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Update No: 045 - (25/01/07)

Blaming the Iranians
During December and January American despair at their own inability to control the situation in Iraq seemed to be getting out of hand. At the end of December the Iraqi government expelled two alleged Iranian spy operatives, who had been arrested by the Americans under the accusation of planning attacks on US forces. The Americans complained bitterly as they saw the expulsion as a favour to the Iranians. Then in January the Americans raided an Iranian unofficial consulate in the Kurdish area, arresting a number of Iranian diplomats whom according to the Kurds had been allowed to operate in the area. One interpretation for American willingness to antagonise Iraqi and Kurdish authorities is that they might be starting to build up a case for action against Iran later in 2007, or at least make the Iranians believe that such action might really take place. While these raids clearly will not be able to contain Iranian influence and activities, they might be more successful at highlighting the extent to which the Iranians are penetrating Iraq.

Sunnis vs. Shias, Shias vs. Shias
On the political battleground, December and January were months of rising tension between Sunnis and Shias, following the execution of Saddam Hussein and two members of his inner circle. The humiliating way in which the execution took place was a major contributing factor in fostering the identification of many Sunnis with Saddam. As the violence increasingly takes the shape of an inter-sectarian civil war, the Shiite front appeared to be trying to find a way out of its own internal impasse. A number of politicians and MPs keep talking of a new coalition to form under PM Maliki, which would exclude Muqtada As-Sadr's group but include the Kurdish alliance and moderate Sunnis. As the end of January approached, sources within the different political groups maintained that the new coalition was virtually ready and just waiting the blessing of Ayatollah Al-Sistani, who is allegedly worried that this might imply a break-up of the Shiite alliance. As-Sadr, on the other hand, seems to be reacting to the risk of marginalisation by softening his chance and accepting talks to reintegrate his followers into the ruling coalition, after ending a boycott of parliament and proclaiming a cease-fire. If he succeeded in reducing somewhat the gap with the other components of the Shiite alliance, the prospects of a new coalition excluding his followers would be somewhat disrupted, to the chagrin of the Bush Administration. Sadr opposes any and all influence of the Americans over the Iraqi government. 

Corruption and ineffectiveness start pissing off donors
In the meanwhile, the Iraqi aid program is coming under growing criticism. Because of the lack of safeguards, nil transparency and the existence of many 'discretionary funds,' it is widely believed that much of the money will be used for patronage purposes or stolen outright. The Americans are asking donors to contribute to a new US$1 billion effort, but the response is so far muted. For good measure, the proposed budget for 2007-8 cuts the allocation of resources to the Public Integrity Commission, which is meant to fight corruption. On the whole the budget foresees a 21% increase in expenditure, much of which is supposed to go into improving infrastructure (+60%). However, last year US$8 billion were left unspent because of the security situation and of ministerial incompetence and ineffectiveness and it is difficult to see how this year it will be possible to make much progress in this regard. The Oil Ministry in particular spent just US$4 million (0.1%) of the US$3.6 billion which it was allocated to improve oil infrastructure. A particular controversial item was the allocation of US$230 million to a fund for the victims of Saddam Hussein, which irritated many Sunnis MPs.

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