Analysis Development Political impasse overshadows oil bonanza By David Ignatius June 23, 2022 Reuters Iraq has lost billions of dollars of oil revenue to bribery and corruption Government yet to pass a federal budget this yearUnemployment and lack of utilities hamper economic progressKurdistan region’s vote in favour of independence adds to woes Precious time is slipping away in Iraq. Since parliamentary elections eight months ago, a political impasse has blocked any moves to deal with the country’s bundle of crises: the lack of access to basic services, insecurity, high unemployment and rampant corruption. The Sadrist Movement, which won the most seats in the October 2021 election, proposed the formation of a cross-sectarian national majority government – a deviation from Iraq’s norm. The Coordination Framework Alliance objected, and the two Shia parties struggled to reach a consensus because of their differences on core issues such as quotas for representation and the involvement of Iran-backed actors in the next government. Oil sector revs up to exploit higher pricesPower sector continues to generate headachesSweltering heatwave adds to power cuts miseryHow global brands can get on the road to Babylon Recent developments provided some hope, with both sides appearing to support the maintenance of the government led by Mustafa Al-Kadhimi, if only for passing legislation and ensuring the day-to-day business of governance is continued. However, this hope was swiftly extinguished when the Coordination Framework pressured the Federal Court into announcing that Al-Kadhimi’s government cannot issue executive decisions on the many challenges that are crippling Iraq, because they are outside its limited jurisdiction. Sadrist leader Muqtada Al-Sadr lashed back in a fiery speech in mid-May, accusing the alliance of obstructing the interests of the people. Six months into 2022 and the government has yet to pass a federal budget. This is despite monthly oil revenues reaching their highest levels since 1972 in March. In an attempt to break the stalemate, on June 12, the Sadrist bloc submitted letters of resignation withdrawing from the legislature. The consequences of this move have still to be determined. According to the constitution, the party with the next biggest number of seats should move forward, but the current government could also remain in place or a new election could be called. Mustafa Al-Kadhimi’s government has only a limited jurisdiction. Picture: Creative Commons Lack of trust Dhia Al-Asadi, an Iraqi politician who heads the Sadrist Al-Ahrar Bloc in parliament, told AGBI that the impasse was caused by “different wills, related to misunderstandings and the lack of trust between different parties”. He added: “In each scenario there might be some losers and some winners. “The framework would like to reach a consensus on the main issue, which is a government that is agreed upon by all participants, which is how we have organised the political system since 2003. “But the Sadrist side want to change this principle and have a majority national government that is instituted by Iraqis of all backgrounds. “The majority government is the solution for some people for the blockage and the problems that have affected the performance of successive governments since 2003.” Iranian influence The Coordination Framework Alliance is the parliamentary representative of the Hashd Al-Shabi, the conglomeration of Iran-backed militias backed by Iran. An attempt in 2017 to incorporate the militias into the governance structure following battles against Isis terrorists has backfired, with the Iraqi Interior Ministry enduring extensive Iranian influence since it was re-established. Kyle Orton, an independent geopolitical analyst, told AGBI: “The overriding problem is that the Iraqi government’s authority is quite limited at street level, despite some apparent progress in the last few years. “It is Iran’s militias that exert much de facto influence: they run their own illicit economic enterprises; critics of Iran’s influence are regularly assassinated, and the state has no mechanism for either preventing or punishing these things.” Even if the Sadrists can break the impasse and some form of political order returns to Baghdad, there is little hope that the next administration will successfully resolve the crises afflicting the country. Endemic corruption The main reason for this pessimism is clear: corruption. No one knows just how much money Iraq has lost to corruption – one government official estimated in 2016 that Baghdad had seen $300 billion lost since 2003 – but no experts have posited that it is less than $100 billion. “There was a darkly comic moment a few years ago when the head of the anti-corruption commission publicly said he had taken bribes,” Orton said. “There have been better and worse Iraqi prime ministers when it comes to corruption – not necessarily in terms of scale, but in the nature of it, the incentive structures and the degree to which it hampers state capacity.” Amid these corruption concerns and mounting political pressure, the country’s economic problems are expanding. Al-Asadi points to multiple crises – unemployment, a lack of water and electricity and other basic services. “All of these are related to the stability of the country. Without stability in politics, there will be no hope for progress in economic issues,” he said. If a government led by Muqtada Al-Sadr takes power, Orton does not expect the situation to improve: “One of Muqtada’s coalition partners, for example, would be Khamis Al-Khanjar, who has been sanctioned by the US Treasury for “misappropriation of state assets [and] corruption related to government contracts.” Iraq is economically stagnant and the public sector is bloated, with 77 percent of the state’s budget spent on salaries. The next government, whenever it is formed, is unlikely to take the destabilising step of slashing state jobs, so the country needs more cash to compensate for its poor appetite for reform. A statement made last month by the finance minister, Ali Allawi, that the country’s financial surplus could hit $40 billion by the end of 2022, thanks to the oil price spike and rising hydrocarbons exports, was warmly received across the country. But while these funds should provide a welcome boost to efforts to rebuild the worn-torn nation, corruption and political blockages are likely to stymie progress. The recent federal commission for integrity has been broadly accepted across the political spectrum as one step forward where everyone is accountable before the law, but the rot runs so deep that few expect corruption to be brought under control any time soon. As long as corruption and political deadlock remain, Iraq’s crises will go unresolved and ordinary people will continue to suffer. Kurdistan independence rally in Erbil Disputes distract Kurdistan region from independence goals In 2017, the Kurdistan region of Iraq organised a referendum that produced a huge mandate in favour of independence. Baghdad retaliated swiftly, launching a military conflict in which the Kurdistan Regional Government (KRG) lost 40 percent of its territory and much of its oil resources. The federal government has since continued to punish the region by attempting to take over its oil contracts. “The referendum was legal, the Iraqi government gives this right for any province to hold a referendum to decide on their fate,” a KRG official told AGBI. “After four years of war with Isis, we moved to decide on our fate. We have been in circles of war for decades, it has always been about chaos and conflict with the Kurdish people, people have been targeted, so it is right for us to decide on our fate.” More than 3 million voted in the referendum, with 92.7 percent supporting independence. The KRG official said the only surprising thing about the referendum was the reaction to it, which he blamed on a lack of dialogue and understanding between Baghdad and the Kurdish authorities in Erbil. The next test for the region will be parliamentary elections, originally due to take place in October but likely to be delayed by a dispute between the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP) over proposed changes to electoral laws. Political tensions have also flared over the region’s presidency, with the KDP putting forward its own candidate for the role. The president is typically proposed by a representative from the PUK under an internal power-sharing arrangement. Such infighting and internal disputes only serve to weaken cohesion within the Kurdistan region, setting back hopes of ever gaining independence.