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IRAQ


 



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Area (sq.km)
437,072

Population

24,001,816 (July 2002 est.)

Capital
Baghdad

Currency
Iraqi dinar (IQD)

President



Update No: 040 - (25/08/06)

Oil industry: optimism of the will
After a lull in September, sabotage in the oil industry was back with a vengeance in August, disrupting the production of fuel so severely that long queues formed at every petrol station of the country. The shortage occurs despite a twelvefold increase in the price of fuel, which has brought the price more in line with regional prices and consequently reduced smuggling. Until a few months ago, about 10% of refined fuel and 30% of imported fuel were smuggled away. The inability to repair pipelines compounds the problem. The new pipeline carrying oil from the Kirkuk fields to Bajii refinery is reported to leaky and unable to carry more then 500,000 bpd rather then 800,000 as planned. Only 38% of planned reconstruction projects related to the oil industry have been completed.
Nonetheless, the new Oil Minister remains optimistic about the medium term prospects and keep revising upwards the expected oil production levels. His latest forecast is 2.9-3 million bpd by the end of the year. In August production averaged 2.23 million bpd, with peaks of 2.5 million. Apart from increasing fuel prices, the Oil Ministry has also enacted a number of other measures to curb smuggling, such as suspending sales to companies blacklisted as smugglers. The struggle against corruption at the Ministry appears less successful, although contracts for purchasing fuel from abroad have been made more transparent. At the beginning of August, Shahristani announced that by October negotiations with international oil companies will start in order to develop Iraq's oil industry. The Kurdish regional government, on the other hand, is upping the stakes in its confrontation with the Ministry and has prepared a regional law which allows it to claim control over oil resources. The Kurds are also preparing a similar draft law to be presented to the national parliament, in a move which will inevitably stir controversy.

Not in a good mood
Together with an ongoing civil war, inflation running at 50% and unemployment now estimated to run at 50% of the workforce (up from last year's 30% estimate), the fuel shortages contribute to shape a mood of impending collapse among the population. Although official estimates of GDP growth this year stand at 4%, few Iraqis seem to benefit at all. With the end of the massive US reconstruction effort at the end of the summer, unemployment is likely to rise further. Moreover, little has been achieved in terms of creating the preconditions for economic recovery. It is now estimated the rebuilding the oil industry and the electrical grid will cost US$50 billion. 

Iran's brinkmanship: not just Lebanon
There are indications that Iran, in line with its policy of controlled brinkmanship, has been resisting any drift towards a settlement between Sunni and Shiite groups in Iraq, presumably in order to make Iraq uncontrollable by the US. The Iranian leadership probably perceives the growing weakness of the Bush Administration and had decided that it is time to start forcing the US military out of Iraq. The Iraqi government re-launched its reconciliation efforts in August, but it is obvious that there are disagreements within it with regard to whom should be allowed to take part in them. Prime Minister Al Maliki is inclined to exclude resistance fighters, while Parliament speaker al-Mashadani, a Sunni, is in favour of including them. 
The continuing slide towards civil war is causing its first victim among the cabinet members, with reports that the replacement of Interior Minister Al-Bolani is imminent. He is accused of having been unable to control the violence and has been in charge for just two months. The move might be an attempt by SCIRI to regain control of the Ministry, which is essential to its strategy of incorporating its party militias into the police. The growing inter-Shiite rift is also evidenced by the resignation of three ministers (Transport, Tourism and Provinces) between the end of June and the end of July, all supporters of Muqtada As-sadr. As-sadr is likely positioning himself to capitalise on the unpopularity of the government, within which his influence was in any case weak and limited to junior ministerial portfolios. He has of course been a consistent opponent of the US presence in Iraq and it is not improbable that he, more than other Shiite groupings is closer to Iran who arm and perhaps finance his faction. We have long considered that he sees himself as the future leader of this nation and that all his actions are about leading to that destination. A Muqtada government with its violent religious make-up might tend to make Saddam Hussein look like a liberal!

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