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24,001,816 (July 2002 est.)


Iraqi dinar (IQD)



Update No: 030- (28/10/05)

Mystery of a referendum
Once again having set an electoral deadline as a benchmark of improvements in Iraq proved to be a boomerang. The delay in announcing the results of the constitutional referendum because of suspected fraud has provided ammunition to the opponents of the new constitution, even though the constitution was in the end approved. Only two out of the three regions necessary to repudiate the draft constitution did so, although there were bitter recriminations from those Sunni who believe that they had a majority against.  They are saying that the police 'stole' ballot boxes. In such a 'fraught society' with so much at stake, one cannot lightly dismiss such claims, except the UN team regulating the referendum pronounced it to be properly done and the result a true one. In any case, the referendum vote did not signal any decrease in the pace of the insurgency, which actually picked up in the weeks following it. 

Disjointed and ineffective government?
Throughout October, increasingly strong signals emerged of a widening rift between President Talabani and Prime Minister Jaffari. A Talabani spokesman even went as far as asking publicly for the resignation of Jaffari, although Talabani later distanced himself. Talabani is clearly trying to raise the profile of the presidency, a largely ceremonial post, by competing with Jaffari for the time and attention of foreign authorities. Neither seems able to impose discipline on the cabinet. At some point the Interior Minister went on the loose and stated that Iraq would not accept to be taught by "a Bedouin on a camel" about human rights and democracy (meaning the Saudis), forcing the Foreign Minister to apologise the next day. There are also differences within the Shiite alliance. The largest component of the Shiite coalition (other than Jaffari's Dawa Party), SCIRI, is even hinting that it might participate in the next elections on its own. The Kurds even accused him of ethnic prejudices against them, while women' groups have not forgotten his earlier calls for measures meant to curtail women's rights. Jaffari has also been accused of not taking much interest in the constitution itself and of being a difficult character to deal with, as well as lacking dynamism. Finally, Jaffari's and the government have even been accused of manipulating the judiciary against former Prime Minister Allawi's group, in order to discredit it. Allawi's defence minister, Al-Sha'lan, appears likely to be soon the object of an arrest warrant for corruption. 

Oil down the drain
The Iraqi oil ministry is now increasing investment and security in the oil sector, with the stated aim to increase exports from the current 1.5 million bpd to 1.8 million. Production potential currently runs at 2.8 million bpd, but in practice it still has to reach the prewar level of 2.5 million bpd due to sabotage and other problems. In September production was just 2.2 million bpd, lower than the post-war peak of 2.5 million bpd of September 2004. As shown in a rare piece of investigative journalism published in the Los Angeles Times at the end of September, the US has already spent US$1.3 billion on the Iraqi oil industry, but this has had little impact due to mismanagement and wrong choices, including the decision to use American officials with little experience of the oil industry instead of officials from the Iraqi ministry. Many in the industry and beyond, including in the US Congress, see the use of no-bid contracts won by cronies of the Bush administration as a major source of problems. Several scheduled repair projects have not been completed and in some cases have been abandoned, at a cost estimated around 500,000 bpd, worth US$8 billion a year. The unwillingness of the Iraqi government to commit resources to complete the necessary repairs, opting instead to spend its revenue in subsidies and salaries, compounded the situation. The damage done to some oil fields might be permanent, adding to the damage done in Saddam Hussein's years. According to UN estimates, in some oil fields it might be possible to recover just 15-25% of the oil, as opposed to averages of 35-60%. Further damage might be being done because of the practice of re-injecting oil which cannot be immediately carried away because of sabotage and lack of storage facilities. Iraq is still re-injecting close to 200,000 bpd. Moreover, the big oil companies do not yet have any concrete plan on how to develop the Iraqi oil industry and oil officials doubt the feasibility of the targets announced by the Oil Minister. The final target of 5.5 million bpd is judged to be as far away as 2013-14 and even the more modest target of 3.5 million bpd might not be reached before 2009. 
There is no plan to significantly cut subsidies on fuel, most of which has to be imported. This year US$1.5 billion was spent on importing fuel, because Iraq cannot refine enough of it, and US$3 billion is expected to be spent next year. 
Meanwhile, reconstruction money is running out, as US has mostly been spent and other donors bide their time, waiting for security to improve. There is not even enough funding budgeted to maintain completed projects. 


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