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Update No: 105 - (26/01/12)

Life without the Americans
American influence in Iraq is evaporating quickly: even Allawi, their favourite, now talks of ‘American failure’ and of regretting having placed his trust in Washington. With the completion of American withdrawal in December, the Iraqis face the challenge of having to sort out their internal problems without any powerful mediator to strong-arm them into coalition making. That, of course, had to happen one day if Iraq was to fully resume its independent status, but many wonder whether Iraq is ready.

In fact, as the withdrawal neared, the ruling coalition already started fraying, as Prime Minister Maliki accentuated his centralist tendencies, without which he and his supporters think the country could implode. He wields his control over the security agencies to exercise pressure on his ‘allies’; he started by having two bodyguards of Vice President Tariq al-Hashemi, a member of Allawi’s party, arrested on charge of being involved in murders. During December Maliki’s main rival, Allawi’s Iraqiya party, threatened louder and louder to abandon the coalition, which it actually did on 19 December. It is also implicitly threatening to split the country, with provincial councils controlled by Iraqiya declaring autonomy from Baghdad, one after the other.

In November it was Salahuddin, in December Diyala. Ominously, in Diyala the Kurds supported Iraqiya’s move, despite their lack of love for Arab Sunnis; they seized the opportunity to send a message to Maliki. Maliki reacted by arresting more and more members of Iraqiya and even issued an arrest warrant for Al Hashemi himself. Maliki also refused to collaborate with his critics within the government. Maliki as well tried to exploit fissures within Iraqiya, which in fact had to fire six of its MPs who refused to join its boycott of parliament.

While tension between Maliki and the Kurdish coalition was rising fast last year, the main axis of conflict is now between Iraqiya and Maliki’s State of Law; and also with the Kurdish region, after Maliki ordered Al Hashemi's arrest. Iraqiya vice president Hashemi took refuge in the Kurdish region. The Kurdish regional government has so far refused to hand him over, yet are trying to play a moderating role.

Life with the Saudis and the Iranians
To further complicate things, meddling by Iranians and Saudis, as well as others, is on the rise to fill the vacuum left by the Americans, and is currently filled by almost universal distrust. The Saudis distrust both Washington, whose intention they believe was to create an alternative pillar of its Middle Eastern politics in Iraq, to reduce dependency on Saudi Arabia, and Maliki, whom they view as an Iranian agent. Saudi support and encouragement for Allawi is increasingly obvious. The Saudis also wield the card of Iraq’s US$20 billion debt with the Kingdom, which they refuse to cancel (like most other countries have done) as long as Maliki is Prime Minister. Saudi Arabia also uses its diplomatic weight in the region to keep Iraq out of the Gulf Cooperation Council, in fact humiliating it with the inclusion of Jordan and Morocco, which are well away from the Gulf. There are also indications that Saudi Arabia is backing up Kuwait’s unwillingness to discuss its disputes with Iraq.

Playing with fire
The American withdrawal has been promptly followed by a resumption of attacks on oil pipelines. In December, oil exports had increased by 1.9% to 2.175 million bpd, while production reached 2.705 million bpd. Further increases in exports might be jeopardised if the government cannot safeguard the pipelines effectively. Attacks on civilians, particularly Shiites, also resumed on a large scale. Clearly, the terrorist groups are hoping to exploit Maliki’s crackdown to reignite the insurgency. Maliki seems to think that he can crush them together with Iraqiya’s hard core, and co-opt the rest. Perhaps his gamble will pay off and Maliki will emerge as the Middle East’s first authoritarian leader after the Arab Spring trend. If not, Iraq might fall back into civil war.

Forecast 2012
While the Iraqi currency has been losing ground to the dollar in early 2012 because of the smuggling of greenbacks into Syria and Iran (which suffer from international sanctions), the overall economic prospects of Iraq remain positive as oil production increases albeit slowly and oil prices remain high. The Iraqi government plans to continue spending in excess of its revenue, but it expects its budget deficit to come down to 11% in 2012 compared to the 14% it reached in 2011. The IMF projects a 12.6% GDP growth for Iraq in 2012, with inflation remaining at a relatively modest 5%.

The government forecasts that oil production will rise to 3.4 million barrels of oil a day in 2012 and will exceed 4 million barrels a day in 2014. During 2012 three new mooring facilities will enter service off Iraq’s southern coast, each adding 850,000 bpd to the country’s export capacity. Whether these targets are achievable will also depend on the government’s ability to secure the pipelines. Indeed political stability is once again the biggest question mark for Iraq in 2012. Prime Minister Maliki seems determined to assert his control and move towards greater centralisation. It might well succeed, as his adversaries are divided internally and their ranks are full of opportunists who might decide to switch sides and join Maliki, while he marginalises the main political rivals. However, almost everybody outside Maliki’s own party and even some within it, fear his rise to autocracy. He will face serious obstacles to consolidate his hold and might have to get through a new civil war. The attitude of the Kurds might be decisive: they fear Maliki’s centralism as much as anybody else, but are not ready for the final confrontation with him because the regional environment is not conducive to enhanced Kurdish autonomy, not to speak of an independent Kurdish state.

If Maliki mishandles the situation, Iraq might become the battlefield of regional hegemons. The Saudis could see the opportunity to roll back Iranian influence, already weakened by the crisis of their Syrian ally. The Iranians will not let their gains in Iraq go without a bitter fight, the more so as their international isolation has been growing.

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