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Update No: 065 - (25/09/08)

The dangers of success
During August rising tension became evident with regard to the status and the future of the Sunni militias sponsored by the Americans. The Shiite-led government is now talking of disbanding these militias and sending their members back home. The accusation is that many of these are reformed insurgents and may have taken many lives in the past, although the more likely political rationale is that the militias might represent a major obstacle to future Shiite domination of Iraqi politics. Better disband them now that the Americans are still in the country, than having to face them alone after 2011. 

Maliki and his supporters are increasingly confident in their national army, particularly after it somehow managed to handle the Sadrist militias earlier this year. Although they might be overestimating the power of the Iraqi army and superficially compare the capabilities of the Sunni and Shiite militias, it is clear that the government is increasingly self-confident and assertive. It will not be easy for the Americans to contain it and protect the Sunni militias, which they are sponsoring. Maliki seems to be deliberately manoeuvring in order to force the Americans to choose between him the Sunni militias. The militias are planned to disband by June 2009, but due to Mailiki’s ‘sabotage’ so far just 9,000 of them have been absorbed into the armed forces of Iraq. Some observers are now beginning to fear that under the double pressure of the remaining insurgents (Iraqi and foreigners) and of the Shiites, many militiamen might soon return20to the insurgency.

The north heats up
The newly found assertiveness of the central government is having an impact also on the situation in Diyala province, which remains very tense as Kurdish forces and Iraqi government army threaten to fight over the control of the town of Khanaqin. The Kurds had evacuated most of the ethnically mixed areas of Diyala province at the end of August. Some Shiite legislators close to Maliki have gone as far as calling the Kurdish forces ‘an outlaw militia’, an affront that the Kurds have not taken well. The Iraqi army units entering the areas evacuated by the Kurds are reportedly claiming to have ‘freed them from the militias’. The government is also casting the Kurds as the villains in the continuing delay of the oil law. Oil Minister Shahristani has recently declared that the reason why the parliament is reluctant to sign the law is the behaviour of the Kurdish regional government, which has been signing a number of oil contracts with small international partners, despite the objections of Baghdad. According to the Ministry, the parliament will not pass the law unless the Kurds cancel all the contracts they have signed. Since the Kurds are indifferent to the oil law anyway, this is probably an attempt to place pressure on Washington to castigate the Kurds and force them to comply, in order to get the oil law going.

Better economic outlook and first oil contract
The general economic outlook of Iraq has improved, thanks to better security and a number of other developments, including better oversight and anti-corruption measures in the oil sector, according to the latest IMF assessment. However, the IMF also claims that without key structural reforms, such improvements will not be sustainable. Real GDP growth is now projected at 9% for 2008, higher than earlier expectations, although the forecast for 2009 is lower at 7.3%. 

In August the Iraqi government reached its first real oil deal of the post-Saddam era. The agreement with China National Petroleum Corp was possible because it is in fact the revival of a deal signed in 1997 with Saddam but never implemented because of the embargo. The al-Ahdab oilfield will require the investment of US$3 billion and will produce 100,000 bpd at full regime.

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