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Update No: 082 - (25/01/10)

More tension over elections
Many, particularly among the Arab Sunnis, have seen the attempt to exclude from the forthcoming elections candidates with past links to the Baath party as a manoeuvre to weaken the opposition and particularly the Sunni opposition; in reality most of those excluded from the race are Shiites and the attempt seems instead to weaken the secularist opposition. Although candidates from Al-Maliki’s list have also been banned from running, the two main secularist alliances have fared much worse. Al-Maliki would have had little to gain if the Sunni former Baathists were to lose ground to the Sunni fundamentalists. In any case this new attempt to manipulate the electoral result has revived the tension, which had seemed to be easing after the approval of the electoral law and the deal with the Kurds.
On the other hand some progress is finally being made with regard to dealing with the militias of the Sons of Iraq and reintegrate them; according to the Iraqi government, about 50% have got jobs and the remaining 50% should get reintegrated by June. The reintegration of about 20% of them into the armed forces is still a source of controversy. Despite the predominance of Shiites in the armed forces, there are still fears that officers with a background in the Baath party could attempt to stage a coup in the future, maybe exploiting the precarious political balance in the country.

Maliki re-establishes relations with Kurds
The relationship between Al Maliki and the Kurds has been showing some signs of improvement in January. The Kurdish regional government has announced the formation of a united militia force, through the merger of the party militias of the two main groups, KDP and KPU. The announcements has caused irritation among many Arabs and concern among observers, who fear that the consolidation of the Kurdish militias could cause a reaction among other groups and therefore to the re-emergence of militias elsewhere. However, Al Maliki has been this time muted in his reaction and it is believed that he is preparing to recognise the newly unified Kurdish force. In exchange, the Kurdish Regional Government would release taxes and customs collected locally and hand them over to Baghdad. The real rationale behind the deal would be to secure Kurdish support to Al Maliki after the March parliamentary elections. Al-Maliki anti-Kurdish sentiment has been muted by his failure to secure a wide alliance behind him to confront the electoral challenge; his growing isolation is forcing him to compromise. This is leading to renewed talks over the sharing of the oil rents deriving from the northern fields; the Kurdish Regional Government has advanced new proposals which some believe could lead to a breakthrough.

The Angolans get their share
The continuing insecurity in some arts of the country is creating opportunities for upstart oil investors, who have little or no experience of working outside their own country. One such example is Angola’s Sonangol, which has just signed two contracts for fields located in Nineveh province, probably the worst one in Iraq right now. The agreed fee (US$5-6 per barrel) is one of the highest granted by the Iraqis in the recent rounds of bidding, a fact that reflect the greater risk.
On the economic front positive news continue to come up; inflation is declining fast and is now just above 6%. The central bank reacted to the easing inflationary threat by reducing the official interest rate to 7% from the previous 9%.

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