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Update No: 088 - (27/07/10)

A self-inflicted crisis
The summer of 2010 is a hot one in Baghdad, and not just because of the sun. The continuing failure to form a coalition government is having major economic implications. The government departments are unable to spend their allocated budget effectively, or to spend it at all, due to a mix of corruption and lack of capacity. Although that was the case even before the elections, it is now getting even worse in the absence of a government and strong leadership. One case in point is the ministry of electricity, which was providing 24 hours supply during the electoral campaign and is down to a few hours a day now: doesnít this suggest that the state bureaucracy could do more if properly pushed? Maybe not, but the improvement in the quality of the service prior to the elections raised expectations. Popular protests against electricity shortage managed to force the minister to resign in June, but not to improve the supply. Political uncertainty and the lack of a government is also delaying the implementation of aid projects, compounding a tendency towards the reduction of aid to Iraq as a result of the financial crisis, of irritation over corruption and inefficiency within the Iraqi bureaucracy and of the declining rank of Iraq in terms of western priorities. Close to US$1 billion of investment in the Iraqi industry has reactivated about 70% of the industrial units, but typically work well below capacity and without turning out a profit. Another US$4-6 billion are believed to be needed to complete the overhaul of the sector.

360 degrees frustration
Among the public, frustration at the lack of a government is mounting, not only because the delay in forming a new cabinet postpones any chance of quick improvement in public services, but also because the security situation in the country remains precarious, with wave after wave of terrorist attacks trying to bring back civil war. While the Shiites are targeted in indiscriminate mass bombings, which seem to carry all the hallmarks of Al Qaida, the Sunni suffer from a series of targeted killings, which are not as easily attributable. The Obama administration shares the same worries as many Iraqis, not least because it is determined to meet its own deadlines about reducing the number of US troops in Iraq to 50,000, despite opposition by US right-wingers. As the troop reductions continue on schedule, US influence in Iraq is proportionally reduced. Therefore, Obamaís call for a quick resolution of the political deadlock is unlikely to carry much weight, nor is the Vice-presidentís latest visit to Iraq likely to be much more effective. As US influence wanes, Iranís influence grows proportionally. Many believe that Teheran is behind the insistence of the Sadrists that Maliki should not be Prime Minister again: some in Iran view him as too inclined to cooperate with the Americans, something which might have been tolerable in the past, but is no longer now.

Negotiations continue
The Sadrist had reportedly offered a deal to Maliki, where he would serve on as Prime Minister, but in exchange for a strong Sadrist share of cabinet posts and other concessions, which would weaken Malikiís credibility as a leader or might not even be possible to implement, such as the lifting of death sentences against detained Sadrist militiamen. Perhaps the typical unacceptable offer is meant to place the blame for the failure of negotiations on Maliki? The Iranians probably want a Prime Minister who would push for a complete US withdrawal and pretty rapidly too. Some within Malikiís party have started talking about alternative candidates to the PM position, an indication that support for the leader might be fraying, even within his own turf. There are some indications that even Allawi, the most pro-American of the candidates to Prime Minister, is recognising the need to accommodate Iranís rise and is ready to accept a junior role in the new government, probably as president, while the two Shiite alliances take the lionís share of the posts. However, it is not clear whether his Sunni supporters would consider this deal satisfactory enough for them. Allawi met Muqtada As-sadr in Syria in July and the latter stated that Allawi was talking of a compromise. Syria, which supports Allawi but is also close to Iran, might be trying to engineer an agreement. Allawi previously held discussions with Maliki too, hoping that Sadrist hostility would mollify Maliki towards a deal with Allawi, but it does not appear to have worked.

                                                                                                  
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