to the city by each of the three major ethnicities there. For example, the Kurds say they were and are presently the majority, while the Turkmen point to the 1947 census that showed they were the largest group. A reporter from PBS’ Frontline that entered Kirkuk right after the invasion said that at that time the Kurds were 45% of city, Turkmen 25%, and the remaining 30% were split between Arabs and Christians.
Human Rights Watch warned in late March 2003 that Kirkuk was a disaster waiting to happen. They said unless the U.S. made plans for all of the people that were expected to return to the province after being pushed out by Saddam there would be a crisis. U.S., Turkish, and Iraqi opposition officials actually did meet that month, and said they would set up a committee to deal with northern Iraq, but it never materialized. This was no different from the rest of Iraq, where the U.S. also failed to adequately plan for the post-war situation.
Kirkuk During The U.S. Invasion
As soon as the U.S. war began in March 2003 Iraqi forces began abandoning their positions along the border with Kurdistan. This opened the road to Kirkuk, which the Kurds had promised the Americans they would not enter. The melting away of Saddam’s army was too tempting however, and the Kurdish peshmerga rushed to fill the vacuum. Looting was immediately reported in northern Tamim as the Kurds took out their anger at the Iraqi government. The situation was completely fluid and under Kurdish control, as there were only 2,000 U.S. paratroops in all of northern Iraq, and 50 Green Berets with the frontline peshmerga.
On April 10, the Iraqi forces withdrew from Kirkuk after heavy U.S. bombing, and Kurdish militiamen and civilians moved in. This set off alarm bells in Turkey that was afraid of Kurdish independence. Ankara warned that they would send in their troops if necessary to prevent that from happening, and the Turkish Foreign Minister demanded that observers be sent in at the minimum. He later talked to Secretary of State Colin Powell to get assurances that the Kurds would not be in control of Kirkuk.
Pillaging began in the city as well. There were lines of trucks and cars going back and forth from Irbil and Sulaymaniya to Kirkuk, full of looted goods. While most of the stealing appeared to be happening in Kurdish and government areas, the Turkmen claimed that they were being victimized by the Kurds as well. A day after Kirkuk fell, the Turkmen even held a demonstration against the looting. U.S. soldiers said they were powerless to stop it because they did not have control of the situation, very similar to what happened in other Iraqi cities after the fall of the government. The U.S. commander in Tamim later said that his unit had no plans for dealing with Kirkuk when they went into the country. They were originally tasked with just protecting the oil fields in the province, and were to stay out of the city. They were compelled to break those orders when Kirkuk descended into chaos.
Because of pressure from Washington and Turkey, the Kurdish leadership announced that the peshmerga would withdraw from Kirkuk. At the same time though, Kurdish police from Sulaymaniya were entering the city to assert law and order, and the Patriotic Union of Kurdistan (PUK) was attempting to take over the administration. A contingent from the U.S. 173rd Airborne Brigade also arrived, and Ankara sent in a small group of Turkish Special Forces as observers.
As the looting was being brought under control, there were the first reports of Arabs being expelled from the city and surrounding rural areas. Divas, a middle class neighborhood in Kirkuk that was built for Iraqi army officers was found largely abandoned after Kurds told them they had 24 hours to leave or be shot. On orders from local PUK officials, 2,000 members of the Shamar tribe who had been moved into Tamim in 1973 with the promise of free land by the government were also forced out of four villages. A PUK official in a neighboring town said this was part of his party’s policy to remove all the Arabs that moved into the province under Saddam. Senior PUK leaders denied this claim however.
Most Arabs actually fled before the U.S. invasion even began. According to interviews conducted by Human Rights Watch, the main reasons why they left were to escape the U.S. bombings and fighting, fear of the Kurds’ revenge, and a belief that much of the property they occupied actually belonged to the Kurds. Many relocated to Kirkuk at first, but then moved south. There were already refugee camps full of Arabs just a week after the fall of the city, and those who tried to return to their homes said Kurdish civilians and peshmerga stopped them.
The Turkmen were also singled out. The Kurdistan Democratic Party (KDP) gave an eviction notice to the Iraqi Turkmen Front’s headquarters in Kirkuk on April 13. The party said that the KDP warned them that there would be trouble if they didn’t leave.
Post-War Kirkuk
By May there were sporadic outbursts of violence between the different ethnic groups in Tamim. In that month, around 500 Arabs from the town of Hawija attacked the Kurdish part of Kirkuk, starting 36 hours of fighting. Five people were killed in the process. The cause was Kurdish harassment of some Arabs at a market and a bridge in the city two days beforehand. The Kurdish police also reported that Arabs had killed four Kurds in another neighborhood, and 40 people had been wounded since the fall of the city. American troops were later shot at in Hawija, showing that some elements were also mad at the U.S. for how things were going.
That anger increased when the Americans put together a governing council in Tamim. On May 25, a 300-member assembly of local leaders elected 30 delegates to the council. The Kurds, Turkmen, Arabs, and Christians got six delegates each, plus there were six independent members. That council went on to pick a governor. The day the council was seated the U.S. arrested five Arab members saying that they were Baathists. Two days before American forces arrested two other Arab leaders on the same charges. The Kurds ended up winning the mayor of Kirkuk, and got the majority of seats on the council when the Americans gave them five of the six independent positions.
In August 2003 violence flared up between Turkmen and Kurds. On August 22, Turkmen held a parade for a rebuilt Shiite shrine in the town of Tuz Khumato, south of Kirkuk. They got into an argument with Kurdish residents, who then tried to destroy the shrine with rocket-propelled grenades. The Turkmen rioted, burning down a police station. Eight Turkmen were killed as a result, two by U.S. forces. The Turkmen were mad at the Kurds and the Americans beforehand because they had appointed a Kurdish mayor and chief of police, even though the Turkmen were a majority there. The next day, Turkmen held a protest in Kirkuk that also led to rioting. Three Turkmen were killed, 15-20 demonstrators and police were wounded, and Kurds set about attacking Turkmen statues in the city. There the Turkmen were accusing the Kurds of flooding the city to create a majority to take it over, while Kurdish officials accused the Turkmen of being manipulated by Turkey.
These bursts of violence continued for the rest of the year, with no one willing to back down. On November 20, the PUK headquarters in Kirkuk was bombed and the Islamist Ansar al-Islam was suspected of being responsible. A month later demonstrations and counter-demonstrations by Kurds, Arabs, and Turkmen for and against federalism in Kirkuk led to a shootout on December 31 leaving five dead. U.S. raids were also turning up illegal weapons in all of the major political parties’ offices including those of the KDP, PUK and Turkmen Front, as all sides seemed to be gearing up for a fight.
The Kurdish parties were also trying to create facts on the ground to support their call for Kirkuk to be annexed by Kurdistan. They encouraged people to move back to Kirkuk, and even offered money to each family that did. Once there, these returnees tended to live in tent camps or squatted on government property. By March 2004, there were around 25,000 Kurds living in these conditions. None of them said they’d gotten any money from the Kurdish parties however, and they were desperate to find work, and were relying upon the government food ration system. There were thousands more still in Kurdistan who said they would not go back unless they knew they had housing and jobs. Others said they were simply too poor to make the trip. While many of these people had a legitimate desire to return to Kirkuk, the Kurdish parties were also manipulating them in their attempt to rest control of the city for themselves.
There were Turkmen and Arabs in a very similar situation. Turkmen were also attempting to return to Kirkuk, and were forced to live in tent camps too, as well as Arabs that had fled the city before the invasion. By 2004 the Mahdi Army was organizing Shiite Arabs and Turkmen in the city against the Kurdish claims, and threatening people to not leave.
The Coalition Provisional Authority (CPA) was very worried about the situation. Paul Bremer, the head of the CPA, was so concerned that he talked twice with Kurdish leaders asking them to drop their claims to Kirkuk, but to no avail. In September 2003 for example, the Kurdish President and head of the KDP Massoud Barzani said that all Arabs who had moved to Kirkuk and other Kurdish areas since 1961 had to leave. The CPA was panicking as a result, and did not offer any assistance to any of the Kurds that returned to Tamim, fearing that it would legitimize the Kurdish strategy.
By early 2004 the situation in Kirkuk and Tamim province were quickly deteriorating just as Human Rights Watch had warned about before the opening of hostilities. Reports of Arabs being expelled by Kurds after the fall of Kirkuk didn’t capture the fact that the majority had fled even before the war started. By June 2003 the Kurdish parties had cracked down on many of their members and there were no more stories of displacement. Much more important were the occasional flashes of violence, and the growing dispute over the governance of Kirkuk and Tamim. A year after the invasion, Kirkuk had grown from a local and regional problem to a national one as insurgents and the Mahdi Army were operating in the city, and the CPA was being drawn in. It seems that the divide and conquer strategy of Saddam Hussein was so effective that it continued to play out even after he was disposed. The Kurds, Turkmen, and Arabs were so tied up in their conflicting claims to Kirkuk that cooperation was nearly impossible. The lack of U.S. forces in the north also created a security vacuum that left every group to fend for itself, and the absence of U.S. planning for post-war Iraq allowed the PUK and KDP to become the de facto sovereigns of Kirkuk and many surrounding areas through their police and control of the administration. The subsequent years have only increased these divisions in the city, just as it has become more of an issue in Iraqi politics.
SOURCES
Badkhen, Anna, “Kurds evicting Arabs in north Iraq,” San Francisco Chronicle, 4/19/03
Baker, Luke, “Ancient Rivalries Vie for Dominance of Iraq’s Kirkuk,” Reuters, 2/5/04
BBC, “Kurds flee Iraqi town,” 3/15/03
Bruni, Frank, “A Nation At War: Northern Iraq; Turkey Sending Military Observers to Watch Kurds; U.S. Warns Against Further Moves,” New York Times, 4/11/03
Chivers, C.J., “A Nation At War: In The Field – Kirkuk; Iraqis Abandon Post And Kurds Advance,” New York Times, 3/28/03
- “A Nation At War: In The Field l Northern Iraq; Kirkuk on the Horizon, and a Falcon and Shells Nearby,” New York Times, 4/2/03
- “A Nation At War: Northern Front; Attention Now Shifts to the Role of the Kurds,” New York Times, 4/10/03
- “A Nation At War: Northern Iraq; Paratroopers Find Suspicious Warheads and Rocket Parts in Kirkuk,” New York Times, 4/13/03
- “A Nation At War: The Kurds; Kirkuk’s Swift Collapse Leaves a City in Chaos,” New York Times, 4/11/03
CNN, “U.S. reinforcements arrive in Kirkuk,” 4/10/03
Fleishman, Jeffrey, “Kirkuk Rises to Uneasy Freedom,” Los Angeles Times, 4/12/03
Human Rights Watch, “Claims in Conflict,” 8/2/04
- “Iraq: Impending Inter-Ethnic Violence in Kirkuk,” 3/27/03
- “Iraq: Killings, Expulsions on the Rise in Kirkuk,” 4/14/03
Internal Displacement Monitoring Center, “IDP News Alert: 16 April 2003,” 4/16/03
- “IDP News Alert: 23 April 2003,” 4/23/03
IRIN, “IRAQ: Focus on IDPs in Kirkuk living in poor conditions,” 3/1/04
Kiley, Sam, “IRAQ: The Road to Kirkuk,” Frontline, May 2003
Mite, Valentinas, “Turkomans Say Kirkuk’s Growing Kurdish Population A Threat,” Radio Free Europe/Radio Liberty, 11/13/03
Mufti, Hania, Stover, Eric, “Troubles in Kirkuk,” San Francisco Chronicle, 4/30/03
Oppel, Richard with MacFarquhar, Neil, “After the War: Southern Iraq; 3 British Soldiers Are Killed in Basra Attack,” New York Times, 8/24/03
PBS Frontline, “Interview Col. William Mayville,” Beyond Baghdad, 2/12/04
Rhode, David, “A Nation At War: The North; As Kurds Move Into Kirkuk, Arabs Fear Revenge,” New York Times, 4/11/03
Sachs, Susan, “A Region Inflamed: Attacks; Truck Bomb Kills 5 in a Pro-U.S. Kurdish Stronghold in Northern Iraq,” New York Times, 11/21/03
Travernise, Sabrina, “After The War: The North; Kurds Celebrate Election of Mayor in Kirkuk,” New York Times, 5/29/03
- “After The War: Northern Iraq; U.S. Detains 5 Suspected Baath Loyalists at Kirkuk Elections,” New York Times, 5/25/03
- “Aftereffects: The North; Arabs and Kurds Clash in Kirkuk, and at Least 5 Are Killed,” New York Times, 5/18/03
Tyler, Patrick, “A Nation At War: Combat; Allies Widen Hold on Iraq; Civil Strife on Rise,” New York Times, 4/11/03
Voice of America, “Iraqi Kurds Return to Kirkuk,” 5/29/03
Washington Times, “Insurgents stir up strife in Kirkuk,” 5/17/04
Wong, Edward, “The Struggle for Iraq: Northern Iraq; Back From Exile, Kurds Demand Political Power and Reparations for Seized Property,” New York Times, 1/19/04
Showing posts with label Coalition Provisional Authority. Show all posts
Showing posts with label Coalition Provisional Authority. Show all posts
Sunday, November 22, 2009
Tuesday, July 28, 2009
Special Inspector General for Iraq Reconstruction, “Hard Lessons,” - Chapter 5 ORHA In Baghdad
Chapter 5 of the Special Inspector General for Iraq Reconstruction’s “Hard Lessons” report on the American effort to rebuild Iraq highlights the first turning point in the war. The previous chapters went through the uncoordinated planning and faulty thinking that occurred in Washington before the invasion. Chapter 5 covers the U.S. invasion and its immediate consequences. The chaos that ensued would ensure a long-term U.S. occupation of Iraq.
On March 17, 2003 President George Bush issued an ultimatum for Saddam Hussein and his two sons Uday and Qusay to leave Iraq within 48 hours. On March 20 the bombing began, and the next day Coalition ground forces crossed the border into Iraq. Most of the Iraqi military disappeared, but Saddam’s Fedayeen militia began attacks in the south. U.S. General John Abizaid, deputy commander of the Central Command (CENTCOM), looked at reports on how the war was going and predicted in April that the U.S. would end up fighting an insurgency in the country. American forces were concentrated on getting to Baghdad as quick as possible to prevent the use of weapons of mass destruction. That meant large cities, and northern and western Iraq were left to themselves for weeks, a situation which would have a negative impact on security later on.
Pre-war planning had been split between military and civilian authorities with little to no coordination. That continued during and immediately after the invasion. Members of the United States Agency for International Development (USAID) and military engineers moved behind combat forces to assess the situation in Iraq independent of each other. The first place the USAID teams went to was the port of Umm Qasr in Basra on March 27. They found the facilities in poor condition, but were still able to have a British ship dock there the next day to delivery humanitarian supplies. The engineers found the power system and infrastructure falling apart across Iraq. In Baghdad for example, the communication and water system were knocked out shortly after the bombing began, and on April 4, the power died in most of the city. Before the war, planners in Washington believed that after the invasion, the country would still be running, and that reconstruction costs would be minimal, and mostly paid for by Iraqi oil revenues. The assessments of the USAID and engineering teams found that it might cost up to $35 billion to rebuild Iraq. USAID and Retired General Jay Garner, the head of the Office of Reconstruction and Humanitarian Affairs (ORHA), had raised this concern before, but were met with deaf ears by administration officials.
Problems with unity of command even occurred within the ORHA itself. Faced with the dire state of Iraq’s infrastructure, Garner ordered the USAID to begin working on services instead of humanitarian issues. USAID refused, which led to a bureaucratic battle that reached all the way up to Secretary of Defense Donald Rumsfeld and Secretary of State Colin Powell over who the USAID should answer to. Eventually Garner had to call Powell himself to get the agency to follow his orders.
Garner faced problems even getting into Iraq himself. General Tommy Franks, head of CENTCOM, was following the military’s plan for Iraq. That saw the U.S. overthrowing the government, securing any WMD, and then turning over Iraq to a civilian authority in six to eight weeks, at which time rebuilding would begin. Garner wanted access to Iraq immediately. Garner flew to Qatar to meet with General Franks where he argued that there was a power vacuum in Iraq that needed to be filled by the ORHA. General Franks reluctantly gave in.
The first place Garner’s staff went to was Basra. There they didn’t have a communication system at first, lacked security because there were too few Coalition troops in the city, and reported the first cases of looting on April 2. The chaos that was being unleashed would setback the work on Basra’s Umm Qasr port for weeks, and lead to skyrocketing costs, a foreshadowing of the overall reconstruction effort in Iraq.
The looting and chaos would quickly spread to the rest of the country. On April 7 looting began in Baghdad. Gunfire, robberies, and murders were reported across the city. All of Iraq’s ministries were stripped, and then burned. The exception was the Oil Ministry, which was protected by U.S. troops. That was because the Defense Department had been tasked with running the oil industry in pre-war planning, and issued orders to protect the building during the invasion. Some ministries even continued to be attacked when the U.S. occupied them. The Health Ministry’s offices for example were burned two or three more times after the Americans re-opened it. Iraq’s three main banks, Rafidain, Rasheed, and the Central Bank had their money and safety deposit boxes taken. Iraqis also began going after the petroleum industry, which lasted for ten weeks from March to May 2003, and caused $943 million in damages. Organized gangs and insurgents would eventually take over the robbing and killing. Some neighborhoods in Baghdad, especially Shiite ones, set up militias for protection. This spread to other areas like Amarah in Maysan where Shiite militias took over the city in the absence of Iraqi administrators and Coalition troops. The U.S. ground forces commander General David McKiernan said there weren’t enough troops to maintain security. He was also constrained by the fact that the invasion plan called for soldiers to continue to push north looking for MWD, leaving Baghdad, and much of southern and western Iraq with no Coalition presence. The result was more instability.
This had four major effects upon the U.S. and Iraq. First, it raised the costs of reconstruction by billions. On April 16, Congress appropriated $2.475 billion for rebuilding Iraq. The U.S. would end up spending $50 billion. Second, the lack of security meant Iraqi weapon depots were looted, which helped arm the insurgency and Shiite militias who would go on to destabilize the country after the invasion. Third, the collapse of the Iraqi government and the poor state of Iraq’s infrastructure after decades of war and sanctions meant that the Americans could not get services up and running, which cost them public support. Finally, the situation on the ground in Iraq would eventually mean the White House would give up its strategy of a quick departure.
Despite these setbacks, the U.S. military and leadership acted as if everything was going according to plan. On April 16 General Franks gave his “Freedom Message” saying that the U.S. would only be in Iraq temporarily, and that an American civilian authority known as the Coalition Provisional Authority would soon take over from the military. On April 21, Rumsfeld, taking the advice of General Franks, cancelled the deployment of 50,000 additional troops to Iraq, and began thinking of withdrawal. General McKiernan and Garner were shocked as they both wanted more troops to handle security.
At the same time, Garner was carrying on with his own policies as well. On April 15 he and Presidential Envoy to the Iraqi opposition Zalmay Khalilzad put together a meeting of over 100 indigenous Iraqi leaders in Nassiriya to discuss forming an interim Iraqi government that would take over from the Americans. On April 22, Garner flew to Kurdistan to consult with the Kurdish leaders on this plan as well, while Secretary Powell sent Khalizad and Ambassador Ryan Crocker to meet with Iraqis in the south. This culminated in a meeting on April 28 in Baghdad that included 250 domestic and exile leaders. They agreed to form an Iraqi government over the next four weeks.
All of the ORHA’s work ended in May. Faced with the instability in Iraq, the White House gave up on Garner. National Security Adviser Condoleeza Rice and Defense Secretary Rumsfeld both believed that ORHA had lost control of the situation in Iraq. On May 6, President Bush named Paul Bremer as his Presidential Envoy to Iraq to head a new organization, the Coalition Provisional Authority (CPA). Bremer had been contacted by the Defense Department and Vice President Dick Cheney’s office at the beginning of April. Garner had been told when he first got his job that he would eventually be replaced, but he didn’t expect it to happen so soon.
The Bush administration’s planning for Iraq had always been haphazard and disconnected. At any one time before the invasion there were at least two different organizations working on a strategy for post-war Iraq, with little to no knowledge of each other. The White House also often interfered with the effort causing more problems. When the invasion started the U.S. military and the civilian OHRA both thought they would be in charge of post-war Iraq. They worked independently, which didn’t help when the country fell into chaos. That instability led the administration to panic, and abandon its early plan to withdraw from Iraq quickly in favor of a long-term occupation under the CPA. The effects of that decision are still being felt today.
SOURCES
Packer, George, Assassins’ Gate, 2005
PBS Frontline, “INTERVIEWS Elisabeth Bumiller,” Bush’s War, 3/24/08
Ricks, Tom, Fiasco, 2006
Special Inspector General for Iraq Reconstruction, “Hard Lessons,” 1/22/09
Woodward, Bob, State of Denial, 2006
On March 17, 2003 President George Bush issued an ultimatum for Saddam Hussein and his two sons Uday and Qusay to leave Iraq within 48 hours. On March 20 the bombing began, and the next day Coalition ground forces crossed the border into Iraq. Most of the Iraqi military disappeared, but Saddam’s Fedayeen militia began attacks in the south. U.S. General John Abizaid, deputy commander of the Central Command (CENTCOM), looked at reports on how the war was going and predicted in April that the U.S. would end up fighting an insurgency in the country. American forces were concentrated on getting to Baghdad as quick as possible to prevent the use of weapons of mass destruction. That meant large cities, and northern and western Iraq were left to themselves for weeks, a situation which would have a negative impact on security later on.
Pre-war planning had been split between military and civilian authorities with little to no coordination. That continued during and immediately after the invasion. Members of the United States Agency for International Development (USAID) and military engineers moved behind combat forces to assess the situation in Iraq independent of each other. The first place the USAID teams went to was the port of Umm Qasr in Basra on March 27. They found the facilities in poor condition, but were still able to have a British ship dock there the next day to delivery humanitarian supplies. The engineers found the power system and infrastructure falling apart across Iraq. In Baghdad for example, the communication and water system were knocked out shortly after the bombing began, and on April 4, the power died in most of the city. Before the war, planners in Washington believed that after the invasion, the country would still be running, and that reconstruction costs would be minimal, and mostly paid for by Iraqi oil revenues. The assessments of the USAID and engineering teams found that it might cost up to $35 billion to rebuild Iraq. USAID and Retired General Jay Garner, the head of the Office of Reconstruction and Humanitarian Affairs (ORHA), had raised this concern before, but were met with deaf ears by administration officials.
Problems with unity of command even occurred within the ORHA itself. Faced with the dire state of Iraq’s infrastructure, Garner ordered the USAID to begin working on services instead of humanitarian issues. USAID refused, which led to a bureaucratic battle that reached all the way up to Secretary of Defense Donald Rumsfeld and Secretary of State Colin Powell over who the USAID should answer to. Eventually Garner had to call Powell himself to get the agency to follow his orders.
Garner faced problems even getting into Iraq himself. General Tommy Franks, head of CENTCOM, was following the military’s plan for Iraq. That saw the U.S. overthrowing the government, securing any WMD, and then turning over Iraq to a civilian authority in six to eight weeks, at which time rebuilding would begin. Garner wanted access to Iraq immediately. Garner flew to Qatar to meet with General Franks where he argued that there was a power vacuum in Iraq that needed to be filled by the ORHA. General Franks reluctantly gave in.
The first place Garner’s staff went to was Basra. There they didn’t have a communication system at first, lacked security because there were too few Coalition troops in the city, and reported the first cases of looting on April 2. The chaos that was being unleashed would setback the work on Basra’s Umm Qasr port for weeks, and lead to skyrocketing costs, a foreshadowing of the overall reconstruction effort in Iraq.
The looting and chaos would quickly spread to the rest of the country. On April 7 looting began in Baghdad. Gunfire, robberies, and murders were reported across the city. All of Iraq’s ministries were stripped, and then burned. The exception was the Oil Ministry, which was protected by U.S. troops. That was because the Defense Department had been tasked with running the oil industry in pre-war planning, and issued orders to protect the building during the invasion. Some ministries even continued to be attacked when the U.S. occupied them. The Health Ministry’s offices for example were burned two or three more times after the Americans re-opened it. Iraq’s three main banks, Rafidain, Rasheed, and the Central Bank had their money and safety deposit boxes taken. Iraqis also began going after the petroleum industry, which lasted for ten weeks from March to May 2003, and caused $943 million in damages. Organized gangs and insurgents would eventually take over the robbing and killing. Some neighborhoods in Baghdad, especially Shiite ones, set up militias for protection. This spread to other areas like Amarah in Maysan where Shiite militias took over the city in the absence of Iraqi administrators and Coalition troops. The U.S. ground forces commander General David McKiernan said there weren’t enough troops to maintain security. He was also constrained by the fact that the invasion plan called for soldiers to continue to push north looking for MWD, leaving Baghdad, and much of southern and western Iraq with no Coalition presence. The result was more instability.
This had four major effects upon the U.S. and Iraq. First, it raised the costs of reconstruction by billions. On April 16, Congress appropriated $2.475 billion for rebuilding Iraq. The U.S. would end up spending $50 billion. Second, the lack of security meant Iraqi weapon depots were looted, which helped arm the insurgency and Shiite militias who would go on to destabilize the country after the invasion. Third, the collapse of the Iraqi government and the poor state of Iraq’s infrastructure after decades of war and sanctions meant that the Americans could not get services up and running, which cost them public support. Finally, the situation on the ground in Iraq would eventually mean the White House would give up its strategy of a quick departure.
Despite these setbacks, the U.S. military and leadership acted as if everything was going according to plan. On April 16 General Franks gave his “Freedom Message” saying that the U.S. would only be in Iraq temporarily, and that an American civilian authority known as the Coalition Provisional Authority would soon take over from the military. On April 21, Rumsfeld, taking the advice of General Franks, cancelled the deployment of 50,000 additional troops to Iraq, and began thinking of withdrawal. General McKiernan and Garner were shocked as they both wanted more troops to handle security.
At the same time, Garner was carrying on with his own policies as well. On April 15 he and Presidential Envoy to the Iraqi opposition Zalmay Khalilzad put together a meeting of over 100 indigenous Iraqi leaders in Nassiriya to discuss forming an interim Iraqi government that would take over from the Americans. On April 22, Garner flew to Kurdistan to consult with the Kurdish leaders on this plan as well, while Secretary Powell sent Khalizad and Ambassador Ryan Crocker to meet with Iraqis in the south. This culminated in a meeting on April 28 in Baghdad that included 250 domestic and exile leaders. They agreed to form an Iraqi government over the next four weeks.
All of the ORHA’s work ended in May. Faced with the instability in Iraq, the White House gave up on Garner. National Security Adviser Condoleeza Rice and Defense Secretary Rumsfeld both believed that ORHA had lost control of the situation in Iraq. On May 6, President Bush named Paul Bremer as his Presidential Envoy to Iraq to head a new organization, the Coalition Provisional Authority (CPA). Bremer had been contacted by the Defense Department and Vice President Dick Cheney’s office at the beginning of April. Garner had been told when he first got his job that he would eventually be replaced, but he didn’t expect it to happen so soon.
The Bush administration’s planning for Iraq had always been haphazard and disconnected. At any one time before the invasion there were at least two different organizations working on a strategy for post-war Iraq, with little to no knowledge of each other. The White House also often interfered with the effort causing more problems. When the invasion started the U.S. military and the civilian OHRA both thought they would be in charge of post-war Iraq. They worked independently, which didn’t help when the country fell into chaos. That instability led the administration to panic, and abandon its early plan to withdraw from Iraq quickly in favor of a long-term occupation under the CPA. The effects of that decision are still being felt today.
SOURCES
Packer, George, Assassins’ Gate, 2005
PBS Frontline, “INTERVIEWS Elisabeth Bumiller,” Bush’s War, 3/24/08
Ricks, Tom, Fiasco, 2006
Special Inspector General for Iraq Reconstruction, “Hard Lessons,” 1/22/09
Woodward, Bob, State of Denial, 2006
Sunday, July 19, 2009
Overview of Iraq’s Tribes
Much of the commentary about Iraq is driven by U.S. experiences, which are not always the reality in Iraq. When the sectarian war took off in 2006 for example, much of the writing about the country was focused upon the Sunni-Shiite divide. A common argument was that these two interpretations of Islam had always been in conflict, and could not coexist in Iraq. Later, when the U.S. began working with the tribes in Anbar, which became known as the Awakening, a new line of thinking opened up claiming that Iraq was at heart a tribal society. This ignored the fact that many of the country’s largest tribes were a mix of Sunnis and Shiites. If the first argument held true, than the sectarian fighting should’ve destroyed many of Iraq’s tribes. Neither was completely true nor false. A quick review of Iraq’s tribal history shows that they are but one form of social organization and identity within the country amongst others. Their influence is usually directly related to the power of the state.
Many of Iraq’s tribes migrated there from the Arabian peninsula. Iraq’s tribes are divided into sub-tribes, clans, and their most basic unit, the extended family. Sheikhs are leaders within these communities. They control local economies, settle disputes, etc. The problem is there are so many it’s hard to determine which ones have real standing. About 75% of Iraq’s 26 million people belong to a tribe. There were originally nine tribes in Iraq, the Mutafiz, Zubayd, Dulaym, Ubayd, Khazal, Bani Lam, Al Bu Muhammad, Rabia, and Kab. By the 1800s there were several new groups included the Shammar, Anaza, Bani Tamim, and Zafire. Many of these groups have divided over the years leading to about 150 different tribes in the country, and around 2,000 clans today. The larger tribes are usually a mix of Sunnis and Shiites.
The power and role of Iraq’s tribes have gone up and down depending upon the rulers of the country. When the Ottomans originally ruled Iraq they had very loose control over the area, so the tribes held the real authority. By the mid-19th Century however, the Ottomans began encouraging people to give up their semi-nomadic lifestyle by settling in towns and cities, and instituted land reform, both of which diluted the standing of the tribes. That changed when the British took over and created Iraq in the wake of World War I. They turned to sheikhs as local partners to institute a form of indirect rule in the country. Many tribes became connected to specific villages at this time based upon extended families. Beginning in the 1920s when the monarchy tried to establish itself that again withered the power of the tribes. In 1968 when the Baathists took power they had a mixed policy towards the tribes. On the one hand the party wanted to modernize the state, and banned tribal names, encouraged migration from rural areas to the cities, again instituted land reform, which broke up the traditional structures many tribes relied upon, and emphasized Iraqi nationalism over other identities. At the same time, top Baathist leaders privileged their own personal kinsmen and gave them top positions in the new government.
Saddam ended up turning to the country’s tribes in the 1980s because of the wars and uprisings he faced, which eventually came back on him. First he looked to the tribes to organize soldiers to fight in the Iran-Iraq war. It was during this time that the Dulaym tribe in Anbar for example, gained privileged status from the government. After the 1991 Gulf War, Saddam relied even more upon the tribes to control the country after the Kurdish and Shiite uprisings. He gave tribes more autonomy and services, and in return, they agreed to provide security in their areas. He also played the tribal leaders off against each other, and created new tribes in a divide and rule policy. The sheikhs’ authority then was dependent upon the amount of support they received from the state. At the same time, their growing power was a sign that the Iraqi state was crumbling from the wars and sanctions. By the 1990s in fact, there were at least two tribal coup attempts against Saddam.
Immediately after the invasion in 2003, the U.S. had a contradictory attitude towards Iraq’s tribes. On the one hand, Paul Bremer wanted to get rid of the old order, which included the tribes. At the same time, in an attempt to create a sectarian and ethnically balanced Iraqi Governing Council and interim Iraqi government the Coalition Provisional Authority selected a few sheikhs to represent the Sunnis. Ghazi Ajil al-Taware of the Shammar tribe for example, was appointed Iraq’s interim president in 2004. The U.S. military also reached out to selected tribes to provide security, but many of those efforts proved futile. Many of the leaders the U.S. worked with proved largely powerless, unpopular, or were playing both sides in the conflict.
In the provinces, the overthrow of Saddam not only led to resistance, but the collapse of the Iraqi state. The situation was made worse when the Sunnis decided to boycott the January 2005 elections. Only 2% of Anbar for example, participated. The Iraqi Islamic Party came to power despite lacking any mandate or legitimacy. The provincial government only operated where U.S. forces could protect them, which was few and far between. Into this vacuum stepped in the insurgency and Al Qaeda in Iraq. Playing upon a sense of loss by the Sunni community, Iraqi nationalism, anti-Americanism, and cash, the militants recruited many young men to fight.
At first the tribes of Anbar aligned themselves with the insurgents, but then came to see Al Qaeda in Iraq as a threat. At first both had a common enemy in the Americans, but then a few tribes felt that the Islamists were attempting to take control of Anbar for themselves. This eventually led to the Anbar Awakening, which aligned itself with the United States. The Americans in turn gave them jobs in the local security forces, and directed reconstruction money to them. This gave rise to a new generation of sheikhs who replaced the old ones. The U.S. in fact, became the new patrons of the tribal leaders, playing a similar role to what Saddam did.
In the south, many tribes were co-opted by the Supreme Islamic Iraqi Council (SIIC) and of Shiite parties. When the U.S. tried to replicate the Awakening with Shiite tribes during the Surge they met stiff resistance by the Supreme Council who controlled many of the provincial governments in the region, and Prime Minister Nouri al-Maliki. Both considered the tribes their constituents. Maliki began winning over many from the Supreme Council in 2008 with his Tribal Support Councils. Like Saddam and the Americans, the Prime Minister created a patronage system to keep these tribes under his control.
The majority of Iraqis claim membership in tribes, but that is not their only identity. Urbanism, Islam, and Iraqi nationalism are other factors that shape Iraqis. Throughout the country’s history the tribes have risen and fallen in relation to the power of the central authorities. During the early Ottoman period, British rule, and after the U.S. invasion, the government was weak and the tribes were strong, while in the other periods their power was diluted. Today, the tribes have found a new space in Iraq, but it appears still conditional. In Anbar the Awakening tribes are trying to form themselves into a new political force, but in southern Iraq many have been co-opted by Prime Minister Maliki. Again, it is the strength of the government that seems to determine the influence of the tribes.
SOURCES
Burns, John and Glanz, James, “Iraqi Shiites Win, but Margin Is less Than Projection,” New York Times, 2/14/05
Byman, Daniel, “An Autopsy of the Iraq Debacle: Policy Failure or Bridge Too Far?” Security Studies, October 2008
Eisenstadt, Lieutenant Colonel Michael, “Iraq Tribal engagement Lessons Learned,” Military Review, September-October 2007
Gordon, Michael, “The Last Battle,” New York Times, 8/3/08
Hassan, Hussein, “Iraq: Tribal Structure, Social, and Political Activities,” Congressional Research Service, 4/7/08
International Crisis Group, “Iraq After The Surge I: The New Sunni Landscape,” 4/30/08
Long, Austin, “The Anbar Awakening,” Survival, April 2008
McCary, John, “The Anbar Awakening: An Alliance of Incentives,” Washington Quarterly, January 2009
Otterman, Sharon, “IRAQ: The Role of Tribes,” Council on Foreign Relations, 11/14/03
Smith, Major Neil and MacFarland, Colonel Sean, “Anbar Awakens: The Tipping Point,” Military Review, March-April 2008
Many of Iraq’s tribes migrated there from the Arabian peninsula. Iraq’s tribes are divided into sub-tribes, clans, and their most basic unit, the extended family. Sheikhs are leaders within these communities. They control local economies, settle disputes, etc. The problem is there are so many it’s hard to determine which ones have real standing. About 75% of Iraq’s 26 million people belong to a tribe. There were originally nine tribes in Iraq, the Mutafiz, Zubayd, Dulaym, Ubayd, Khazal, Bani Lam, Al Bu Muhammad, Rabia, and Kab. By the 1800s there were several new groups included the Shammar, Anaza, Bani Tamim, and Zafire. Many of these groups have divided over the years leading to about 150 different tribes in the country, and around 2,000 clans today. The larger tribes are usually a mix of Sunnis and Shiites.
The power and role of Iraq’s tribes have gone up and down depending upon the rulers of the country. When the Ottomans originally ruled Iraq they had very loose control over the area, so the tribes held the real authority. By the mid-19th Century however, the Ottomans began encouraging people to give up their semi-nomadic lifestyle by settling in towns and cities, and instituted land reform, both of which diluted the standing of the tribes. That changed when the British took over and created Iraq in the wake of World War I. They turned to sheikhs as local partners to institute a form of indirect rule in the country. Many tribes became connected to specific villages at this time based upon extended families. Beginning in the 1920s when the monarchy tried to establish itself that again withered the power of the tribes. In 1968 when the Baathists took power they had a mixed policy towards the tribes. On the one hand the party wanted to modernize the state, and banned tribal names, encouraged migration from rural areas to the cities, again instituted land reform, which broke up the traditional structures many tribes relied upon, and emphasized Iraqi nationalism over other identities. At the same time, top Baathist leaders privileged their own personal kinsmen and gave them top positions in the new government.
Saddam ended up turning to the country’s tribes in the 1980s because of the wars and uprisings he faced, which eventually came back on him. First he looked to the tribes to organize soldiers to fight in the Iran-Iraq war. It was during this time that the Dulaym tribe in Anbar for example, gained privileged status from the government. After the 1991 Gulf War, Saddam relied even more upon the tribes to control the country after the Kurdish and Shiite uprisings. He gave tribes more autonomy and services, and in return, they agreed to provide security in their areas. He also played the tribal leaders off against each other, and created new tribes in a divide and rule policy. The sheikhs’ authority then was dependent upon the amount of support they received from the state. At the same time, their growing power was a sign that the Iraqi state was crumbling from the wars and sanctions. By the 1990s in fact, there were at least two tribal coup attempts against Saddam.
Immediately after the invasion in 2003, the U.S. had a contradictory attitude towards Iraq’s tribes. On the one hand, Paul Bremer wanted to get rid of the old order, which included the tribes. At the same time, in an attempt to create a sectarian and ethnically balanced Iraqi Governing Council and interim Iraqi government the Coalition Provisional Authority selected a few sheikhs to represent the Sunnis. Ghazi Ajil al-Taware of the Shammar tribe for example, was appointed Iraq’s interim president in 2004. The U.S. military also reached out to selected tribes to provide security, but many of those efforts proved futile. Many of the leaders the U.S. worked with proved largely powerless, unpopular, or were playing both sides in the conflict.
In the provinces, the overthrow of Saddam not only led to resistance, but the collapse of the Iraqi state. The situation was made worse when the Sunnis decided to boycott the January 2005 elections. Only 2% of Anbar for example, participated. The Iraqi Islamic Party came to power despite lacking any mandate or legitimacy. The provincial government only operated where U.S. forces could protect them, which was few and far between. Into this vacuum stepped in the insurgency and Al Qaeda in Iraq. Playing upon a sense of loss by the Sunni community, Iraqi nationalism, anti-Americanism, and cash, the militants recruited many young men to fight.
At first the tribes of Anbar aligned themselves with the insurgents, but then came to see Al Qaeda in Iraq as a threat. At first both had a common enemy in the Americans, but then a few tribes felt that the Islamists were attempting to take control of Anbar for themselves. This eventually led to the Anbar Awakening, which aligned itself with the United States. The Americans in turn gave them jobs in the local security forces, and directed reconstruction money to them. This gave rise to a new generation of sheikhs who replaced the old ones. The U.S. in fact, became the new patrons of the tribal leaders, playing a similar role to what Saddam did.
In the south, many tribes were co-opted by the Supreme Islamic Iraqi Council (SIIC) and of Shiite parties. When the U.S. tried to replicate the Awakening with Shiite tribes during the Surge they met stiff resistance by the Supreme Council who controlled many of the provincial governments in the region, and Prime Minister Nouri al-Maliki. Both considered the tribes their constituents. Maliki began winning over many from the Supreme Council in 2008 with his Tribal Support Councils. Like Saddam and the Americans, the Prime Minister created a patronage system to keep these tribes under his control.
The majority of Iraqis claim membership in tribes, but that is not their only identity. Urbanism, Islam, and Iraqi nationalism are other factors that shape Iraqis. Throughout the country’s history the tribes have risen and fallen in relation to the power of the central authorities. During the early Ottoman period, British rule, and after the U.S. invasion, the government was weak and the tribes were strong, while in the other periods their power was diluted. Today, the tribes have found a new space in Iraq, but it appears still conditional. In Anbar the Awakening tribes are trying to form themselves into a new political force, but in southern Iraq many have been co-opted by Prime Minister Maliki. Again, it is the strength of the government that seems to determine the influence of the tribes.
SOURCES
Burns, John and Glanz, James, “Iraqi Shiites Win, but Margin Is less Than Projection,” New York Times, 2/14/05
Byman, Daniel, “An Autopsy of the Iraq Debacle: Policy Failure or Bridge Too Far?” Security Studies, October 2008
Eisenstadt, Lieutenant Colonel Michael, “Iraq Tribal engagement Lessons Learned,” Military Review, September-October 2007
Gordon, Michael, “The Last Battle,” New York Times, 8/3/08
Hassan, Hussein, “Iraq: Tribal Structure, Social, and Political Activities,” Congressional Research Service, 4/7/08
International Crisis Group, “Iraq After The Surge I: The New Sunni Landscape,” 4/30/08
Long, Austin, “The Anbar Awakening,” Survival, April 2008
McCary, John, “The Anbar Awakening: An Alliance of Incentives,” Washington Quarterly, January 2009
Otterman, Sharon, “IRAQ: The Role of Tribes,” Council on Foreign Relations, 11/14/03
Smith, Major Neil and MacFarland, Colonel Sean, “Anbar Awakens: The Tipping Point,” Military Review, March-April 2008
Friday, May 08, 2009
Doing Away With The Iraqi National Security Council
On April 30, 2009 Iraq’s cabinet announced that it was introducing a law in parliament to disband the National Security Council (NSC). The NSC is supposed to be replaced by a Committee for National Security, which will be part of the cabinet. The current National Security Advisor is Mowaffak al-Rubaie, a longtime former exile Shiite politician.
The Americans set up the NSC when the Coalition Provisional Authority (CPA) was running the country. CPA Order 68 created the body, and Paul Bremer appointed Mowaffak al-Rubaie its head in April 2004. Previously he was a member of the Iraqi Governing Council that was also put together by the CPA. He was known for his ties to the Shiite clerical elite such as Grand Ayatollah Ali al-Sistani, Grand Ayatollah Muhammad Baqir al-Sadr, and Abdul Majid al-Khoei.
Rubaie continued to be National Security Advisor under the interim government of Ilyad Allawi until September 2004 when the Prime Minister replaced him over disputes on how to deal with Moqtada al-Sadr. Rubaie later regained his position as part of the United Iraqi Alliance after the 2005 elections, and has held that post ever since.
As part of his duties Rubaie oversees Iraq’s intelligence services. Those include the National Intelligence Service, and the Collection, Management and Analysis Directorate, which are supervised by the National Intelligence Coordination Committee.
Before the U.S. invasion Rubaie was an Iraqi exile, doctor, and author, who fled the country in 1979. During that period he first worked for the Dawa Party, then al-Khoei’s foundation in England, before finally joining the Iraqi National Congress. He returned after the overthrow of Saddam, and worked his way into the Shiite establishment and government.
Rubaie’s duties could be taken up by Shirwan al-Waili, the Minister of State for National Security, who is a Dawa member and ally of Prime Minister Nouri al-Maliki. A government spokesman said this move was being made as part of a restructuring of the security apparatus. It could very well be another move by the Prime Minister to centralize power. Maliki already appoints commanders, created a separate intelligence service, and has direct control of an anti-terrorism unit and the Baghdad Brigade that protects the Green Zone in the capital. Replacing Rubaie and his office, which were appointed by the Americans, could be another way for Maliki to put his stamp on the government and assert his authority.
SOURCES
Abdul-Ahad, Gaith, “Six years after Saddam Hussein, Nouri al-Maliki tightens his grip on Iraq,” Guardian, 4/30/09
Agence France Presse, “Iraq moves to dissolves National Security Council,” 4/29/09
Alsumaria, “Iraq cancels National Security Advisor post” 4/30/09
- “Iraq cancels National Security Council,” 5/2/09
BBC, “Doubt cast over Saddam images,” 1/4/01
Biedermann, Ferry, “IRAQ: Mostly Outsiders Appointed Ministers,” IPS, 9/4/03
Coalition Provisional Authority, “Governing Councilmen Assume Posts as Minister of Interior and National Security Advisor,” 4/9/04
Erickson, Marc, “Deadline looming, US forces the issue,” Asia Times, 4/27/04
Filkins, Dexter, “Raising the Pressure in Iraq,” New York Times, 9/14/04
Filkins, Dexter and Eckholm, Erik, “Talks to Disarm Rebel Shiites Collapses in Iraq,” New York Times, 9/1/04
Fuller, Max, “Crying Wolf Media Disinformation and Death Squads in Occupied Iraq,” Global Research, 11/10/05
Global Security.org, “Iraqi Governing Council”
Potter, Beth, “Iraq ministers run the show,” UPI, 2/23/05
Rubaie, Mowaffak, “Shias Dance for Iraq,” Institute for War & Peace Reporting, 4/9/03
The Americans set up the NSC when the Coalition Provisional Authority (CPA) was running the country. CPA Order 68 created the body, and Paul Bremer appointed Mowaffak al-Rubaie its head in April 2004. Previously he was a member of the Iraqi Governing Council that was also put together by the CPA. He was known for his ties to the Shiite clerical elite such as Grand Ayatollah Ali al-Sistani, Grand Ayatollah Muhammad Baqir al-Sadr, and Abdul Majid al-Khoei.
Rubaie continued to be National Security Advisor under the interim government of Ilyad Allawi until September 2004 when the Prime Minister replaced him over disputes on how to deal with Moqtada al-Sadr. Rubaie later regained his position as part of the United Iraqi Alliance after the 2005 elections, and has held that post ever since.
As part of his duties Rubaie oversees Iraq’s intelligence services. Those include the National Intelligence Service, and the Collection, Management and Analysis Directorate, which are supervised by the National Intelligence Coordination Committee.
Before the U.S. invasion Rubaie was an Iraqi exile, doctor, and author, who fled the country in 1979. During that period he first worked for the Dawa Party, then al-Khoei’s foundation in England, before finally joining the Iraqi National Congress. He returned after the overthrow of Saddam, and worked his way into the Shiite establishment and government.
Rubaie’s duties could be taken up by Shirwan al-Waili, the Minister of State for National Security, who is a Dawa member and ally of Prime Minister Nouri al-Maliki. A government spokesman said this move was being made as part of a restructuring of the security apparatus. It could very well be another move by the Prime Minister to centralize power. Maliki already appoints commanders, created a separate intelligence service, and has direct control of an anti-terrorism unit and the Baghdad Brigade that protects the Green Zone in the capital. Replacing Rubaie and his office, which were appointed by the Americans, could be another way for Maliki to put his stamp on the government and assert his authority.
SOURCES
Abdul-Ahad, Gaith, “Six years after Saddam Hussein, Nouri al-Maliki tightens his grip on Iraq,” Guardian, 4/30/09
Agence France Presse, “Iraq moves to dissolves National Security Council,” 4/29/09
Alsumaria, “Iraq cancels National Security Advisor post” 4/30/09
- “Iraq cancels National Security Council,” 5/2/09
BBC, “Doubt cast over Saddam images,” 1/4/01
Biedermann, Ferry, “IRAQ: Mostly Outsiders Appointed Ministers,” IPS, 9/4/03
Coalition Provisional Authority, “Governing Councilmen Assume Posts as Minister of Interior and National Security Advisor,” 4/9/04
Erickson, Marc, “Deadline looming, US forces the issue,” Asia Times, 4/27/04
Filkins, Dexter, “Raising the Pressure in Iraq,” New York Times, 9/14/04
Filkins, Dexter and Eckholm, Erik, “Talks to Disarm Rebel Shiites Collapses in Iraq,” New York Times, 9/1/04
Fuller, Max, “Crying Wolf Media Disinformation and Death Squads in Occupied Iraq,” Global Research, 11/10/05
Global Security.org, “Iraqi Governing Council”
Potter, Beth, “Iraq ministers run the show,” UPI, 2/23/05
Rubaie, Mowaffak, “Shias Dance for Iraq,” Institute for War & Peace Reporting, 4/9/03
Thursday, April 02, 2009
Special Inspector General Testifies To Congress
The Special Inspector General for Iraq Reconstruction (SIGIR) Stuart Bowen recently testified to the House Armed Services Committee on March 25. Much of what he said was based upon SIGIR’s “Hard Lessons” report, which has been partially covered here. The gist of Bowen’s and the paper’s findings are that the U.S. went into Iraq not ready for the task of rebuilding the country. When security quickly deteriorated, so did the reconstruction project. The Coalition Provisional Authority (CPA) set out to reform the entire country whether it wanted to or not, yet never had the money, personnel, oversight, or coordination to do it. Much of the work was done on an ad hoc basis, did not pay attention to the security situation, or the needs of Iraqis. The CPA also never adapted to the situation in the country. It wasn’t until 2007 and the Surge that violence was down enough that some effective reconstruction work was possible. Overall, Bowen believes that the U.S. failed to meet its goals of rebuilding the country due to poor planning and unrealistic goals.
The SIGIR was created in January 2004. Immediately after it started its work it began to find problems with the reconstruction effort. The “Hard Lessons” report detailed much of what they found. In the fall of 2001 post-war planning for Iraq began in the U.S. It was based upon a best-case scenario where the Americans would be greeted as liberators, the U.S. would take care of any humanitarian crises and deal with war damage, and then leave. Washington was warned by several different groups several times of the consequences of invading, but their advice was ignored. The U.S. thus set about the largest nation-building project in history completely unaware of what they were getting themselves into. This led to massive waste and many failures.
The U.S. expected Iraq to largely be functioning after the invasion, but instead it fell into immediate chaos. The U.S. was thus stuck running and rebuilding the country, something it had not planned for. It has been paying for these missteps ever since. When the CPA took over Paul Bremer wanted to change every part of the society whether Iraqis were interested or not. This was beyond its capabilities. The CPA effort was largely ad hoc, with programs and goals constantly changing. The Americans were left responding to or ignoring the security situation rather than creating the conditions necessary for successful rebuilding work. In 2004 for example, it started large projects in Fallujah and in Basra in 2005 when they were being run by insurgents and militias that doomed them from the beginning. This didn’t change until 2007 when the Surge finally created enough safe areas to effectively carry out reconstruction.
The result of this lack of planning has been massive cost overruns that Americans are still paying for today. In 2003 the CPA came up with a $20 billion reconstruction plan, ten times larger than the pre-war plans. Today the U.S. has spent $50 billion, 25 times more than the original plan. The insurgency was largely responsible for these huge increases. The U.S. also did not have the personnel, contracts, resources, or doctrine to achieve its goals. That led Bowen to claim that the U.S. has failed at rebuilding Iraq, although it has put the Iraqi security forces back together.
Bowen warned that many of these problems could be repeated in Afghanistan. In 2008 a Special Inspector General was created for that country, and it found many of the same mistakes that happened in Iraq occurring in Afghanistan. The SIGIR emphasized that a well-planned reconstruction program goes hand-in-hand with a successful counterinsurgency campaign.
The SIGIR finished with his suggestions for how the U.S. should proceed in Iraq, and any other efforts in the future. For Iraq Bowen said that the U.S. needs to maintain its personnel there so there is not such a large turnover, the government needs to increase its trained staff for reconstruction, contracts should be re-thought, the capacity of the Iraqis needs to be increased so that they can do their own rebuilding, and the military’s mini-grant program needs to be institutionalized. For nation-building in general the SIGIR said that the U.S. needs to come up with a general strategy for the concept. There also needs to be a high level official in the White House tasked with dealing with the problem. Security needs to be the top priority before effective rebuilding can begin, locals have to have the institutions and bureaucracy to eventually take over the effort themselves, and their needs should lead the rebuilding. The U.S. also needs better contracts, more oversight, and staff to create background knowledge of wherever the U.S. may need to go. The title of the SIGIR’s review of Iraq is called “Hard Lessons.” Bowen and his fellow inspectors have been detailing the problems there for five years now. The question is if any of these lessons will be integrated into the Washington bureaucracy so that they can be avoided in the future. As Bowen pointed out, many of the same mistakes are already happening in Afghanistan. Will the U.S. be able to recover there in time to not repeat the waste of billions of dollars and failures experienced in Iraq?
SOURCES
Bowen, Stuart, “Effective Counterinsurgency: How the Use and Misuse of Reconstruction Funding Affects the War Effort in Iraq and Afghanistan,” Committee on Armed Services, United States House of Representatives, 3/25/09
Special Inspector General For Iraq Reconstruction, “Hard Lessons,” 1/22/09
The SIGIR was created in January 2004. Immediately after it started its work it began to find problems with the reconstruction effort. The “Hard Lessons” report detailed much of what they found. In the fall of 2001 post-war planning for Iraq began in the U.S. It was based upon a best-case scenario where the Americans would be greeted as liberators, the U.S. would take care of any humanitarian crises and deal with war damage, and then leave. Washington was warned by several different groups several times of the consequences of invading, but their advice was ignored. The U.S. thus set about the largest nation-building project in history completely unaware of what they were getting themselves into. This led to massive waste and many failures.
The U.S. expected Iraq to largely be functioning after the invasion, but instead it fell into immediate chaos. The U.S. was thus stuck running and rebuilding the country, something it had not planned for. It has been paying for these missteps ever since. When the CPA took over Paul Bremer wanted to change every part of the society whether Iraqis were interested or not. This was beyond its capabilities. The CPA effort was largely ad hoc, with programs and goals constantly changing. The Americans were left responding to or ignoring the security situation rather than creating the conditions necessary for successful rebuilding work. In 2004 for example, it started large projects in Fallujah and in Basra in 2005 when they were being run by insurgents and militias that doomed them from the beginning. This didn’t change until 2007 when the Surge finally created enough safe areas to effectively carry out reconstruction.
The result of this lack of planning has been massive cost overruns that Americans are still paying for today. In 2003 the CPA came up with a $20 billion reconstruction plan, ten times larger than the pre-war plans. Today the U.S. has spent $50 billion, 25 times more than the original plan. The insurgency was largely responsible for these huge increases. The U.S. also did not have the personnel, contracts, resources, or doctrine to achieve its goals. That led Bowen to claim that the U.S. has failed at rebuilding Iraq, although it has put the Iraqi security forces back together.
Bowen warned that many of these problems could be repeated in Afghanistan. In 2008 a Special Inspector General was created for that country, and it found many of the same mistakes that happened in Iraq occurring in Afghanistan. The SIGIR emphasized that a well-planned reconstruction program goes hand-in-hand with a successful counterinsurgency campaign.
The SIGIR finished with his suggestions for how the U.S. should proceed in Iraq, and any other efforts in the future. For Iraq Bowen said that the U.S. needs to maintain its personnel there so there is not such a large turnover, the government needs to increase its trained staff for reconstruction, contracts should be re-thought, the capacity of the Iraqis needs to be increased so that they can do their own rebuilding, and the military’s mini-grant program needs to be institutionalized. For nation-building in general the SIGIR said that the U.S. needs to come up with a general strategy for the concept. There also needs to be a high level official in the White House tasked with dealing with the problem. Security needs to be the top priority before effective rebuilding can begin, locals have to have the institutions and bureaucracy to eventually take over the effort themselves, and their needs should lead the rebuilding. The U.S. also needs better contracts, more oversight, and staff to create background knowledge of wherever the U.S. may need to go. The title of the SIGIR’s review of Iraq is called “Hard Lessons.” Bowen and his fellow inspectors have been detailing the problems there for five years now. The question is if any of these lessons will be integrated into the Washington bureaucracy so that they can be avoided in the future. As Bowen pointed out, many of the same mistakes are already happening in Afghanistan. Will the U.S. be able to recover there in time to not repeat the waste of billions of dollars and failures experienced in Iraq?
SOURCES
Bowen, Stuart, “Effective Counterinsurgency: How the Use and Misuse of Reconstruction Funding Affects the War Effort in Iraq and Afghanistan,” Committee on Armed Services, United States House of Representatives, 3/25/09
Special Inspector General For Iraq Reconstruction, “Hard Lessons,” 1/22/09
Saturday, March 14, 2009
Special Inspector General For Iraq Reconstruction’s “Hard Lessons” – Preface
In January 2009 the Special Inspector General for Iraq Reconstruction (SIGIR) released a heavy tome, over 500 pages long, reviewing America’s attempt to rebuild Iraq after the 2003 invasion. The report, entitled “Hard Lessons” begins with the pre-war planning for Iraq that started in mid-2002, and goes all the way up to the fall of 2008. The paper is far too long to read or digest in one fell swoop, so instead it will be tackled chapter by chapter. Overall, SIGIR found that America’s effort was uncoordinated, derailed by the security situation, and relied upon a bad contracting process. America’s greatest success in this endeavor was to build up the Iraqi security forces, but it failed to reconstruct the country’s basic services, infrastructure, and economy.
The Inspector General was first created during the time of the Coalition Provisional Authority (CPA). It was originally called the Coalition Provisional Authority Office of Inspector General. In October 2004 it became the Special Inspector General for Iraq Reconstruction. At the same time Stuart Bowen was appointed its director, a position he holds to this day.
Since the 2003 invasion the U.S. has committed around $50 billion for the reconstruction of Iraq. It is the largest rebuilding project ever attempted by the United States. “Hard Lessons” believes that the Bush administration lacked unity of command and coordination when dealing with Iraq. To make things worse American policy and personnel were often changed. Security also became such an overriding concern that it derailed and diverted much of the reconstruction plan. Bad contracts and the lack of oversight and management also led to massive waste. The U.S. relied upon cost-plus contracts that paid companies a fixed price plus costs, allowed high overheads, paid excessive fees, and consented to long delays that all led to large cost overruns. At the same time, there were very few cases of fraud or corruption as seen by the few criminal cases that have been prosecuted.
As soon as the SIGIR went to Iraq it began to see problems. The first was the large amounts of cash that were used by the CPA to pay for everything. The U.S. for example, flew in $12 billion in $100 bills to Iraq from the Federal Reserve Bank in New York City in 2004. Second, the attacks in the country shot up security costs and delayed many projects. Last, SIGIR believed that the CPA set too many grand goals for what they could accomplish in Iraq.
All of these and more led to some tough criticisms in “Hard Lessons.” It does not believe that the U.S. met its goals for reconstructing Iraq. Electricity and oil production for example are still below goals set by the CPA. The number of successfully completed projects is also below expectations. SIGIR believes the lack of security in the country was the major cause for this failure. The U.S. was able to build up Iraq’s security forces largely from scratch after the CPA disbanded the armed forces. They have gone through a massive expansion, and while there are still problems, they have more capabilities then before. In the end, SIGIR believes that the U.S. did not have the resources or organization to carry out such a grandiose plan as rebuilding Iraq.
SOURCES
Glanz, James, “In Ramadi, Real Rebuilding, With Fresh Paint,” New York Times, 11/23/08
Pallister, David, “How the US sent $12bn in cash to Iraq. And watched it vanish,” Guardian, 2/8/07
Special Inspector General For Iraq Reconstruction, “Hard Lessons,” 1/22/09
The Inspector General was first created during the time of the Coalition Provisional Authority (CPA). It was originally called the Coalition Provisional Authority Office of Inspector General. In October 2004 it became the Special Inspector General for Iraq Reconstruction. At the same time Stuart Bowen was appointed its director, a position he holds to this day.
Since the 2003 invasion the U.S. has committed around $50 billion for the reconstruction of Iraq. It is the largest rebuilding project ever attempted by the United States. “Hard Lessons” believes that the Bush administration lacked unity of command and coordination when dealing with Iraq. To make things worse American policy and personnel were often changed. Security also became such an overriding concern that it derailed and diverted much of the reconstruction plan. Bad contracts and the lack of oversight and management also led to massive waste. The U.S. relied upon cost-plus contracts that paid companies a fixed price plus costs, allowed high overheads, paid excessive fees, and consented to long delays that all led to large cost overruns. At the same time, there were very few cases of fraud or corruption as seen by the few criminal cases that have been prosecuted.
As soon as the SIGIR went to Iraq it began to see problems. The first was the large amounts of cash that were used by the CPA to pay for everything. The U.S. for example, flew in $12 billion in $100 bills to Iraq from the Federal Reserve Bank in New York City in 2004. Second, the attacks in the country shot up security costs and delayed many projects. Last, SIGIR believed that the CPA set too many grand goals for what they could accomplish in Iraq.
All of these and more led to some tough criticisms in “Hard Lessons.” It does not believe that the U.S. met its goals for reconstructing Iraq. Electricity and oil production for example are still below goals set by the CPA. The number of successfully completed projects is also below expectations. SIGIR believes the lack of security in the country was the major cause for this failure. The U.S. was able to build up Iraq’s security forces largely from scratch after the CPA disbanded the armed forces. They have gone through a massive expansion, and while there are still problems, they have more capabilities then before. In the end, SIGIR believes that the U.S. did not have the resources or organization to carry out such a grandiose plan as rebuilding Iraq.
SOURCES
Glanz, James, “In Ramadi, Real Rebuilding, With Fresh Paint,” New York Times, 11/23/08
Pallister, David, “How the US sent $12bn in cash to Iraq. And watched it vanish,” Guardian, 2/8/07
Special Inspector General For Iraq Reconstruction, “Hard Lessons,” 1/22/09
Wednesday, February 18, 2009
U.S. Reports On Iraq’s Economy & Services
In January 2009 both the Defense Department and the Special Inspector General for Iraq Reconstruction (SIGIR) released their quarterly reports to Congress on Iraq. Both included overviews of Iraq’s economy and services. While the Pentagon tends to stress the positives, the SIGIR has some of the most up to date statistics, and gives a much more in depth look at the major sectors of Iraq’s economy. Both found aggregate improvements in the country, but still massive problems that need to be addressed.
Growth
The Iraqi Ministry of Planning recently reported that Iraq’s Gross Domestic Product (GDP) grew 10.9% in 2008. That was above the 9% growth predicted by the International Monetary Fund (IMF). While the improved security conditions has allowed more space for Iraqi businesses, the one major reason why Iraq’s economy grew so much last year was because of the massive increase in the price of oil. With the dramatic drop in the petroleum market, Iraq’s economy can be expected to shrink in 2009. There are also large structural problems. Iraq’s oil sector has been largely stagnant since the U.S. invasion. The violence has kept foreign investors away and hindered local businesses, which has left the state the driving force in the economy. The country needs massive investment to upgrade its infrastructure and provide jobs. Officially the unemployment rate is 15%, but the Minister of Planning Ali Baban and other sources believe it is much higher. The SIGIR thinks that unemployment and underemployment could be as high as 60%. Corruption also affects every part of the government and economy, and takes a large toll.
Oil & Gas
Oil is the main driver of Iraq’s economy. All the oil companies are state-run, and are expected to account for 85% of the country’s revenue in 2009. The drop in oil prices therefore will cause a major crisis for Iraq at least in the short term. Besides that the country has no flexibility in its oil exports to make up for fluctuations in international prices. Oil production in 2008 averaged 2.42 million barrels a day, an almost 15% increase from 2.11 million barrels a day in 2007. However that was below the 2.5 million mark from before the U.S. invasion. Overall, production has been stagnant since 2003, with minor changes up and down. The same thing applies to exports. In the last three months of 2008 Iraq exported 1.79 million barrels a day, a 3% increase from the previous quarter, but a 6% decrease from the same period in 2007.
The U.S. has spent $1.86 billion on the oil and gas industry, but it still needs several billion dollars more in investment. An audit by the SIGIR of work done by Kellog Brown & Root to work on Iraq’s southern oil fields and port found that Iraqis may not be taking care of many of these projects finished by the United States. At the end of 2008 the Oil Ministry also began two rounds of bidding for international companies to invest in nineteen oil and gas fields across the country. By the middle of this year the Ministry hopes to have these contracts completed. They are hoping that these corporations will boost exports to two million barrels a day in 2009, and overall production to 6 million by 2015. Iraq has also signed up a Japanese company to work on improving the port in Basra where the vast majority of the country’s exports flow through. Baghdad is moving ahead with these deals despite the fact that the Hydrocarbon law that will define the role of companies and the government in the oil and gas fields has been deadlocked in parliament for almost two years now.
Despite Iraq’s oil wealth it cannot meet its public’s demand for refined petroleum products. At the end of 2008 it did not meet its benchmarks for production of a range of goods like gas and diesel. By that time it was short 51% of gas needs, 36% of diesel, 24% of liquefied petroleum, and 15% of kerosene demand. The production of these products has gone up, but it is being outstripped by the Iraqis’ desires for more.
Corruption and transparency is also a problem with the industry. In December 2008 the IMF said that Iraq was not doing enough to fight corruption in the oil sector. The IMF and United Nations also both criticized Baghdad for not setting up rules for better accountability with its revenues. The huge amount of money generated by petroleum is obviously a huge attraction to officials hoping to steal, but Prime Minister Nouri al-Maliki has never shown any enthusiasm for stopping it. Instead he sees it as a public relations problem to be solved by simply not talking about it.
Farming
The Pentagon’s report said that farming has the biggest opportunity for growth this year. Agriculture accounts for 6% of GDP, and employs around 25% of the workforce, the second largest private employer in Iraq. Most of it is subsistence however, rather than for profit. The Defense Department listed all the structural impediments to this sector actually improving any time soon. Farming lacks government support, tariffs to keep out foreign competition, modern technology and techniques, electricity and fuel shortages that hinder the use of pumps for irrigation, a system that is broken down throughout the country, credit and investment, markets, and security. For those reasons Iraq imports 50% of its food needs.
In 2008 Iraq was also hit by a drought. It was mostly concentrated in the north affecting the provinces of Irbil, Dohuk, Tamim, Diyala, and Ninewa the worst. As a result wheat and barley production are down 51%, two of Iraq’s three major crops. The Water Resource Ministry reported in January 2009 that rain and snow was again down one third from normal, which could mean another water shortage this year. Kurdistan is working with the U.N. to help relieve the issue, while the Ministry of Agriculture began several assistance programs as well. The U.S. doesn’t think the government’s moves have been very effective however.
State Owned Businesses
As reported before, under Saddam the economy was state-run. After the U.S. invasion, the Coalition Provisional Authority unsuccessfully tried to privatize it, which led to the closing of hundreds of government owned businesses that employed up to 15% of the workforce. In 2006 the Defense Department began a program to revitalize these public industries to create more jobs. Over $100 million has been put into this project. That funding is now coming to an end, and Baghdad will now be responsible for their revitalization. At the end of 2008 the SIGIR did an audit of this effort, but found no reliable data to determine whether it was effective or not. It also found that cash was being given out without invoices, which would encourage corruption.
Debt
One area where Iraq has made a lot of progress has been with its foreign debt. Iraq owes money to two groups, the Paris Club and non-Paris Club countries. Most of this was from the Saddam era. Since 2004 Baghdad has been able to get $74 billion of its debt forgiven. That leaves $50-$75 billion still owed. The Paris Club, which is made up of western industrialized countries holds $7.6 billion in Iraq debt, down from $50 billion. Iraq reached an agreement with them on this remaining amount at the end of 2008. Most of Iraq’s remaining obligations belong to Saudi Arabia, China, and Kuwait. Negotiations with them are on going.
Banking
Banking is another industry the government is hoping will grow in 2009. The Iraqi Central Bank has been able to keep inflation in check. In 2006 it was at 32%, but by September 2008 it was cut to 12.9%. Control over inflation has allowed the Iraqi dinar to appreciate in value. From November 2006 to October 2008 Iraq’s currency increased 20% in value, and stood at 1,172 dinars for one American dollar in December 2008. The low inflation and appreciation has given Iraqis more buying power. The Central Bank is now cutting interest rates to encourage loans.
State owned banks account for 90% of all banking assets in the country. There are seven such enterprises that control 66% of the branches. The two main ones are the Rafidain and Rasheed Banks that have 150 branches each. The Agricultural Cooperative Bank, the Real Estate Bank, the Industrial Bank, the Iraq Bank, and the Trade Bank of Iraq follow those. In total the government has 397 bank branches. The largest private banks are the Al-Qarka Bank for Investment and Funding with 68 branches, the Investment Bank of Iraq with 22, and the Basra International Bank for Investment with nineteen. There are 194 private bank branches overall. Private banks have expanded with the improvement in security with more moving out to the provinces.
Like everything else, Iraq’s banks still have many problems. A December 2008 audit of the Rasheed and Rafidain banks found no business plan, no rules or regulations for workers, no reporting rules, no technology, little risk management, and hardly any services offered. For example, there are no personal accounts, safety deposit boxes, or dealings with foreign banks. More importantly, in late December 2008 two state-run banks ran out of cash, leaving Diyala province with no money to pay for government salaries, pensions, or reconstruction projects. The head of the Rafidain bank told Radio Free Europe/Radio Liberty in January 2009 that if banking were a sign of economic progress, Iraq would be far behind. The entire system needs to be reformed as a result.
This year the government is attempting to solve some of these problems by encouraging foreign banks to do business in Iraq. At the end of January 2009 the Finance Ministry held a conference asking international banks to invest and open branches in Iraq. The Finance Ministry promised them that he could clear any bureaucratic obstacles that they might face. The two-day event was attended by officials from American, English, Turkish, Iranian, Lebanese, Jordanian, and Bahrain owned banks. The Iraq Central Bank had already issued licenses to three foreign banks. JP Morgan Chase and Citibank said they were interested as well.
Stock Exchange
The Iraqi Stock Exchange was opened for business in August 2007. Since then it has sputtered forward. The number of shares traded in 2008 was down from 2007, although there are now more foreign stocks available. In 2007 there were 94 companies listed on the exchange. In 2008 that only increased by two. The number of sessions went up from 119 in 2007 to 139 in 2008, as well as the shares traded, however their value went down from $357 million to $251 million.
Services
American surveys of Iraqis have found mass disappointment with the delivery of services. The Pentagon declared that in 2009 meeting basic needs would be the top issue surpassing security for the first time since the invasion. It should be no surprise than that this was a major issue in the January 2009 provincial elections. While the U.S. has found some improvement in the government’s abilities, supply of essential services still does not meet demand.
Iraqis are generally unhappy with their supply of food, water, electricity, sewage, and health. A survey from the end of 2008 found that only 16% were satisfied with the amount of electricity they received, down from 32% in 2007. 26% said they were happy with their health services, down from 36% in 2007. 31% were satisfied with their drinking water, the same amount as 2007.
Electricity
Electricity production has increased, but it is only meeting 66% of demand. By the end of last year Iraq was producing 4,997 megawatts per day, a record high. That was a 2% increase from the previous quarter. The capacity of Iraq’s generators has increased by around 1,500 megawatts on average. Like the oil industry, the power system needs massive investment to repair and upgrade facilities. Security and fuel shortages also hinder production. Climate changes, like the drought have also cut hydroelectric output.
The U.S. has spent $4.78 billion on Iraq’s electrical system and added 2,683 megawatts. Iraqis have matched this investment. In 2007 they spent $1.4 billion, in 2008 $2.3 billion, and in 2009 the proposed budget sets aside $1.1 billion. The Ministry of Electricity signed a $3 billion deal recently with General Electric to provide generators. The Ministry wants to double production eventually, and match demand. In the meantime, many Iraqis have been forced to rely upon private generators that produce between 2,000-3,000 megawatts. Thankfully, the number of attacks on the system are also down with no major ones since April 2008. Previous ones however have kept four of eleven damaged power lines out of use.
Health
Baghdad is making small steps to provide more health services, but lacks the personnel to be effective. Iraq has 27.5 million people, but only 15,500 doctors. A study said they need about 100,000. Many physicians have left the country due to the violence. The Health Ministry has a large budget, $192 million in 2008, but like the rest of the administration, has not been able to spend most of it. By the end of September 2008 they had only expended $28.5 million, 14.8%. The Ministry did launch a public relations campaign to educate Iraqis about health issues last year, has plans to build six new hospitals and 1,000 health clinics by the end of the decade, and conducted a successful five day polio campaign that vaccinated 97% of Iraq’s five million children. Until Iraq is able to meet its staffing deficit however, it will be hard to do more.
Water
Iraq’s water system is in disrepair. The facilities are operating below capacity because of a lack of maintenance, and problems with operating them. For example, when the U.S. turned over the Nassiriya Water Treatment Plant in September 2007, which cost $278 million to build, it had a capacity to treat 10,000 cubic meters of water per hour. When the SIGIR later looked at it they found that Baghdad wasn’t providing enough power, leaks were not fixed, and the personnel were not trained for their jobs. By the beginning of 2008 when American inspectors went back they found that it was operating at less then a quarter of its capabilities. The U.S. had to sign two contracts worth $1.1 million to save the project, since it felt that Baghdad would not.
As reported before, Iraq suffered a cholera outbreak in 2008 that affected more than half of its eighteen provinces. Besides the incompetence of some provincial officials that used expired chlorine to clean water, the broken down sewage and water system were largely to blame. International organizations have said that Iraq will face annual cholera incidents as a result.
Food Rations
Iraq has the largest food ration system in the world. It took up 8% of the 2008 budget. It is looked at as a basic indicator of how well the government can provide services. For 2009 there are plans to cut wealthy families from the program because of the budget crisis caused by the drop in oil prices. Less money is also going to be appropriated for it overall.
Transportation and Communication
Iraq’s Ministries of Transportation and Communication have not been able to spend most of their 2008 budgets. Transportation only spent $55 million by the end of September 2008 of its $322 million, 17%, while Communications expended $28 million of its $315 million budget, 8.8%. Iraq’s roads are in need of repair, but the lack of spending by the government means that will not be taken care of. The Ministry of Transportation does have a plan to revitalize the country’s railway system. It is opening a plant at Abu Ghraib to manufacture railroad ties at a cheaper price than imports.
Conclusion
Overall, Iraq’s economy is too dependent upon oil, and its management by the government is inefficient and corrupt. Petroleum is the only thing that makes Iraq’s economy grow, since its other industries are small and underdeveloped. The legacy of Saddam’s system still resonates, as Iraq’s bureaucracy does not function without orders from the top officials. There is little to no individual initiative. Many ministers have to sign for everything even down to hiring people. The government is also paper based, which makes things move at a snail’s pace. Many of the country’s best and brightest have left the country and are not coming back. That has led to a massive talent deficit. The lack of transparency and accounting has allowed large-scale corruption to occur largely unencumbered by any real government effort to stop it. The lack of tariffs has meant that many private businesses have suffered from cheap foreign imports. Fuel and electricity shortages, and the lack of security have increased costs. Iraqis have also shown a general lack of willingness to maintain their infrastructure, which leads to breakdowns and plants operating at less then capacity. The one positive is that security has improved, which could allow foreign companies in oil, gas, electricity, and banking to finally invest in Iraq. The lack of competent bureaucrats could negatively affect that as well as they could give foreigners too much control over Iraq’s resources, deter companies from coming because of bad contracts, or provide new avenues for graft and bribes. Still foreign know how, technology, and money is desperately needed. It will be a long and hard struggle to overcome Iraq’s many problems, and create a diversified economy that can meet the needs of its public. There is no guarantee that it will ever happen.
SOURCES
Abouzeid, Rania, “Mismanaging Iraq: No Cash to Carry,” Time, 12/29/08
Associated Press, “Iraqi official appeals to foreign banks to invest,” 1/28/09
Aswat al-Iraq, “GDP higher by 10.9 % in 2008,” 2/11/09
- “Iraqi Unemployment Rate Dropped by 15% in 2008,” 1/27/09
Chon, Gina, “Western Bank Giants Prepare to Revamp Iraq’s Financial System,” Baghdad Life Blog, Wall Street Journal, 1/28/09
Department of Defense, “Measuring Stability and Security in Iraq,” December 2008
O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution, 11/20/08
Radio Free Europe/Radio Liberty, “Official: Iraqi Banking System Needs Overhaul,” 1/13/09
Al Sabah, “Iraq faces massive water shortage, Water Resources said,” 1/21/09
Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09
El-Tablawy, Tarek, “Official: 80 percent of Iraq pipelines damaged,” Associated Press, 2/11/09
Growth
The Iraqi Ministry of Planning recently reported that Iraq’s Gross Domestic Product (GDP) grew 10.9% in 2008. That was above the 9% growth predicted by the International Monetary Fund (IMF). While the improved security conditions has allowed more space for Iraqi businesses, the one major reason why Iraq’s economy grew so much last year was because of the massive increase in the price of oil. With the dramatic drop in the petroleum market, Iraq’s economy can be expected to shrink in 2009. There are also large structural problems. Iraq’s oil sector has been largely stagnant since the U.S. invasion. The violence has kept foreign investors away and hindered local businesses, which has left the state the driving force in the economy. The country needs massive investment to upgrade its infrastructure and provide jobs. Officially the unemployment rate is 15%, but the Minister of Planning Ali Baban and other sources believe it is much higher. The SIGIR thinks that unemployment and underemployment could be as high as 60%. Corruption also affects every part of the government and economy, and takes a large toll.
Oil & Gas
Oil is the main driver of Iraq’s economy. All the oil companies are state-run, and are expected to account for 85% of the country’s revenue in 2009. The drop in oil prices therefore will cause a major crisis for Iraq at least in the short term. Besides that the country has no flexibility in its oil exports to make up for fluctuations in international prices. Oil production in 2008 averaged 2.42 million barrels a day, an almost 15% increase from 2.11 million barrels a day in 2007. However that was below the 2.5 million mark from before the U.S. invasion. Overall, production has been stagnant since 2003, with minor changes up and down. The same thing applies to exports. In the last three months of 2008 Iraq exported 1.79 million barrels a day, a 3% increase from the previous quarter, but a 6% decrease from the same period in 2007.
The U.S. has spent $1.86 billion on the oil and gas industry, but it still needs several billion dollars more in investment. An audit by the SIGIR of work done by Kellog Brown & Root to work on Iraq’s southern oil fields and port found that Iraqis may not be taking care of many of these projects finished by the United States. At the end of 2008 the Oil Ministry also began two rounds of bidding for international companies to invest in nineteen oil and gas fields across the country. By the middle of this year the Ministry hopes to have these contracts completed. They are hoping that these corporations will boost exports to two million barrels a day in 2009, and overall production to 6 million by 2015. Iraq has also signed up a Japanese company to work on improving the port in Basra where the vast majority of the country’s exports flow through. Baghdad is moving ahead with these deals despite the fact that the Hydrocarbon law that will define the role of companies and the government in the oil and gas fields has been deadlocked in parliament for almost two years now.
Despite Iraq’s oil wealth it cannot meet its public’s demand for refined petroleum products. At the end of 2008 it did not meet its benchmarks for production of a range of goods like gas and diesel. By that time it was short 51% of gas needs, 36% of diesel, 24% of liquefied petroleum, and 15% of kerosene demand. The production of these products has gone up, but it is being outstripped by the Iraqis’ desires for more.
Corruption and transparency is also a problem with the industry. In December 2008 the IMF said that Iraq was not doing enough to fight corruption in the oil sector. The IMF and United Nations also both criticized Baghdad for not setting up rules for better accountability with its revenues. The huge amount of money generated by petroleum is obviously a huge attraction to officials hoping to steal, but Prime Minister Nouri al-Maliki has never shown any enthusiasm for stopping it. Instead he sees it as a public relations problem to be solved by simply not talking about it.
Farming
The Pentagon’s report said that farming has the biggest opportunity for growth this year. Agriculture accounts for 6% of GDP, and employs around 25% of the workforce, the second largest private employer in Iraq. Most of it is subsistence however, rather than for profit. The Defense Department listed all the structural impediments to this sector actually improving any time soon. Farming lacks government support, tariffs to keep out foreign competition, modern technology and techniques, electricity and fuel shortages that hinder the use of pumps for irrigation, a system that is broken down throughout the country, credit and investment, markets, and security. For those reasons Iraq imports 50% of its food needs.
In 2008 Iraq was also hit by a drought. It was mostly concentrated in the north affecting the provinces of Irbil, Dohuk, Tamim, Diyala, and Ninewa the worst. As a result wheat and barley production are down 51%, two of Iraq’s three major crops. The Water Resource Ministry reported in January 2009 that rain and snow was again down one third from normal, which could mean another water shortage this year. Kurdistan is working with the U.N. to help relieve the issue, while the Ministry of Agriculture began several assistance programs as well. The U.S. doesn’t think the government’s moves have been very effective however.
State Owned Businesses
As reported before, under Saddam the economy was state-run. After the U.S. invasion, the Coalition Provisional Authority unsuccessfully tried to privatize it, which led to the closing of hundreds of government owned businesses that employed up to 15% of the workforce. In 2006 the Defense Department began a program to revitalize these public industries to create more jobs. Over $100 million has been put into this project. That funding is now coming to an end, and Baghdad will now be responsible for their revitalization. At the end of 2008 the SIGIR did an audit of this effort, but found no reliable data to determine whether it was effective or not. It also found that cash was being given out without invoices, which would encourage corruption.
Debt
One area where Iraq has made a lot of progress has been with its foreign debt. Iraq owes money to two groups, the Paris Club and non-Paris Club countries. Most of this was from the Saddam era. Since 2004 Baghdad has been able to get $74 billion of its debt forgiven. That leaves $50-$75 billion still owed. The Paris Club, which is made up of western industrialized countries holds $7.6 billion in Iraq debt, down from $50 billion. Iraq reached an agreement with them on this remaining amount at the end of 2008. Most of Iraq’s remaining obligations belong to Saudi Arabia, China, and Kuwait. Negotiations with them are on going.
Banking
Banking is another industry the government is hoping will grow in 2009. The Iraqi Central Bank has been able to keep inflation in check. In 2006 it was at 32%, but by September 2008 it was cut to 12.9%. Control over inflation has allowed the Iraqi dinar to appreciate in value. From November 2006 to October 2008 Iraq’s currency increased 20% in value, and stood at 1,172 dinars for one American dollar in December 2008. The low inflation and appreciation has given Iraqis more buying power. The Central Bank is now cutting interest rates to encourage loans.
State owned banks account for 90% of all banking assets in the country. There are seven such enterprises that control 66% of the branches. The two main ones are the Rafidain and Rasheed Banks that have 150 branches each. The Agricultural Cooperative Bank, the Real Estate Bank, the Industrial Bank, the Iraq Bank, and the Trade Bank of Iraq follow those. In total the government has 397 bank branches. The largest private banks are the Al-Qarka Bank for Investment and Funding with 68 branches, the Investment Bank of Iraq with 22, and the Basra International Bank for Investment with nineteen. There are 194 private bank branches overall. Private banks have expanded with the improvement in security with more moving out to the provinces.
Like everything else, Iraq’s banks still have many problems. A December 2008 audit of the Rasheed and Rafidain banks found no business plan, no rules or regulations for workers, no reporting rules, no technology, little risk management, and hardly any services offered. For example, there are no personal accounts, safety deposit boxes, or dealings with foreign banks. More importantly, in late December 2008 two state-run banks ran out of cash, leaving Diyala province with no money to pay for government salaries, pensions, or reconstruction projects. The head of the Rafidain bank told Radio Free Europe/Radio Liberty in January 2009 that if banking were a sign of economic progress, Iraq would be far behind. The entire system needs to be reformed as a result.
This year the government is attempting to solve some of these problems by encouraging foreign banks to do business in Iraq. At the end of January 2009 the Finance Ministry held a conference asking international banks to invest and open branches in Iraq. The Finance Ministry promised them that he could clear any bureaucratic obstacles that they might face. The two-day event was attended by officials from American, English, Turkish, Iranian, Lebanese, Jordanian, and Bahrain owned banks. The Iraq Central Bank had already issued licenses to three foreign banks. JP Morgan Chase and Citibank said they were interested as well.
Stock Exchange
The Iraqi Stock Exchange was opened for business in August 2007. Since then it has sputtered forward. The number of shares traded in 2008 was down from 2007, although there are now more foreign stocks available. In 2007 there were 94 companies listed on the exchange. In 2008 that only increased by two. The number of sessions went up from 119 in 2007 to 139 in 2008, as well as the shares traded, however their value went down from $357 million to $251 million.
Services
American surveys of Iraqis have found mass disappointment with the delivery of services. The Pentagon declared that in 2009 meeting basic needs would be the top issue surpassing security for the first time since the invasion. It should be no surprise than that this was a major issue in the January 2009 provincial elections. While the U.S. has found some improvement in the government’s abilities, supply of essential services still does not meet demand.
Iraqis are generally unhappy with their supply of food, water, electricity, sewage, and health. A survey from the end of 2008 found that only 16% were satisfied with the amount of electricity they received, down from 32% in 2007. 26% said they were happy with their health services, down from 36% in 2007. 31% were satisfied with their drinking water, the same amount as 2007.
Electricity
Electricity production has increased, but it is only meeting 66% of demand. By the end of last year Iraq was producing 4,997 megawatts per day, a record high. That was a 2% increase from the previous quarter. The capacity of Iraq’s generators has increased by around 1,500 megawatts on average. Like the oil industry, the power system needs massive investment to repair and upgrade facilities. Security and fuel shortages also hinder production. Climate changes, like the drought have also cut hydroelectric output.
The U.S. has spent $4.78 billion on Iraq’s electrical system and added 2,683 megawatts. Iraqis have matched this investment. In 2007 they spent $1.4 billion, in 2008 $2.3 billion, and in 2009 the proposed budget sets aside $1.1 billion. The Ministry of Electricity signed a $3 billion deal recently with General Electric to provide generators. The Ministry wants to double production eventually, and match demand. In the meantime, many Iraqis have been forced to rely upon private generators that produce between 2,000-3,000 megawatts. Thankfully, the number of attacks on the system are also down with no major ones since April 2008. Previous ones however have kept four of eleven damaged power lines out of use.
Health
Baghdad is making small steps to provide more health services, but lacks the personnel to be effective. Iraq has 27.5 million people, but only 15,500 doctors. A study said they need about 100,000. Many physicians have left the country due to the violence. The Health Ministry has a large budget, $192 million in 2008, but like the rest of the administration, has not been able to spend most of it. By the end of September 2008 they had only expended $28.5 million, 14.8%. The Ministry did launch a public relations campaign to educate Iraqis about health issues last year, has plans to build six new hospitals and 1,000 health clinics by the end of the decade, and conducted a successful five day polio campaign that vaccinated 97% of Iraq’s five million children. Until Iraq is able to meet its staffing deficit however, it will be hard to do more.
Water
Iraq’s water system is in disrepair. The facilities are operating below capacity because of a lack of maintenance, and problems with operating them. For example, when the U.S. turned over the Nassiriya Water Treatment Plant in September 2007, which cost $278 million to build, it had a capacity to treat 10,000 cubic meters of water per hour. When the SIGIR later looked at it they found that Baghdad wasn’t providing enough power, leaks were not fixed, and the personnel were not trained for their jobs. By the beginning of 2008 when American inspectors went back they found that it was operating at less then a quarter of its capabilities. The U.S. had to sign two contracts worth $1.1 million to save the project, since it felt that Baghdad would not.
As reported before, Iraq suffered a cholera outbreak in 2008 that affected more than half of its eighteen provinces. Besides the incompetence of some provincial officials that used expired chlorine to clean water, the broken down sewage and water system were largely to blame. International organizations have said that Iraq will face annual cholera incidents as a result.
Food Rations
Iraq has the largest food ration system in the world. It took up 8% of the 2008 budget. It is looked at as a basic indicator of how well the government can provide services. For 2009 there are plans to cut wealthy families from the program because of the budget crisis caused by the drop in oil prices. Less money is also going to be appropriated for it overall.
Transportation and Communication
Iraq’s Ministries of Transportation and Communication have not been able to spend most of their 2008 budgets. Transportation only spent $55 million by the end of September 2008 of its $322 million, 17%, while Communications expended $28 million of its $315 million budget, 8.8%. Iraq’s roads are in need of repair, but the lack of spending by the government means that will not be taken care of. The Ministry of Transportation does have a plan to revitalize the country’s railway system. It is opening a plant at Abu Ghraib to manufacture railroad ties at a cheaper price than imports.
Conclusion
Overall, Iraq’s economy is too dependent upon oil, and its management by the government is inefficient and corrupt. Petroleum is the only thing that makes Iraq’s economy grow, since its other industries are small and underdeveloped. The legacy of Saddam’s system still resonates, as Iraq’s bureaucracy does not function without orders from the top officials. There is little to no individual initiative. Many ministers have to sign for everything even down to hiring people. The government is also paper based, which makes things move at a snail’s pace. Many of the country’s best and brightest have left the country and are not coming back. That has led to a massive talent deficit. The lack of transparency and accounting has allowed large-scale corruption to occur largely unencumbered by any real government effort to stop it. The lack of tariffs has meant that many private businesses have suffered from cheap foreign imports. Fuel and electricity shortages, and the lack of security have increased costs. Iraqis have also shown a general lack of willingness to maintain their infrastructure, which leads to breakdowns and plants operating at less then capacity. The one positive is that security has improved, which could allow foreign companies in oil, gas, electricity, and banking to finally invest in Iraq. The lack of competent bureaucrats could negatively affect that as well as they could give foreigners too much control over Iraq’s resources, deter companies from coming because of bad contracts, or provide new avenues for graft and bribes. Still foreign know how, technology, and money is desperately needed. It will be a long and hard struggle to overcome Iraq’s many problems, and create a diversified economy that can meet the needs of its public. There is no guarantee that it will ever happen.
SOURCES
Abouzeid, Rania, “Mismanaging Iraq: No Cash to Carry,” Time, 12/29/08
Associated Press, “Iraqi official appeals to foreign banks to invest,” 1/28/09
Aswat al-Iraq, “GDP higher by 10.9 % in 2008,” 2/11/09
- “Iraqi Unemployment Rate Dropped by 15% in 2008,” 1/27/09
Chon, Gina, “Western Bank Giants Prepare to Revamp Iraq’s Financial System,” Baghdad Life Blog, Wall Street Journal, 1/28/09
Department of Defense, “Measuring Stability and Security in Iraq,” December 2008
O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution, 11/20/08
Radio Free Europe/Radio Liberty, “Official: Iraqi Banking System Needs Overhaul,” 1/13/09
Al Sabah, “Iraq faces massive water shortage, Water Resources said,” 1/21/09
Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09
El-Tablawy, Tarek, “Official: 80 percent of Iraq pipelines damaged,” Associated Press, 2/11/09
Thursday, January 15, 2009
Iraq’s Closed Factories
The head of the Iraqi Union of Industries recently said that 90% of the country’s industries had closed since 2003. He claimed that 36,000 small and medium sized companies had gone out of business for a variety of reasons. Those included cheap imports, the lack of tariffs, electricity shortages, banks not giving out loans, and skilled workers leaving for other countries. While he didn’t mention it, the violence in the country also played a role.
Iraq’s factories have been endangered since the Coalition Provisional Authority (CPA) tried to privatize the economy. The leaders and administrators of the CPA believed in a rapid privatization program for Iraq. They had ideological reasons working for a conservative Republican administration, and also believed crash courses in capitalism were successful in Eastern Europe after the fall of the Iron Curtain. In September 2003 the CPA announced its plan. This came as a shock to Iraqis and the Governing Council as they had never been consulted. At the time there were about 200 hundred state-owned businesses. None of them could operate on their own however. Some had no money, the looting after the invasion had destroyed some, while others had aging and out of date equipment. Just as important, there were no buyers for any of them. The plan proved so unpopular that in November the CPA canceled its plan. Instead of helping these struggling businesses however, the U.S. simply ignored them believing the market would determine whether they should stay in business or not. The result was most of them closed, and around 500,000 Iraqis were laid off. In the process, important businesses for reconstruction and transportation went under such as the railroad, fertilizer and cement industries.
The lack of security, services, and protectionist barriers has also hampered business. Military operations, attacks by insurgents, checkpoints, roadblocks, etc. have all strangled trade and commerce in Iraq. Many companies had to hire security guards to protect themselves. The supply of electricity has also been inconsistent forcing businesses to buy their own personal generators. Fuel costs have also skyrocketed since the invasion, meaning more bills. All three have added costs to Iraqi goods, which make them less competitive in the world market. Iraq also has few tariffs on manufactured goods, which has led to a flood of cheap foreign imports. All of these together have led to factories shutting down.
During the Surge, the Pentagon and Baghdad both tried and failed to revive Iraq’s industries. The Defense Department appropriated $50 million for the project, believing that the jobs created would help decrease the draw of the insurgency. Baghdad contributed $400 million as well. The military hoped that they could get American companies to buy the Iraqi manufactured goods, but they found no takers. Only around twenty factories were re-opened, the initiative got caught in a bureaucratic struggle between the State and Defense Departments, and the U.S. officials in charge of the project came under investigation for mismanagement and waste. Later, the Ministry of Minerals and Industry planned to sell off engineering, construction, textile, chemical, petrochemical, food and medicine plants to foreign investors, but found no bidders.
Before the invasion, Iraq was already a poor country because of the Iran-Iraq War, the Gulf War, and international sanctions. After 2003 Iraq ran into a slew of new problems including a failed privatization program by the Americans, cheap imports, lack of electricity and fuel, and a security vacuum. All contributed to the closing of the vast majority of the country’s factories, which were major employers, and largely unsustainable without state support. As reported before, the entire economy has suffered under these conditions. Iraq has a 60% unemployment/underemployment rate as a result. Some of these factories were doomed, but others could’ve been better managed and kept in business for the rebuilding that lay ahead. Firing hundreds of thousands of workers also did not help the country in anyway. The problem that lies ahead is reviving Iraq’s industries, which face massive structural problems beginning with the lack of tariffs and foreign investment.
For more see:
Iraq’s Troubled Economy
SOURCES
Aswat al-Iraq, “Imported products subvert Iraqi economy,” 2/24/08
Fairweather, Jack, “Iraqi state enterprises warily reopen,” Financial Times, 6/16/08
Gunter, Frank, “Economic Development During Conflict: The Petraeus-Crocker Congressional Testimonies,” Strategic Insights, December 2007
Henderson, Anne Ellen, “The Coalition Provisional Authority’s Experience with Economic Reconstruction in Iraq: Lessons Identified,” United States Institute of Peace, April 2005
Iraq Directory, “More than 90% of Iraqi industries are halted,” 1/10/09
Looney, Robert, “Half Full of Half Empty? An Assessment of the Crocker Report on Iraqi Economic Conditions,” Strategic Insights, December 2007
Al-Sadawi, Ahmad, “Iranian products win the market,” Niqash, 6/13/08
Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/08
- “Quarterly Report to the United States Congress,” 10/30/08
White, Josh, “U.S. Falters In Bid to Boost Iraqi Business,” Washington Post, 8/24/07
Yacoub, Sameer, “United Arab Emirates to name ambassador to Baghdad,” Associated Press, 6/5/08
Iraq’s factories have been endangered since the Coalition Provisional Authority (CPA) tried to privatize the economy. The leaders and administrators of the CPA believed in a rapid privatization program for Iraq. They had ideological reasons working for a conservative Republican administration, and also believed crash courses in capitalism were successful in Eastern Europe after the fall of the Iron Curtain. In September 2003 the CPA announced its plan. This came as a shock to Iraqis and the Governing Council as they had never been consulted. At the time there were about 200 hundred state-owned businesses. None of them could operate on their own however. Some had no money, the looting after the invasion had destroyed some, while others had aging and out of date equipment. Just as important, there were no buyers for any of them. The plan proved so unpopular that in November the CPA canceled its plan. Instead of helping these struggling businesses however, the U.S. simply ignored them believing the market would determine whether they should stay in business or not. The result was most of them closed, and around 500,000 Iraqis were laid off. In the process, important businesses for reconstruction and transportation went under such as the railroad, fertilizer and cement industries.
The lack of security, services, and protectionist barriers has also hampered business. Military operations, attacks by insurgents, checkpoints, roadblocks, etc. have all strangled trade and commerce in Iraq. Many companies had to hire security guards to protect themselves. The supply of electricity has also been inconsistent forcing businesses to buy their own personal generators. Fuel costs have also skyrocketed since the invasion, meaning more bills. All three have added costs to Iraqi goods, which make them less competitive in the world market. Iraq also has few tariffs on manufactured goods, which has led to a flood of cheap foreign imports. All of these together have led to factories shutting down.
During the Surge, the Pentagon and Baghdad both tried and failed to revive Iraq’s industries. The Defense Department appropriated $50 million for the project, believing that the jobs created would help decrease the draw of the insurgency. Baghdad contributed $400 million as well. The military hoped that they could get American companies to buy the Iraqi manufactured goods, but they found no takers. Only around twenty factories were re-opened, the initiative got caught in a bureaucratic struggle between the State and Defense Departments, and the U.S. officials in charge of the project came under investigation for mismanagement and waste. Later, the Ministry of Minerals and Industry planned to sell off engineering, construction, textile, chemical, petrochemical, food and medicine plants to foreign investors, but found no bidders.
Before the invasion, Iraq was already a poor country because of the Iran-Iraq War, the Gulf War, and international sanctions. After 2003 Iraq ran into a slew of new problems including a failed privatization program by the Americans, cheap imports, lack of electricity and fuel, and a security vacuum. All contributed to the closing of the vast majority of the country’s factories, which were major employers, and largely unsustainable without state support. As reported before, the entire economy has suffered under these conditions. Iraq has a 60% unemployment/underemployment rate as a result. Some of these factories were doomed, but others could’ve been better managed and kept in business for the rebuilding that lay ahead. Firing hundreds of thousands of workers also did not help the country in anyway. The problem that lies ahead is reviving Iraq’s industries, which face massive structural problems beginning with the lack of tariffs and foreign investment.
For more see:
Iraq’s Troubled Economy
SOURCES
Aswat al-Iraq, “Imported products subvert Iraqi economy,” 2/24/08
Fairweather, Jack, “Iraqi state enterprises warily reopen,” Financial Times, 6/16/08
Gunter, Frank, “Economic Development During Conflict: The Petraeus-Crocker Congressional Testimonies,” Strategic Insights, December 2007
Henderson, Anne Ellen, “The Coalition Provisional Authority’s Experience with Economic Reconstruction in Iraq: Lessons Identified,” United States Institute of Peace, April 2005
Iraq Directory, “More than 90% of Iraqi industries are halted,” 1/10/09
Looney, Robert, “Half Full of Half Empty? An Assessment of the Crocker Report on Iraqi Economic Conditions,” Strategic Insights, December 2007
Al-Sadawi, Ahmad, “Iranian products win the market,” Niqash, 6/13/08
Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/08
- “Quarterly Report to the United States Congress,” 10/30/08
White, Josh, “U.S. Falters In Bid to Boost Iraqi Business,” Washington Post, 8/24/07
Yacoub, Sameer, “United Arab Emirates to name ambassador to Baghdad,” Associated Press, 6/5/08
Wednesday, December 03, 2008
Iraq’s Troubled Economy
In the second half of 2008, there began to be reports about Iraq’ improving economy. After having been flat in 2007, the International Monetary Fund (IMF) predicted that Iraq’s economy would grow 7% in 2008. Some saw an improving future. Most of this was due to the skyrocketing price of oil that was occurring at the time, before it dropped. The Special Inspector General for Iraq Reconstruction said that even the non-petroleum sectors of the economy grew in the first half of 2008 however, except for farming that was hit by a drought. These macroeconomic numbers however hide the deep-seated problems the country is facing.
Oil Industry
The biggest issue with Iraq’s economy is that it is based upon a single primary product, oil, which is not labor intensive. Petroleum dominates Iraq. 94% of the country’s 2009 budget will come from oil according to the Ministry of Finance. The industry accounts for 65% of Gross Domestic Product (GDP) in 2008. The amount of money it generates for the country has also steadily increased. In 2005, oil earned over $22 billion. By 2008 it is estimated to garner $65 billion. While bringing in large amounts of cash, the industry does not require many workers. Only 2% of the workforce is involved in petroleum. This creates a predicament for the nation, as its major industry cannot provide any relief for unemployment and undermployment, which stands at around 60%.
Farming
Farming is one of the largest employers in the country, but has run into major problems since the invasion. 6% of GDP comes from farming in 2008, but it accounts for 27% of the workforce. Agriculture predominates in Wasit, 40% of the workforce, Salahddin, 35% of the workforce, Babil, 34% of the workforce, and Diyala, 30% of the workforce. Since 2003 this sector has fallen on hard times. One major cause was the move towards a free market initiated by the Coalition Provisional Authority (CPA). Under CPA Law No. 80, farming subsidies were ended, which led to many farms going under, unemployment, and migration to the cities. Rising fuel prices and shortages also limits the use of water pumps to irrigate fields. That has led to cheap foreign food imports flooding the Iraqi market from the United Arab Emirates, Saudi Arabia, Syria, China, India, and Iran. The government also runs a massive food ration system, which distorts prices. In 2008, the country was also hit by one of the worst droughts in years. As a result, wheat production dropped 27%, and barley 60%. The country will have to import millions of tons of farm products to make up for this shortfall.
Industry
Iraqi industry also suffered under the Coalition Provisional Authority. The CPA shut down much of the country’s large manufacturing plants, which were owned by the government, leading to more out of work Iraqis. By 2008 it accounted for only 2% of GDP. The Pentagon eventually began a plan to re-open these factories by encouraging foreign investment, and promising markets in the United States for their products. This policy ran into problems, as many foreign firms were unwilling to be involved in Iraq because of the violence and instability. The U.S. company that the Defense Department hired to run the program also came under investigation for mismanagement and abuses. By August 2007, only 9 factories had re-opened, less than 5% of the total. By the summer of 2008, the Ministry of Industry and Minerals initiated its own privatization program. Like the American one, Baghdad fared no better in attracting foreign investors. Another large barrier to industrial growth is the fact that Iraq has no tariffs on imported manufactured goods. Like farming, this has led to cheap foreign imports, especially from Iran, taking over much of Iraq’s market. This is causing more Iraqi businesses to close, and increasing unemployment.
Retail, Service and Construction Business
After oil, retail, wholesale, and service businesses are the second largest part of Iraq’s economy. Together they account for 20% of GDP. Like other Iraqi businesses, however, this sector has major issues. Violence of course, has been an inhibitor. A lot of companies have security guards to protect them. Even with attacks declining, there are still plenty of checkpoints and security operations that have strangled trade and delivery of goods. Power shortages are also a problem. Many businesses have invested in their own generators to make up for the shortages, but fuel is in short supply and therefore expensive. All of these together have increased costs, and made Iraqi products less competitive, leading to more imports. Because supply is so shoddy within the country however, some Iraqi companies have been able to hang on to their market share. There has also been a large increase in spending by Iraqis, especially for consumer goods since 2003, which accounts for the increase in this sector. It’s just that many of the products sold are not Iraqi.
On the positive side, many new Iraqi firms were able to develop thanks to the massive influx of American and international dollars for reconstruction. The U.S. has increasingly turned to giving contracts directly to Iraqi businesses for this line of work. In June 2008 it was reported that 3,500 Iraqi companies had been awarded $1.6 billion in construction business by the U.S. The Americans are ending their rebuilding effort however, so Iraqi companies will now have to turn to Baghdad for new funding.
Conclusion
Iraq has seen massive dislocations since 2003. Before the U.S. invasion, the economy was dominated by the state sector. Afterwards, the Americans started a privatization policy, which was badly planned and implemented. The result was thousands of Iraqis, especially professionals, were left out of work as many businesses closed. It should be no wonder than that a recent poll found 65.9% of Iraqis living below the international poverty level. Today private businesses and farms suffer from high costs, and cheap imports with little to no protective trade barriers. As a result, oil is an even larger part of the overall GDP, even though it provides few jobs. Even that has run into problems as the international price for crude has nosedived because of the world recession. Ironically, the government is still the largest employer in the country, despite the U.S. effort. 37% of households work in the public field, while salaries and pensions took up 20.4% of the 2007 budget. It is unlikely that Iraq will be able to fix any of these problems, and balance its economy any time soon. Baghdad has proven just as incompetent if not worse than the CPA in managing and planning. Grand announcements are usually made with little follow up. That will mean continued unemployment and poverty for a majority of Iraqis, with oil being the main industry keeping the economy going.
SOURCES
Alsumaria, “Iraq plan to reduce government jobs by 75%,” 11/10/08
Aswat al-Iraq, “Imported products subvert Iraqi economy,” 2/24/08
Davis, Eric, “Rebuilding a Non-Sectarianism in Iraq,” Strategic Insights, December 2007
Department of Defense, “Measuring Stability and Security in Iraq,” September 2008
Fairweather, Jack, “Business wanes as Baghdad takes over,” Financial Times, 6/4/08
- “Iraqi state enterprises warily reopen,” Financial Times, 6/16/08
Fifield, Anna, “Iraqis exist on margins of positive picture,” Financial Times, 10/21/08
Gunter, Frank, “Economic Development During Conflict: The Petraeus-Crocker Congressional Testimonies,” Strategic Insights, December 2007
Janabi, Ahmed, “Iraqis forced to abandon farming,” Al Jazeera, 5/11/08
Al-Jumaili, Hazem, “Iranian goods most popular in Iraq,” Azzaman, 9/7/08
Middle East Online, “Iraqi professionals forced to take small jobs,” 2/21/08
Rasheed, Ahmed and Ryan, Missy, “Iraq’s farm sector crumbling as drought bites,” Reuters, 10/24/08
Sachet, Khalid Hantoush, “Results of the Field Survey For Needs and Opinions of The Poor in Iraq,” Iraqi Al Amal Association and University of Baghdad, September 2008
Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/08
World Food Programme, “Comprehensive Food Security & Vulnerability Analysis: Iraq,” November 2008
Yacoub, Sameer, “United Arab Emirates to name ambassador to Baghdad,” Associated Press, 6/5/08
Xinhua, “Iraqi Factories Fight to Survive Turbulence,” 11/23/08
Oil Industry
The biggest issue with Iraq’s economy is that it is based upon a single primary product, oil, which is not labor intensive. Petroleum dominates Iraq. 94% of the country’s 2009 budget will come from oil according to the Ministry of Finance. The industry accounts for 65% of Gross Domestic Product (GDP) in 2008. The amount of money it generates for the country has also steadily increased. In 2005, oil earned over $22 billion. By 2008 it is estimated to garner $65 billion. While bringing in large amounts of cash, the industry does not require many workers. Only 2% of the workforce is involved in petroleum. This creates a predicament for the nation, as its major industry cannot provide any relief for unemployment and undermployment, which stands at around 60%.
Farming
Farming is one of the largest employers in the country, but has run into major problems since the invasion. 6% of GDP comes from farming in 2008, but it accounts for 27% of the workforce. Agriculture predominates in Wasit, 40% of the workforce, Salahddin, 35% of the workforce, Babil, 34% of the workforce, and Diyala, 30% of the workforce. Since 2003 this sector has fallen on hard times. One major cause was the move towards a free market initiated by the Coalition Provisional Authority (CPA). Under CPA Law No. 80, farming subsidies were ended, which led to many farms going under, unemployment, and migration to the cities. Rising fuel prices and shortages also limits the use of water pumps to irrigate fields. That has led to cheap foreign food imports flooding the Iraqi market from the United Arab Emirates, Saudi Arabia, Syria, China, India, and Iran. The government also runs a massive food ration system, which distorts prices. In 2008, the country was also hit by one of the worst droughts in years. As a result, wheat production dropped 27%, and barley 60%. The country will have to import millions of tons of farm products to make up for this shortfall.
Industry
Iraqi industry also suffered under the Coalition Provisional Authority. The CPA shut down much of the country’s large manufacturing plants, which were owned by the government, leading to more out of work Iraqis. By 2008 it accounted for only 2% of GDP. The Pentagon eventually began a plan to re-open these factories by encouraging foreign investment, and promising markets in the United States for their products. This policy ran into problems, as many foreign firms were unwilling to be involved in Iraq because of the violence and instability. The U.S. company that the Defense Department hired to run the program also came under investigation for mismanagement and abuses. By August 2007, only 9 factories had re-opened, less than 5% of the total. By the summer of 2008, the Ministry of Industry and Minerals initiated its own privatization program. Like the American one, Baghdad fared no better in attracting foreign investors. Another large barrier to industrial growth is the fact that Iraq has no tariffs on imported manufactured goods. Like farming, this has led to cheap foreign imports, especially from Iran, taking over much of Iraq’s market. This is causing more Iraqi businesses to close, and increasing unemployment.
Retail, Service and Construction Business
After oil, retail, wholesale, and service businesses are the second largest part of Iraq’s economy. Together they account for 20% of GDP. Like other Iraqi businesses, however, this sector has major issues. Violence of course, has been an inhibitor. A lot of companies have security guards to protect them. Even with attacks declining, there are still plenty of checkpoints and security operations that have strangled trade and delivery of goods. Power shortages are also a problem. Many businesses have invested in their own generators to make up for the shortages, but fuel is in short supply and therefore expensive. All of these together have increased costs, and made Iraqi products less competitive, leading to more imports. Because supply is so shoddy within the country however, some Iraqi companies have been able to hang on to their market share. There has also been a large increase in spending by Iraqis, especially for consumer goods since 2003, which accounts for the increase in this sector. It’s just that many of the products sold are not Iraqi.
On the positive side, many new Iraqi firms were able to develop thanks to the massive influx of American and international dollars for reconstruction. The U.S. has increasingly turned to giving contracts directly to Iraqi businesses for this line of work. In June 2008 it was reported that 3,500 Iraqi companies had been awarded $1.6 billion in construction business by the U.S. The Americans are ending their rebuilding effort however, so Iraqi companies will now have to turn to Baghdad for new funding.
Conclusion
Iraq has seen massive dislocations since 2003. Before the U.S. invasion, the economy was dominated by the state sector. Afterwards, the Americans started a privatization policy, which was badly planned and implemented. The result was thousands of Iraqis, especially professionals, were left out of work as many businesses closed. It should be no wonder than that a recent poll found 65.9% of Iraqis living below the international poverty level. Today private businesses and farms suffer from high costs, and cheap imports with little to no protective trade barriers. As a result, oil is an even larger part of the overall GDP, even though it provides few jobs. Even that has run into problems as the international price for crude has nosedived because of the world recession. Ironically, the government is still the largest employer in the country, despite the U.S. effort. 37% of households work in the public field, while salaries and pensions took up 20.4% of the 2007 budget. It is unlikely that Iraq will be able to fix any of these problems, and balance its economy any time soon. Baghdad has proven just as incompetent if not worse than the CPA in managing and planning. Grand announcements are usually made with little follow up. That will mean continued unemployment and poverty for a majority of Iraqis, with oil being the main industry keeping the economy going.
SOURCES
Alsumaria, “Iraq plan to reduce government jobs by 75%,” 11/10/08
Aswat al-Iraq, “Imported products subvert Iraqi economy,” 2/24/08
Davis, Eric, “Rebuilding a Non-Sectarianism in Iraq,” Strategic Insights, December 2007
Department of Defense, “Measuring Stability and Security in Iraq,” September 2008
Fairweather, Jack, “Business wanes as Baghdad takes over,” Financial Times, 6/4/08
- “Iraqi state enterprises warily reopen,” Financial Times, 6/16/08
Fifield, Anna, “Iraqis exist on margins of positive picture,” Financial Times, 10/21/08
Gunter, Frank, “Economic Development During Conflict: The Petraeus-Crocker Congressional Testimonies,” Strategic Insights, December 2007
Janabi, Ahmed, “Iraqis forced to abandon farming,” Al Jazeera, 5/11/08
Al-Jumaili, Hazem, “Iranian goods most popular in Iraq,” Azzaman, 9/7/08
Middle East Online, “Iraqi professionals forced to take small jobs,” 2/21/08
Rasheed, Ahmed and Ryan, Missy, “Iraq’s farm sector crumbling as drought bites,” Reuters, 10/24/08
Sachet, Khalid Hantoush, “Results of the Field Survey For Needs and Opinions of The Poor in Iraq,” Iraqi Al Amal Association and University of Baghdad, September 2008
Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/08
World Food Programme, “Comprehensive Food Security & Vulnerability Analysis: Iraq,” November 2008
Yacoub, Sameer, “United Arab Emirates to name ambassador to Baghdad,” Associated Press, 6/5/08
Xinhua, “Iraqi Factories Fight to Survive Turbulence,” 11/23/08
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