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Update No: 033- (30/01/06)

Difficult negotiations ahead
The official results of the Iraqi parliamentary elections, released on 20 January, confirmed the predictions that little would change compared to the previous elections, except for increased Sunni Arab participation. With 128 seats, the Shiite alliance lost just 18 seats compared to January 2005. The representation of the Shiite Islamic parties actually increased, as the alliance has in the meanwhile shed its secular and Sunni components. Ahmad Chalabi, who used to be part of that alliance and competed in these elections as the head of another, secular-leaning alliance, was utterly defeated and his alliance failed to win a single seat, including his own. Secular Shiite voters flocked instead towards the alliance led by former Prime Minister Allawi, which won 25 seats, with a loss of 15 seats compared to the previous elections, despite the enlargement of the alliance to include a number of secular and leftist groups. A similar secular-religious split took place among the Sunni electorate, with an alliance of religious groups getting 44 seats and another alliance of secular and nationalist groups winning 11. In the case of the Kurds, a split between secular and religious groups also occurred, but the proportions of it were inversed, with the secularists gaining 53 seats and the Islamist just 5. On the whole the vote showed increased sectarianism, with parties claiming to represent cross-sectarian and cross-ethnic interests gathering just over 10% of the vote.
It is now expected that long and complex negotiations will be needed in order to form a government. There are several main bones of contention. Both Shiite and Sunni groups want to control the Ministry of Interior, whose involvement in the repression of the insurgency has led to widespread allegations of abuse. Two different factions within the Shiite alliance claim the position of Prime Minister, while it is not clear yet what Muqtada As-Sadr's group will ask in exchange for having contributed to the victory of the Shiite alliance. The only positive aspect is that Shiites and Kurds appear to have settled their own conflict over the city of Kirkuk, which contributed to make negotiations for the formation of a government so difficult early last year. 

US re-positions itself
Between December and January several signals emerged from the Bush Administration that showed how it might be courting Sunni groups with an eye both at undermining the insurgency and weakening the hold of pro-Iranian groups (i.e. the Shiite alliance) on the Iraqi state. Ambassador Khalilzad insisted that in the future cabinet the Interior Ministry should be held by a non-sectarian, while it is currently held by a Shiite, who has been filling it with supporters of the Shiite alliance. At the same time, the ambassador also appeared to side with the Sunnis when their politicians claimed that large scale rigging had robbed them of a fair share of seats in the parliamentary elections. However, it remains to be seen how far the US embassy will be able to go in terms of successfully manipulating sectarian and ethnic divides in Iraq. The improvement in the relations between the Shiite alliance and the Kurdish alliance is likely to deprive the Americans of sufficient room for manoeuvre. As long as the Shiites are ready to grant to the Kurds what they want, that is Kirkuk and autonomy in their own region, the latter are unlikely to complain too loudly about whatever the Shiites might be doing in Baghdad. 

US rebuilding effort ends
In January the Bush Administration announced that it will not seek any more funding for the rebuilding of Iraq, which will therefore run out once the remaining unspent 20% of the US$18.4 billion allocated so far will have been used up. This move is in part dictated by internal budget constraints, but probably also by the feeling that the effort done so far has had very little impact in terms of public mood among the Iraqi population. Such effort has also faced huge difficulties to the security situation and inbuilt inefficiencies of the US aid system. Even the electricity generation sector, which was one of the focuses of the US reconstruction effort, is still 10% short of pre-war output. 

Stormy times at the Oil Ministry
The increasing difficult situation of the Iraqi oil industry was highlighted in January, when Oil Minister Bahr al-Ulum resigned after having put on administrative leave by the government. Although he resumed his post after one week, the mood remains gloomy at the Ministry. Allegations are flourishing that the Ministry is now under the control of gangs and is losing its ability to manage the country's extraction and refining installations. The Ministry was forced to take the very unpopular measure of increasing the price of gasoline from US$0.01 per litre to US$0.80, while the price of petrol has gone from US$0.03 to US$0.09. These increases sparked the protests which forced the Minister to take his position against the increases, a move which in turn brought him the censorship of the government. 
On another note Iraq made further progress in January towards the definitive solution of the debt problem. A group of commercial creditors, who are owed US$14 billion of a total US$23.5 billion worth of commercial claims, agreed to a debt swap offer.  

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