Iraq Update: December 2010

End in Sight: Major Hurdles Cleared, Minor Hurdles Remain

For eight long months following the March parliamentary elections, the leaders of Iraq's four main political blocs failed to create a government. This delay, which earned Iraq the dubious distinction of a world record for the longest such duration, resulted from a predictably complex interaction of personal ambitions and enmities, clashing identity politics, and cold electoral calculus, and may well have continued unbroken were it not for a judicial order giving the Parliament 2 weeks to convene and nominate a prime minister.

Iraq's political leaders hashed out the details of a compromise in Erbil in the beginning of November, one which put Maliki back in the premiership and Talabani at the presidency, while giving the Speaker of the Parliament role to Osama al Nujayfi, a member of Iyad Allawi''s Iraqiyya list. Allawi himself had steadfastly insisted that the premiership should fall to him, and not without reason, given Iraqiyyah's 91 seats in Parliament put it ahead of any other political coalition. The compromise instead gave Allawi control over an as-yet-to-be formed body of oversight for strategic policies. However, in an episode of high political drama, the Parliament elected Talabani, who then nominated Maliki without addressing this new institution, placing Allawi's role in considerable jeopardy and causing him to walk out of the session followed by his fellow Iraqiyyah legislators. The Eid holiday provided a convenient intermission in order to let the dust settle and let Maliki form a government. The final act should move to resolve outstanding conflicts quickly so that Iraq can address the significant legislative issues it faces regarding oil, the status of Kirkuk, the telecommunications sector and others.

Maliki has emerged as the big winner in this process. After an election that left him with virtually no chance of retaining the premiership, he became the post's only viable candidate by virtue of both his shrewd advocacy as well as the inability of the Shi'a coalition — united primarily by it's opposition to him — to identify a suitable alternative. The clearest indication of Maliki's success, and indeed the turning of the tide for his political fortunes, was the Oct 1 decision of Moqtada al Sadr, until that point a bitter enemy of Maliki since his war on the Shi'a militias in Basra in 2008, to back him as their candidate. Allawi, on the other hand, has seen a precipitous decline. The top vote-getter overall, he finds himself now with notional control over an as-yet-to-be formed advisory council with no Constitutional basis.

One issue remains of paramount importance for Iraq's stability regardless of the changing fates of individual politicians: how to give Sunni Arabs a meaningful stake in Iraq's government. For much of Iraq's modern history, Sunni Arabs have enjoyed political power disproportionate to their numbers. Particularly as Iraq became more fiercely sectarian from 2004-2007, the advent of a Shi'a-dominated government stirred Sunni fears of their future in the new Iraq, fears that in some cases have fueled a persistent insurgency. Politicians on all sides have recognized that alienation of the Sunni Arab community from government will be severely detrimental for Iraq's stability. Allawi's secular Iraqiyyah list was the only coalition in the March elections with serious Sunni support, and while personal enmities may lead Iraq's major politicians to try to marginalize him, it will difficult for them to do so without also marginalizing them. Additionally, the apparent power sharing arrangement moves Iraq closer to a Lebanon-style consociational division of posts, an outcome which would be detrimental for Iraq's stability.

On the economic front, international investors are gaining greater appetite for Iraq. Some have hesitated to enter in light of the authority vacuum. With a clear timeline for a government formation and reasonable level of continuity stemming from Maliki's reappointment, investors should feel reassured as soon as the new government is seated. This of course depends on the government's ability to combat the sporadic but ongoing violence from terrorist groups.

However, economic development on other fronts has proceeded despite the lack of a government. The government has awarded dozens of projects this year under the auspices of the National Investment Commission's initiative to build 1 million middle-income housing units throughout the country. Gulftainer and the French firm CMA have won tenders to rehabilitate and operate container terminals at Iraq's Umm Qasr port. And Iraq's oil sector development is proceeding, with ENI and BP reporting progress in increasing the Zubair and Rumaila fields' production, respectively. Additionally, the Iraqi government has begun to seriously address its compromised oil infrastructure, which constrains its ability to increase oil output to the target of 12 million barrels per day. To this end they have contracted with Leighton Offshore to build a $733 million oil export facility, while Foster Wheeler has been tapped to build 4 single-point mooring terminals off Iraq's gulf coast.