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Update No: 058 - (28/02/08)

Unexpected progress
The political front showed some unexpected progress in February after the parliament approved three new laws, in an unusual spur of activity. Apart from the 2008 budget, the parliament also approved an amnesty bill and a provincial powers bill. The amnesty benefits the Arab Sunni minority and should allow thousands of prisoners linked to the insurgency to return home, but there are doubts about its effective implementation. The law on provincial powers should lead to new elections in October, which in turn could allow the Sunni Arabs to elect their own representatives to the provincial councils. Mailiki is also trying to appease his critics from within the running coalition by holding regular meeting with the President and the vice president.
The Americans now hope to turn As-Sadr's militia into allies in a way similar to what they have done with many Sunnis militias. Already an estimated 20% of the militias recruited by the Americans over the last year are Shiite, although the extent to which they belonged to Muqtada As-sadr's group is unclear. American efforts seem to be receiving some encouragement as Muqtada renewed in February his six month ceasefire for another six months, despite grassroots support for a return to fighting in response to alleged targeting of Sadrists by the Iraqi security forces. He is trying hard to rein his militias and impose some discipline, weeding out the more extreme and unruly elements. Muqtada now talks of turning his movement into something more like a social solidarity organization and seems clearly worried about the war-weariness growing within the Shiite community, which reacted very negatively at episodes of clashes among Shiite militias. But his ultimate aims remain unclear. 

Long term prospects for oil still dubious
Although oil production has now climbed some way upwards and stands at 2.3 million bpd, future prospects of the sector are jeopardized by the continuing failure to approve the new oil law. Earlier optimism about its approval has now completely evaporated and the deadlock in the parliament seems irresolvable. There are reportedly four different drafts of the law in circulation, but none is supported by a majority. In the meanwhile Baghdad is trying to involve foreign oil firms by offering them a role in servicing the existing oil infrastructure. More than 70 companies have registered to compete in the forthcoming tenders. At the same time Baghdad is trying to prevent further deals between oil companies and the Kurdish regional authorities by using retaliation. The oil ministry has already halted oil exports to SK Energy (South Korea) and OMV AG (Austria), which it accuses of illegal oil deals. Figures for last year show that oil exports rose 9.2% to an average of 1.6 million bpd, a modest achievement given the potential. The reduction in sabotage activity against the northern Iraq pipeline is the main reason for this increase, as many of those attacking the pipelines have not been hired by the government to protect them, although US$560 million have also been spent on oil facilities upgrades by foreign companies. The oil ministry now plans to bring production to 3 million bpd by the end of the year, but these forecasts to say the least, lack conviction in the outside world.

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