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Update No: 050 - (27/06/07)

Oil law blues continues
Although in June the Baghdad government and the Kurdish autonomous government reached a deal over the oil law, new trouble arose because of the opposition of the powerful oil workers union, which criticises the draft law as too favourable to the interests of oil multinationals and too unfavourable to the workers. The technocrats at the oil ministry and outside it are now criticising the latest version of the draft because it gives too much power to the regions. At the same time the Maliki government is under ever growing American pressure to approve the law: Gates was only the latest in a series of US officials to visit Baghdad to remind the government that the approval of the law is of utmost importance to Washington. In the meanwhile Baghdad continues to neglect its oil fields, as well as the rest of the country's infrastructure. Last year only 67% of the state budget was spent and most of that was salaries. Only 22% of the budgeted investments effectively took place; in the oil sector the percentage was as low as 3%. Although the Americans themselves have spent US$1.6 billion since the overthrow of Saddam Hussein, this is not sufficient to prevent a further deterioration of the infrastructure. To that, sabotage and theft have to be added, particularly in the north where most of the already reduced production fails to produce any revenue for the government because it is siphoned off.

Hollow recovery
Analysts are as divided with regard to the actual growth rate of the Iraqi economy, with estimates ranging between 4 and 17%, as they are over any other statistics concerning Iraq. Estimates of the jobless rate are similarly wide, at 30-50%. What is certain however is that whatever growth is taking place is stimulated by high oil prices and the pumping in of reconstruction money. Even that did not suffice to resolve infrastructural issues such as the provision of electricity, which in Baghdad declined by 8% this year instead of improving. Higher government salaries and lower import tariffs have allowed an increase in the purchasing power of the average household, which is also being reflected in the massive increase of mobile phone subscribers, which has now reached 7.1 million, an increase of 900% over 2003. But the impact of violence is creating huge disparity in the economic performance of the different regions. The Kurdish region, largely spared by violence and once one of the most backward, has now a per-capita income 25% higher than the rest of Iraq. Unsurprisingly given the level of insecurity, the private sector of the economy remains virtually dead and even the Americans, for all their support of private enterprise, have channelled just 4% of their funds towards it. The professional classes account for a large share of the 650,000 who have fled the country, both because they have better chances to find jobs abroad and because they feel that the militants are targeting them. About 2,000 physicians, for example, have been killed since the beginning of the insurgency. The long-term impact of this flight are grim: the flight of teachers has resulted in a 45% drop in the school enrolment date over the last two years. 

Bush increasingly isolated
With the Baghdad surge failing to show appreciable effects so far, President Bush appears increasingly isolated on the Iraqi front. At home, his ever worsening popularity polls are beginning to push core Republicans to readjust their position and begin ventilating hypothesis of troops withdrawals. In Iraq, the Maliki government seems unable or unwilling to give Bush a hand by delivering some political success, such as the final approval of the Oil Law or anything else which Bush could present as an achievement by September, a deadline which Bush himself unwisely proposed for measuring the ongoing trend in Iraq. Instead, Maliki is now criticising the Americans for their arming of Sunni Arab militias to fight against the insurgents, at a time when he is under heavy pressure to dismantle Arab Shiite militias. 

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