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Update No: 092 - (22/11/10)

Almost there…
By 11 November it seemed that finally a power-sharing deal between the different Iraqi factions had taken shape. Maliki seemed bound to remain as Prime Minister, Talabani was re-elected as President, Allawi’s group would receive the parliamentary speaker’s position and the headship of a new Council of Strategic Policy, which Allawi himself was supposed to take. However, it soon became clear that Allawi was not convinced that the deal, fully supported by Washington, gave him any real power. As Talabani designated Maliki as prime minister, Allawi decided to opt for confrontation once again even if most MPs of his groups were in favour of the deal. He led about 60 his MPs in a walkout in protest, technically because Maliki had refused to re-instate three members of Iraqiya who had been barred from the parliament because of their Baathist past. However, his position is weaker than ever, because one third of his own MPS did not follow him and doubts about the wisdom of the move reportedly exist even among many of the 60 or so who stayed loyal to the leader. Maliki then started new negotiations to see whether the deal could be saved, but it is clear that despite some initial enthusiasm the deal is pretty shaky. The deal was mediated by Kurdish leader Barzani, a fact which highlights how in the end the Kurdish alliance has decided to throw its king-making weight on Maliki’s side. Maliki would be able to rule with Kurdish and minority Sunni support, but Washington would certainly like to see Allawi be part of the deal.

Some observers believe that the deal was the result of some kind of rapprochement between Washington and Teheran; Teheran was believed to be obstructing any deal-making until recently, but has changed its attitude in November. Perhaps the deal was meant to prepare the ground for a thaw with Washington over the nuclear issue?

Paralysis and hope
The paralysis of government which followed the political deadlock has had a negative impact on the level of investment and economic activity, in a country still largely dependent on government spending. Currently unemployment is varyingly estimated at 15-30%. Foreign investment in the Iraqi oil infrastructure is beginning to bring some fruits, but the benefits will still have to be redistributed through the government.

BP and partners are increasing Rumaila’s output and the targeted 10% increase by the end of November should be met. Iraq is also beginning to reconnect with the rest of the world. The end of October’s auction of gas fields was quite a disaster, with the provinces where the fields are located all opposing the move and threatening to refuse cooperation to the developers. The provincial authorities wanted to be consulted and most importantly wanted to be guaranteed a share of the benefits, a clear indicator of distrust in the central government and the residual fact that money and ‘who gets what’ was always going to be the key in such a situation.

The government went ahead regardless and eventually the winners were Kuwait Energy Co, Turkiye Perolleri AO and Korea Gas Corp. For the Mansouriya and Siba gas fields. Korea Gas and Kazakhstan’s state fuel producer, KazMunaiGaz National Co won instead the bid for the Akkas gas field. The authorities of Anbar’s province have proved particularly resilient and Baghdad was forced to start negotiations with them, at the request of the developers themselves.

The current IMF forecast for Iraqi GDP growth is a modest 2.6%, although rising oil prices are expected to land Iraq with a 11.1% growth next year. Inflation is estimated at around 5%, a rate expected to remain about the same next year. In November direct commercial flights with Europe were finally re-established, although the largest airlines still stay away from Iraq.

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