Khan Bani Saad Prison, The Greatest Failure In America’s Reconstruction Of Iraq

The Special Inspector General for Iraq Reconstruction (SIGIR) called the Khan Bani Saad Prison in Diyala province, “The single greatest project failure in the U.S. reconstruction program [in Iraq].” Started in 2004 as part of a plan to fix the poor conditions and overcrowding in the prisons in the province, the Khan Bani Saad facility ran into one problem after another. The original contractor, Parsons Corporation, failed to meet its schedule, and left a partially built prison when the U.S. government ended its deal in June 2007. The job was then turned over to two Iraqi and one American firm that did just as bad a job before their contracts were terminated as well. What was left was an empty, multi-million dollar building that the Iraqis have never used.

The Kahn Bani Saad Prison, abandoned by the Iraqis and still half built in 2008 (AP)

The Khan Bani Saad Prison was one of many failures by the Parsons Corporation to fulfill its work in Iraq. Originally, the Coalition Provisional Authority (CPA) gave Parsons a contract to build several prisons in northern Iraq. In May 2004, the company signed a $72.9 million contract to construct Khan Bani Saad to hold 1,800 prisoners. The work was supposed to begin right away, and be finished by November 2005. Immediately, the project ran into trouble. First, Parsons didn’t get under way until November 2004, five months late. Second, there was poor security, and some very shoddy work. The firm missed its deadline, and then in June 2006, told the U.S. government that the prison would not be completed until September 2008, and cost an additional $13.5 million. That would make Khan Bani Saad over three years behind schedule. Parsons blamed a lack of security for its problems. In August 2005 for instance, its site manager was killed in his office. The Army Corps of Engineers, however, which was in charge of the contract, claimed that the company knew about its work environment before it signed the deal. The Corps said that Parsons only reported 76 days where it could not work, because of violence. An officer from the Corps also told the New York Times, that the firm’s September 2008 finish date was unrealistic, because it had stopped work in April 2006. As a result, Parsons’ contract with the Corps was cancelled. It charged Parsons with not following its schedule and running into huge cost overruns, both of which the U.S. stated were under the company’s control. At the time, the Army Corps of Engineers found that only 40% of the work had been finished. Still, the corporation was paid $31 million. At the same time, the company's $99.1 million contract to build prisons in northern Iraq was terminated as well. The previous month, it lost a $234 million deal to build and repair hospitals and health clinics too. In total, Parsons received $333 million for its reconstruction work. $142 million of that was for projects like Kahn Bani Saad, which had been cut or cancelled. The Special Inspector General for Iraq Reconstruction found almost all of Parsons’ work to be over budget, late, and shoddy. The Kahn Bani Saad Prison was not only symbolic of how poorly it did in Iraq, but of many other companies that signed huge deals to rebuild the country, but failed to deliver.

The United States was not done with the prison however. In September 2006, it gave out three new work orders; two to Iraqi companies, and one to an American one to finish the job Parsons had failed to do. Those were worth $44 million. In May 2007, an engineering assessment was done of their work. It found that the facility was still only partially completed, and what was done was of poor quality. That led the U.S. to terminate the contracts. The next month, the site was permanently shut down. Only 52% of the prison was done. The follow up companies proved just as bad as Parsons had been. The construction was still not up to par, and most importantly Kahn Bani Saad was not finished three years after the initial deal was signed.

That was not the end of the fiasco the prison had become. On August 1, 2007, the partially completed facility was turned over to the Iraqi government. The Deputy Minister of Justice refused to accept it. He said that his Ministry had no plans to complete or use it. At the same time, $1.2 million in material, such as fencing, gravel, pipes, etc., were left at the site unguarded. The Iraqis seemed to know what the Americans were not willing to accept, Kahn Bani Saad had turned into a running joke. No matter what the U.S. tried to do with it, the prison was a failure. The Iraqis were right not to take it since it would still take millions to finish, and what was done, was pretty much unusable anyway.

In June 2008, members of the Special Inspector General for Iraq Reconstruction visited Kahn Bani Saad. It found no one at the site since the Iraqis refused the prison. As a result, most of the $1.2 million in material left behind was missing. The following SIGIR audit found that some of the building was done so poorly that demolition was the only solution. It believed that the prison could never be used as a result. Iraqis seemed to agree. Local officials in Diyala didn’t know what to do with the empty prison, and didn’t think it could be repurposed. At the same time, Parsons was ranked the worst contractor out of seven the Inspector General had investigated. It called Kahn Bani Saad the biggest waste of money the U.S. had made in its attempt to rebuild Iraq.

Kahn Bani Saad is a perfect example of the problems that the United States ran into trying to reconstruction Iraq. The Americans came up with plans for expanding Diyala’s prisons without consulting Iraqis. They contracted an American company that appeared completely out of its element. Not only that, it did a sorry job. When its deal was terminated, three more firms were brought in who did no better. What was left was a scar on the landscape. A huge, unfinished prison that cost tens of millions of dollars that could never be used. Too many projects ended up like Kahn Bani Saad. The U.S. failed at planning for post-war Iraq before the 2003 invasion. Afterward, there was a lack of coordination between the various government agencies that were supposed to carry out the reconstruction effort, not to mention little consultation with Iraqis over what they wanted and needed. The result was an overall failure to put Iraq back together again, the repercussions of which are still being felt to this day.

SOURCES

CBS News, “Empty Iraq Prison A “Monument” To Waste,” 2/11/09

Glanz, James, “Army Cancels Contract for Iraqi Prison,” New York Times, 6/20/06

Puzzanghera, Jim and Spiegel, Peter, “Audit details contract failures,” Los Angeles Times, 7/29/08

Special Inspector General for Iraq Reconstruction, Hard Lessons, 1/22/09

- “Kahn Bani Saad Correctional Facility Kahn Bani Saad, Iraq,” 6/25/08

Will A Prince Or A Villain Emerge In Iraq? Review Of Kenneth Pollack’s New Article On Machiavelli’s Lessons For Iraqi Politics

Kenneth Pollack is a longtime analyst and commentator on Iraq who works for the Saban Center at the Brookings Institution. His latest article in The National Interest, “Reading Machiavelli in Iraq,” compares the writings of Niccolo Machiavelli on 16^th Century Italian city-states, and the current situation in Iraq. He makes a good comparison between the two, pointing out that Machiavelli’s Florence was a budding democracy with deep internal divisions, surrounded by a combination of weak and powerful states. Machiavelli noted that in those types of situations, leaders often act out of fear, and make bad decisions that make things worse, because there are no strong institutions to keep them in check. That’s similar to Iraq, which is split along political, ethnic, and religious lines, and lies in the heart of the Middle East with all of its rivalries. It’s also comparable to Prime Minister Nouri al-Maliki whose recent actions are leading to accusations that he is becoming an autocrat. Pollack wonders whether Iraq can pull itself out of this quandary, which is the question of the day for Iraq watchers.

Premier Maliki sees himself strengthening the state to save the country from the chaos it has faced since the 2003 invasion, while his opponents see those moves as heading towards autocracy (BBC)

In Machiavelli’s The Prince and Discourses on the First Ten Books of Titus Livy, he outlined the good and bad sides of politics. In The Prince, he wrote that in weak states politicians often see things in zero sum terms, and resort to subterfuge, because they fear their rivals so much. He called for a prince to emerge that would save the system from its troubles. In Discourses on the First Ten Books of Titus Livy, he pointed to ancient Rome as a model for how a republic can be created and maintained. Kenneth Pollack uses these two examples to help explain the current situation in Iraq. There, external threats and internal divisions could undermine the nation’s developing democracy. Iraq’s elite are very similar to those in Machiavelli’s Florence. There is deep distrust between all of Iraq’s major parties as shown by the repeated controversies since the 2010 election. First, Prime Minister Nouri al-Maliki got the courts to rule that any party that could put together the most seats in parliament after the voting was done, rather than before as had been done previously, could form a new government. Then, he failed to follow through with the Irbil agreement, which put together the ruling coalition. That led to a no confidence vote by the Iraqi National Movement (INM), the Kurdish Coalition, and the Sadrists, and a boycott of the legislature and cabinet by the INM. The premier was able to withstand all of this, and came out on top each time due to the deep divisions amongst his rivals. At the same time, he has tried to centralize power in his hands, by appointing commanders within the security forces, and gain control over government agencies such as the Election Commission, the anti-corruption Integrity Commission, and the Central Bank of Iraq. That has all led to Maliki’s opponents to call him a dictator, and to compare him to Saddam Hussein. Now that Maliki has emerged as the victor with no real threat to his power, Pollack believes this would be the time for him to reach out to the other parties, and make concessions to assure them that their fears about him are unfounded. Instead, the prime minister’s conspiratorial mind leads him in the opposite direction. He doesn’t want to show any weakness, and always seems to see plots against him. Because Iraq has a new political system put together by the Americans after the 2003 invasion, its institutions are weak, and there are no real checks and balances that would limit Maliki. Instead, he is systematically undermining the government’s independence, because he believes that a strong hand is needed after the years of chaos the country went through. That is leading the other lists to turn to outside countries for support such as Iran, Turkey, Saudi Arabia, and the other Gulf States, which in turn only increases Maliki’s suspicions of their intentions. In an ideal situation, the prime minister could be taking the high road, and becoming the prince that Machiavelli called for, and be thinking about the future as he wrote in Discourses on the First Ten Books of Titus Livy. Instead, Iraqi politics are likely to continue down the dysfunctional path that they have been following for the last several years, going from crisis to crisis as no one appears to be above the fray.

In a strong government, institutions are what maintain stability, and that is what is lacking in Iraq. No matter who is in office, the various agencies, courts, etc. remain after them. Pollack made a good observation that it is not Maliki personally that is the problem, but the lack of those types of pillars in Iraq that allows the prime minister to do what he’s been doing over the last few years. If another person were in power for example, they would probably be doing the same, because other bodies such as the parliament have largely abdicated their oversight of the government. Where Pollack goes wrong is his constant argument that a U.S. military presence would have helped Iraq down the right road. Since the Obama administration seems to follow the Bush administration in seeing Iraq largely in ethnosectarian terms, it would continue to cause just as many problems as it tried to solve. It also ignores the growing Iraqi nationalism, which would not allow a continued foreign presence in the country after eight years of occupation. Today, Iraq is in a precarious situation. The level of mistrust amongst the elite is growing, foreign interference is increasing, and politics is mired in one crisis after another. Rather than a prince emerging to save the state as Machiavelli called for in Florence almost 500 years ago, Iraq seems to be mimicking its post-independence period when the premier was largely able to do what he wanted by playing off his rivals, and forming loose alliances with the possibility that he could become a strong man like the dictators that followed that time.

SOURCES

Hanna, Michael, Wahid, “How much do they hate Maliki?” Middle East Channel, Foreign Policy, 3/26/10

International Crisis Group, “Iraq’s Secular Opposition: The Rise and Decline of Al-Iraqiya,” 7/31/12

Kenneth Pollack, “Reading Machiavelli in Iraq,” The National Interest, Nov-Dec 2012

Wicken, Stephen, “The Hashemi Verdict and the Health of Democracy In Iraq,” Institute for the Study of War,” 9/11/12

Two New Studies Point To Worsening Health Situation In Iraq’s Fallujah

The September 2012 issue of the journal Health had two articles about the medical situation in Iraq’s Fallujah in Anbar province. One was about infant mortality rates, “Perinatal and neonatal mortality in Fallujah General Hospital, Fallujah City, Anbar Province, west of Iraq,” and the other was on cancer, “Incidence of cancer in Fallujah above 10 years age with over view of common cancers in 2011.” The two papers both found a worsening health situation in the city. A likely culprit could be the U.S. invasion and the intense fighting that took place in Fallujah. However, the reports were very circumspect to point blame in that direction. “Incidence of cancer” for instance, believed that the increased cases found in the study could be because of better diagnosis, reporting, and changes in population, although the military operations could be a cause as well. Likewise, “Perinatal and neonatal mortality in Fallujah General Hospital” thought the decade long sanctions deprived Iraq of the necessary medical equipment and money to maintain the country’s health system. Whatever the speculation may be, both pieces found more cancer and infant mortality rates in Fallujah since 2003, which is troubling enough trends even if the root reason for them remains unclear.

(Wikipedia)

“Incidence of cancer in Fallujah above 10 years age with over view of common cancers in 2011” found higher rates of the disease in the city than in the rest of Iraq, and neighboring countries. The study looked at all cases of cancer from January 1 to December 31, 2011 in Fallujah and three of its sub-districts, excluding leukemia. This was the first look at the disease in the city since the 2003 invasion. It got its data from the Fallujah General Hospital, Al-Janabi Hospital, Amyrea Hospital, private health centers in downtown Fallujah and three sub-districts, a histopathology lab, private clinics, and the oncology center in Ramadi. Of the approximate 600,000 people in those four areas, the report found cancer in 27.2% of them. That broke down to an incident rate of 96 per 100,000 overall, with 92.6 for men and 99.4 for women. Fallujah city center had the largest amount of cases at 128 per 100,000, with the western district of Saqlawiya second at 82. The lowest rate was found in the eastern district of Karmah at 50 per 100,000. The two most common forms of the disease reported were breast and lung cancer. The overall rate of 96 per 100,000 was three times higher than that reported for the city in 2002, which was 34.5 per 100,000. It was also higher than the rate for all of Iraq at that time, 63 per 100,000. The same was true when comparing Fallujah to some other countries in the region. In Qatar for instance, the cancer rate was 63.1 per 100,000, 67.2 in Jordan, and 71.7 in Saudi Arabia. Only Iran, at 98 per 100,000 for females, and 103 for males was worse. The study speculated on many possible reasons for why such a high cancer rate was found in the city. The first was the two Battles of Fallujah, which took place in 2004. The authors thought that might be why there were much higher rates in the central area of the city, then in its sub-districts. At the same time, there were many other possibilities. Those included better diagnosis, improved reporting, and changes in the population. With the paper only focusing upon the cases of cancer reported, no direct correlation could be made with any of those causes.

Cancer Rates In Fallujah And 3 Sub-Districts 2011

Central Fallujah 128 per 100,000

Saqlawiya 82 per 100,000

Amyrea 66 per 100,000

Karmah 50 per 100,000

Overall 96 per 100,000

Cancer Rates In Fallujah vs Selected Middle Eastern Countries

Fallujah 96 per 100,000

Iran 100.5 per 100,000

Saudi Arabia 71.7 per 100,000

Jordan 67.2 per 100,000

Qatar 63.1 per 100,000

“Perinatal and neonatal mortality in Fallujah General Hospital, Fallujah City, Anbar Province, west of Iraq” wanted to determine the state of Fallujah’s health services after the U.S. occupation by looking at infant mortality rates. It looked at data collected at the Fallujah General Hospital’s intensive care unit from January 1 to December 31, 2010. The study included 290 neonatal deaths and 64 stillbirths. Those established a perinatal mortality rate of 50.3 per 1,000 live births, and a neonatal mortality rate of 41.5 per 1,000 live births. The latter was lower than the rate reported by the hospital from 2007-2009, which was 57.3, but higher than the national rate in 2009 of 23 per 1,000 live births. Fallujah’s neonatal mortality rate was also considerably higher than several neighboring countries including Qatar, 4 per 1,000, the United Arab Emirates, 5 per 1,000, Kuwait and Bahrain, 6 per 1,000, Oman, 7 per 1,000, Lebanon, 8 per 1,000, Libya, 9 per 1,000, Tunisia and Saudi Arabia, 12 per 1,000, Jordan and Egypt, 13 per 1,000, Iran, 19 per 1,000, Morocco, 23 per 1,000, Yemen, 32 per 1,000, and Djibouti, 35 per 1,000. Only Sudan at 41 per 1,000 was close. What troubled the authors was that Fallujah General Hospital is one of the best in Anbar, and is known for its equipment and staff. Despite that, it still had a very poor record of taking care of pregnant mothers. In Europe and America, infant mortality rates have gone down, because of better technology and treatments. The paper believed that the international sanctions imposed on Iraq in 1990 for its invasion of Kuwait, and the eight-year occupation by the United States caused a decline in the country’s health services. Those two events deprived the country of the advances that occurred in Europe and America, and can now be seen in many nations in the region. What the authors advocated for was more spending on Iraq’s health care services, so that it could make up for what it lost over the last twenty years.

Neonatal Mortality Rate Fallujah vs Selected Regional Countries

Fallujah 41.5 per 1,000 live births

Sudan 41 per 1,000 live births

Djibouti 35 per 1,000 live births

Yemen 32 per 1,000 live births

Morocco 23 per 1,000 live births

Iran 19 per 1,000 live births

Egypt 13 per 1,000 live births

Jordan 13 per 1,000 live births

Saudi Arabia 12 per 1,000 live births

Tunisia 12 per 1,000 live births

Libya 9 per 1,000 live births

Lebanon 8 per 1,000 live births

Oman 7 per 1,000 live births

Bahrain 6 per 1,000 live births

Kuwait 6 per 1,000 live births

UAE 5 per 1,000 live births

Qatar 4 per 1,000 live births

These two papers were important to add scientific data to Fallujah’s health situation. The city has been the focus of many news reports for its poor state of affairs, but they were mostly based upon anecdotal stories. These studies add specific data to that more general picture. They found large numbers of cancer cases and infant mortalities, which were above many other countries in the Middle East and North Africa. Those were disturbing figures. The causes were pure speculation, because there was no attempt to make a direct correlation between any included in the papers. Many articles have pointed the finger at the two Battles of Fallujah in 2004. Those could very well be the reasons why health has deteriorated in the city, but there are other possibilities as well. The cancer report for instance, pointed to a decline in spending for health services that occurred in the last twenty years, while the mortality rate paper also pointed to better reporting and diagnosis. Further studies will have to be made before a clearer picture emerges of what has led Fallujah to have such poor health conditions.

SOURCES

Abdul Ghani, Samira T., Sirhan, Yaseen Taha, Lawas, Abdul Sattar Kadhem, “Perinatal and neonatal mortality in Fallujah General Hospital, Fallujah City, Anbar Province, west of Iraq,” Health, September 2012

Al-Faluji, Abdul Wahab A.R., Ali, Salih Hussein, Al-Esawi, Arkan A. Jasem, “Incidence of cancer in Fallujah above 10 years age with over view of common cancers in 2011,” Health, September 2012

DEUTSCHE BANK GROUP VIDEO: The Building Of The Baghdad Railway

New Health Study On Birth Defects In Iraq’s Basra And Fallujah

For several years now there have been sporadic reports about the health affects of the U.S. and British military operations in Iraq. Most of these reports have focused upon the city of Fallujah in Anbar province, which witnessed two large battles in 2004. The articles usually involved interviews with doctors and patients who witnessed birth defects since the 2003 invasion, and blamed munitions used against insurgents as the cause. In September 2012, a paper was released, “Metal Contamination and the Epidemic of Congenital Birth Defects in Iraqi Cities” in the journal Bulletin of Environmental Contamination and Toxicology, which did a scientific study of that issue in both Fallujah and Basra. It found high levels of toxic metals in both infant patients and their parents in the two cities, and tried to relate that to the fighting that occurred there. While no direct correlation was made, it provided greater evidence that the health of Iraqis has been affected by the war then the previous news reports did, which were usually based upon anecdotal stories.

The article in the Bulletin of Environment Contamination and Toxicology included two separate studies of the levels of toxic metals found in hospitals in Fallujah and Basra. One involved 56 families who went to the Fallujah General Hospital in Anbar province in 2010. It focused upon hair samples and birth defects amongst those families. It found high levels of lead and mercury, which are neurotoxins, amongst families that suffered birth defects. Lead was five times higher in their hair samples, and mercury was six times higher. The Basra data came from two separate time periods, and relied upon the records of the Al Basra Maternity Hospital. First, an article, “Incidents of Congenital Fetal Anomaly in Al Basra Maternity Hospital” from 1997 was consulted. That covered patients at the hospital from October 1994 to October 1995. It found 1.37 birth defects per 1,000 live births amongst the families studied. That set a pre-2003 control group, which would be compared to patients who visited afterward. The number of birth defects reported at the hospital skyrocketed after the U.S. invasion. In 2003, there were 23 per 1,000 live births, followed by 34 in 2004, 34 in 2005, 44 in 2006, 45 in 2007, 35 in 2008, peaking at 48 in 2009, followed by 29 in 2010, and 37 in 2011. That was an average of 36.5 birth defects per 1,000 live births for that nine-year period. That was 3.5 times higher than the world average of birth defects, and obviously a dramatic jump from the 1994-1995 levels. Again, high levels of toxic metals were found in hair and nail samples amongst the families included in the study that had birth defects. Obviously, a connection was made between the high levels of lead and mercury found amongst those studied and the large number of birth defects that the families suffered. Exposure to those types of metals can lead to miscarriages, birth defects, and infertility. It was also shown that the number of problems with births took off in Basra after the 2003 invasion as compared to the 1990s. Where the study did not provide a direct correlation was the cause of these troubles. Lead and mercury are common ingredients in bullets, and other munitions. However, there are no public records about how many of those armaments or what kinds the U.S. and British used in the fighting in Fallujah and Basra. It can only be speculated then, that the increased toxic metal levels are due to the military operations that occurred, rather than providing direct proof.

“Metal Contamination and the Epidemic of Congenital Birth Defects in Iraqi Cities” provided good, scientific evidence that there have been dramatic increases in birth defects in some of Iraq’s cities. Those families that suffered those problems also had high levels of lead and mercury in their bodies, which were the likely causes. What the paper did not prove was whether the increased amounts of neurotoxins were because of the Iraq War. Speculation would obviously point to the fighting as the cause, but further study needs to be done to make a direct correlation. Unfortunately for Iraq, cities like Basra and Fallujah are finding more and more cases of birth problems, but lack the medical staff and health funding to adequately treat them, let alone try to clean up those areas to prevent them from happening in the future. That means toxicity and birth defects are likely to continue at these aggravated levels.

SOURCES

Al-Sabback, M., Ali, S. Sadid, Savabi, O., Savabi, G., Dastgiri, S., Savabieasfahani, M., “Metal Contamination and the Epidemic of Congenital Birth Defects in Iraqi Cities,” Bulletin of Environmental Contamination and Toxicology, 9/16/12

Iraq’s Kurdistan Sends Delegations To Talk With Baghdad About Disputes, But Brings Up Divisions Within Regional Government

In the last month or two there have been several high-level meetings between representatives of Iraq’s central and Kurdish regional governments. Most recently oil officials from Baghdad and Kurdistan met, while a delegation from the Kurdish ruling parties and the Kurdistan Regional Government (KRG) travelled to Baghdad to consult with Prime Minister Nouri al-Maliki, amongst others. That might give the impression that progress is being made in mediating the major disputes between the two sides. In actuality neither side has budged on the substantive issues, and there are differences within the KRG as well about how these negotiations should be conducted.

In September and October 2012, there were four meetings between Baghdad and Kurdish politicians to discuss the on-going problems they have with each other. Deputy secretary general of the Patriotic Union of Kurdistan (PUK) Barham Saleh and the deputy KRG Prime Minister Imad Ahmed representing the ruling Kurdish parties and the regional government respectively headed  two separate delegations. They met with Iraqi President Jalal Talabani, the Sadrist bloc in parliament, Prime Minister Nouri al-Maliki, and others. On the same day, October 21, there was also a conference between KRG Natural Resource Minister Ashti Hawrami, Deputy Premier Rowsch Nouri al-Shaways of the Kurdistan Democratic Party (KDP), and Deputy Premier Hussein al-Shahristani of State of Law who is in charge of the country’s energy policy. Likewise, in September, Premier Maliki travelled to Sulaymaniya to meet with President Talabani after he returned from three months of medical treatment in Germany. The Kurds wanted to go over the Irbil Agreement, which put the current ruling coalition together after the 2010 election, the 19 points that the ruling Kurdish parties had Maliki sign in return for their support for his second term in office, the Tigris Operations Command, which has just been formed in Tamim, Salahaddin, and Diyala provinces, and the oil industry. These are some of the outstanding issues the KDP and PUK have with the central government. Baghdad for example, has called all of the oil deals the Kurdistan Regional Government has signed illegal, because it wants control over the country’s resources. This has complicated attempts to pass a new oil and gas bill as well as the Kurds’ desire to export their petroleum. Likewise, Kurdish President Massoud Barzani has become increasingly upset with the lack of power sharing within the government, feeling that the prime minister has tried to concentrate power in his hands. Finally, the ruling parties in the KRG are alarmed that Maliki recently created a new security command that covers some of the disputed territories in Iraq, which they hope to eventually annex. All of these issues have their antecedents in the struggle over the direction Iraq should take since the fall of Saddam Hussein. Maliki on the one hand, feels like he has to take a strong hand to keep the country together after all the chaos that beset it following the 2003 invasion. In contrast, the KDP and PUK have been pushing for greater autonomy for the Kurdish region, and feel that a strong government like that which the prime minister hopes for will be an impediment to their cause. While these get togethers may seem like the two sides are at least talking with each other to resolve some of these differences, nothing has changed the current stalemate. In the zero sum game that these officials view Iraqi politics there is little room to compromise, especially on matters that are so important such as the country’s oil and gas reserves.

At the same time, the Kurdish delegations have highlighted the continuing differences within the KRG. A statement by the Kurdish Coalition in parliament said that the Saleh-Shaways groups stood for all the Kurdish parties. In fact, it only represented the PUK and KDP. Before the parties arrived in Baghdad, there was a meeting with President Barzani to go over their itineraries. The Change List did not attend, and later criticized the delegations as being partisan. That’s because Change and the two Kurdish Islamic parties, have been calling for a national strategy for the Kurds formed by consensus amongst all of the KRG entities. This is in part, because the opposition has said that the ruling parties only represent their own agendas when holding meetings with Baghdad. This points to the fact that within Kurdistan there is a power struggle going on as well. The PUK and KDP have run the region since the 1990s, and therefore consider themselves the representatives of the Kurds. They have been very jealous of holding onto their positions, and therefore resent the demands and attacks made by the opposition. President Barzani especially, tends to act unilaterally, and expects the other parties to fall in line behind him. The opposition parties are not always willing to heed him, and want a real say in Kurdish policy vis-à-vis the central government.

Iraq’s political parties have been battling for power even before the 2010 parliamentary elections happened. Many of the arguments that the KDP and PUK have with Maliki even predate that. The recent meetings between the two sides are all part of this on-going soap opera. They will not be the last as Baghdad and Irbil always have time to talk. The question is whether anything will come of them. This also brings up the Kurdish opposition parties, as they would like to be involved in the discussions as well. Maliki and the KRG have been unwilling to budge from their positions. Likewise, the ruling Kurdish parties have not been willing to take the opposition in Kurdistan that seriously when it comes to dealing with the central government. Things remain stalemated as a result, and will likely take many years, and perhaps a change in leadership in both central and northern Iraq before any real change will come about.

SOURCES

Abdul-Rahman, Mohammed, “Barzani warns Kurds not ready to live under “dictatorship,”” AK News, 9/22/12

Aswat al-Iraq, “Baghdad plans “dangerous and frightening” Nijrvan Barzani,” 10/21/12

Brusk, Raman, “Gorran MP not optimistic about Talabani’s solutions for Iraqi cities,” AK News, 9/22/12

Francis, Bassem, “Kurds Head for Baghdad Talks As ‘Final Attempt’ to End Conflict,” Al-Hayat, 10/18/12

Mackey, Peg and Garnder, Timothy, “Exxon seeks to quit flagship Iraq oil project,” Reuters, 10/18/12

National Iraqi News Agency, “BREAKING NEWS Kurdish delegations meets with Sadrist Trend’s Political Body,” 10/22/12

- “Kurdish official delegation leaves Baghdad,” 10/23/12

- “Kurdistan’s Deputy Prime Minister to heads delegation to Baghdad,” 10/18/12

- “Maliki meets Kurdish delegation,” 10/22/12

- “Shahristani, Shaways and Hawrami discuss point of views relating to oil,” 10/22/12

- “Talabani meets with Kurdish delegation, stresses necessity to present demand within their Iraqi fram,” 10/22/12

Radio Nawa, “MDC: Kurdistan delegation to Baghdad represents the ruling parties and the representatives of other parties purely decorative,” 10/23/12

Rudaw, “PM Maliki and Other Iraqi Leaders Meet With Talabani in Sulaimani,” 9/21/12

More On Central Bank of Iraq Scandal

The October 2012 announcement that the governor of the Central Bank of Iraq Sinan Shabibi and several of his staff were facing arrest warrants came as a surprise to many. The initial stories said they were being charged with manipulating the value of the dinar, money laundering, fraud, and other illegal activities. Now it seems that the investigation only involves the first matter. Whenever something controversial happens in Iraq, politicians are quick to jump in, and make their own announcements about the matter before the official story comes out. That’s why the case against the Bank officials is still unclear, and is likely the result of political manipulation.

There was some initial confusion over what exactly Central Bank Governor Sinan Shabibi was being charged with. The Supreme Judicial Council issued warrants for Shabibi and 15 other bank officials on October 15. There were contradictory reports about what the head of the integrity committee in parliament, Sadrist Bahaa Hussein Ali Kamal Araji said about the charges against them. Agence France Presse for instance, said that Araji claimed that Shabibi had manipulated the value of the Iraqi currency, the dinar to lower its value. Shafaq News on the other hand, said that the governor had increased its value. A State of Law parliamentarian was cited in the Wall Street Journal that the bank officials were being investigated for the capital requirements the Central Bank made of private banks, fraud, and money laundering. The head of the integrity committee Araji denied all of those accusations. One member of the integrity committee told Al-Hayat that it had not looked into the matter at all, rather that it was done by a special group made up of Qusay Abdul Wahab Suhail, the Sadrist deputy speaker of parliament, Haidar Abadi of State of Law who is the head of the finance committee, Haitham al-Jabouri from State of Law, and one member of the Board of Supreme Audit, which is in charge of looking into the government’s finance. There are still some contradictory stories coming out about the matter. It does appear that Shabibi and his staff are only being looked at for manipulating the value of the dinar. Whether that’s for raising or lowering its price in relation to the dollar is still not clear. This is what happens during political crises in Iraq. All kinds of politicians chime in, and that leads to all the different versions of events. Many believe that Prime Minister Nouri al-Maliki is using the situation to get rid of Shabibi, which could be the reason why State of Law members have been quoted making the greatest accusation against the bank officials. 

The fact that Shabibi and the others are being accused of exploiting the value of the dinar is very suspicious since the Central Bank is widely considered to have saved the currency from a dramatic devaluation earlier in the year. Buying dollars is relatively easy at Iraqi money exchanges. Starting in December 2011, (1) the dinar started dropping in value as huge amounts of dollars started being bought up. Governor Shabibi told the press that demand for American currency had increased 40-50% at the beginning of 2012. The situation got so bad that the Central Bank was afraid there would be a run on the dinar, so it started vastly increasing the amount of dollars in circulation. Before, the Bank usually sold around $150 million a week to other banks. That suddenly jumped to $400 million. Many believed that Iran and Syria were involved, buying dollars in Iraq to make up for their shortage of hard currency due to sanctions. Shabibi responded by issuing new rules to tighten the dollar supply. That seemed to stabilize the dinar by the end of spring. Foreign experts believed that the actions of the Bank were commendable in this situation. Now it seems this series of events is at the heart of the charges against the governor and his staff. That only adds to the questions about the validity of the investigation. Again, because the premier has been known to oppose the Bank’s actions, he could just be using this situation to trump up charges to either get rid of Shabibi or intimidate him, so that he does not stand up to the prime minister in the future.

What exactly the case is against Governor Shabibi still seems to be in contention. The latest reports are focusing just upon the value of the dinar, but whether it’s increasing or decreasing it is not clear either. What is apparent is that the actions of the Central Bank were critical in stopping a run on the dinar vis-à-vis the dollar at the beginning of the year. A credible case can also be made for the fact that Prime Minister Nouri al-Maliki has attempted to take control of the Bank before, has opposed its plans to revalue the currency, and has wanted to replace Shabibi. The premier has been making a series of moves in the last year or two to take over all of the country’s independent institutions. The Central Bank could be just the latest example of Maliki’s political maneuverings to achieve this goal.

FOOTNOTES

1. Saleh, Khayoun Ahmed, “Per capita income in Iraq to reach $10,000 in 2015,” Azzaman, 1/4/12

SOURCES

Agence France Presse, “Iraq cabinet names interim central bank governor: spokesperson,” 10/16/12

Al-Ansary, Khalid and Razzouk, Nayla, “Iraq Deplores ‘Currency Attack’ as Dollars Flow to Syria, Iran,” Bloomberg, 1/12/12

Dagher, Sam and Nabhan, Ali, “Iraq Dismisses Central Bank Chief Amid Investigation,” Wall Street Journal, 10/16/12

Habib, Mustafa, “dinar woes: iraqi currency traders break Syria, iran sanctions,” Niqash, 5/17/12

Harissi, Mohamad Ali, “Iraqi dinar casualty of Iran, Syria sanctions,” Agence France Presse, 4/12/12

Hatem, Oudai, “Iraq Lawmakers See a Power Grab In Maliki Ouster of Central Banker,” Al-Hayat, 10/18/12

Kami, Aseel, “Iraq tries again to buoy dinar, stem dollar flight,” Reuters, 6/6/12

Kami, Aseel and Chaudhry, Serena, “Iraq dinar hit by fallout from sanctions next door,” Reuters, 4/15/12

Khallat, Khudr, “Battle against counterfeit gangs before change in currency,” AK News, 4/9/12

Muhammad, Barzan, “Erbil Currency Traders Lose Out as US Dollar Value Fluctuates,” Rudaw, 5/27/12

Peel, Michael, “Iraq bank moves to allay laundering fears,” Financial Times, 4/2/12

- “Iraq issues arrest warrant for bank governor,” Financial Times, 10/18/12

Sami, Zeena, “Central Bank fails to stem Iraqi dinar’s weakening vis-à-vis the dollar,” Azzaman, 4/17/12

- “Iraq expands ties with Iran,” Azzaman, 1/14/12

Saleh, Khayoun, “Deputy Premier warns against attempts to meddle in Iraqi Central Bank’s affairs,” Azzaman, 4/16/12

- “Iraq hard cash reserves exceed $60 billion,” Azzaman, 4/10/12

- “Per capita income in Iraq to reach $10,000 in 2015,” Azzaman, 1/4/12

Shafaq News, “Integrity committee reveals the reasons of dismissing al-Shabibi,” 10/17/12

Sowell, Kirk, “Inside Iraqi Politics No. 39,” 5/29/12

Exxon May Drop Contract With Iraq’s Central Government To Concentrate On Kurdistan

Exxon Mobile may be taking a dramatic step in its operations in Iraq. In October 2012, it was reported that the corporation might sell its stake in southern Iraq to concentrate on its deal with the Kurdistan Regional Government (KRG). This would be a first where a major oil company has decided to give up on the huge oil fields in Basra to work in the north instead. At first, Exxon said it wanted to operate in all parts of the country. Now, it seems that it has grown tired of its dealings with Baghdad, and might just focus upon Kurdistan.

Exxon may sell its stake in the West Qurna 1 field in Basra to concentrate upon its investments in Kurdsitan (Arabia Oil and Gas)

Exxon seems willing to sell off its share in its Basra oil field in part, because it is unhappy with its contract and business environment there. The company owns 60% of a joint venture with Shell and a state-run company worth $50 billion in the West Qurna 1 field in Basra. Exxon has told the United States State Department of its intentions, and now appears to be looking for a buyer. West Qurna currently produces 400,000 barrels a day. Exxon has invested over $1 billion in the field since it won an auction for it in 2009. Since then, the firm has run into all kinds of problems, as have other petroleum businesses in southern Iraq. That includes the lack of infrastructure, red tape, small profits, and slow payments. By March 2011 for example, Exxon had increased production at the field by 10%, and could start getting paid by the government. It was owed $470 million by the end of the year, and wanted cash instead of oil as Baghdad had been using. It wasn’t until March 2012 that a payment agreement was worked out. Exxon also agreed to $1.90 per barrel remuneration fee once it hit its output mark, which would hardly meet its costs. That was the company’s own fault, because in the 2009 auction for West Qurna it put in a bid for the lowest possible fee to win the contract that had nothing to do with what was feasible. At the same time, the Iraqi bureaucracy is notorious for being slow and inefficient, because it lacks the capacity and trained staff to deal with oil contracts. It is also run top down, which slows all decisions, not to mention that it still has a state-run, command economy from the Baath period, which makes it hard for the private sector to operate and flourish.

Another possible reason for Exxon’s change of mind is the continuous threats it has faced from the central government for its deal with the Kurds. In October 2011, the company signed a contract with the KRG to work on six blocs. (1) Baghdad claims that all petroleum deals need to go through it, and therefore has called the Kurdish ones illegal. As a result, Baghdad was very upset that Exxon decided to agree to work in the KRG, not only because it already had a contract to work on West Qurna 1, but because it was the first major energy company to do so. In December 2011, Prime Minister Nouri al-Maliki claimed that if the corporation followed through with its deal it could lead to war, because three of the blocks are in the disputed territories, which the Kurdistan Region would like to annex. The next month, the central government demanded that Exxon freeze any plans to go north. Then in February, the Oil Ministry said that Exxon could continue working on the West Qurna 1 field only if it gave up its contract with the KRG. That same month, the government took away Exxon’s lead in a water injection project for the oil fields in Basra. In March, Deputy Premier Hussein al-Shahristani who is in charge of the country’s energy policy stated that Exxon had to choose between operating in Kurdistan and southern Iraq. By April, the Oil Ministry had excluded Exxon from a May oil and gas auction, and in June, Maliki asked the Obama administration to stop Exxon’s plans. The Ministry also threatened bureaucratic retaliation such as not providing permits for work or issuing visas for company staff and workers to enter the country. Finally, in October, the premier mentioned bringing in Russian companies to replace Exxon at the West Qurna field. While Baghdad has talked tough, it is actually making empty threats. Baghdad can’t end its contract with Exxon without being sued. The corporation is also one of the largest energy firms in the world, exactly the type that the government hopes to attract to develop its oil industry. It is simply too large for the government to take any real action against.

Since the beginning of the year, the company has moved ahead with its work in Kurdistan. It has scouted locations in northern Iraq, and met with the KRG’s Natural Resource Minister Ashti Hawarmi. CEO Rex Tillerson talked with Kurdish President Massoud Barzani in Washington, and reiterated the business’ commitment to the region. In June, it opened the bidding process for drilling work on its six fields with the Kurds. It and the regional government have also won over Governor Atheel Nujafi of Ninewa where two of the blocks in the disputed territories reside. That means Exxon can work in the province without local opposition. Finally, it has started seismic surveying, and has received drilling permits from the KRG, with work to begin in early 2013. Large energy companies like Exxon go where they see exploitable and profitable oil fields. That’s the reason why it signed a contract with Kurdistan. Despite all the warnings from Baghdad it was not going to pass up the opportunity to work there, especially when it ran into so many problems with the Oil Ministry, and the central government’s red tape.

If Exxon goes ahead with its plan to get out of southern Iraq it would be a major setback for Iraq’s oil plans. Baghdad hopes to become one of the largest petroleum producers in the world. It needs major energy corporations like Exxon to achieve that goal, because they not only bring large sums of money to invest in oil fields, but the technology and know how that the government sorely lacks from years of socialism, along with wars and sanctions that isolated the country for over a decade. The combination of Exxon’s low bid that offered little room for profits on the West Qurna field, the bureaucracy in Baghdad, and the Maliki government’s threatening posture have now soured the firm’s views of southern Iraq. It appears willing to give up on its work there, and focus just upon Kurdistan. It joins other big energy companies like Chevron, Total, and Gazprom that are seeing the potential of the KRG. That places Baghdad in a bind, because it opposes al of those contracts, and wants sole control over energy policy. This could force it to compromise with the Kurds, but given the Maliki regime’s past actions, it will most likely lead to continued opposition to the KRG’s independent oil plans.

FOOTNOTES

1. Hadi, Hemn, “Nineveh governor becomes powerful ally for Kurdistan Region and Exxon Mobile,” AK News, 6/16/12

SOURCES

Ajrash, Kadhim and Razzouk, Nayla, “Iraq Oil Output Has Reached a 20-Year High, Shahristani Says,” Bloomberg, 12/22/11

Aqrawi, Shamal, “Kurds say Exxon still working in North Iraq,” Reuters, 3/17/12

Bloomberg, “KRG Denies Exxon has ‘Frozen’ Oil Contract,” Iraq Business News, 4/4/12

Dagher, Sam and Ammar, Munaf, “Iraq Leader Warns of Coalition’s End,” Wall Street Journal, 12/21/11

Hadi, Hemn, “Nineveh governor becomes powerful ally for Kurdistan Region and Exxon Mobile,” AK News, 6/16/12

Hafidh, Hassan, “Exxon Nears Sale of South Iraq Stake,” Wall Street Journal, 10/18/12

- “Iraq Says Exxon Seeks More Time on Kurd Decision,” Wall Street Journal, 3/6/12

Hassan, Rebin, “Exxon Mobil chief executive to arrive in Erbil soon,” AK News, 7/3/12

International Crisis Group, “Iraq And The Kurds: The High-Stakes Hydrocarbons Gambit,” 4/19/12

Iraq Business News, “Exxon Mobil Rumoured to Abandon West Qurna,” 4/5/12

Iraq Oil Report, “Exxon continues Kurdistan development,” June 2012

Jacobs, Caroline and Boselli, Muriel, “UPDATE 3-Total latest oil group to shift Iraq focus to Kurdistan,” Reuters, 2/10/12

Kramer, Andrew and Werdigier, Julia, “Exxon Spars With Iraq Over Lack of Payment,” New York Times, 12/22/11

Lando, Ben, “Kurdistan, Exxon gain key ally in Mosul,” Iraq Oil Report, 6/14/12

Mackey, Peg, “Exxon, Iraq agree on West Qurna oilfield payments,” Reuters, 3/12/12

Mackey, Peg and Garnder, Timothy, “Exxon seeks to quit flagship Iraq oil project,” Reuters, 10/18/12

Neuhof, Florian, “Iraq blocks Exxon from next round of licensing,” The National, 2/14/12

News Wires, “Iraqi province looks to court ExxonMobil,” Upstream, 7/3/12

Rasheed, Ahmed and Mackey, Peg, “Iraq asks Obama to halt Exxon’s Kurdish deal,” Reuters, 6/19/12

Reuters, “Exxon Scouts already in Erbil,” Iraq Business News, 1/26/12

- “Iraq says Exxon Mobil freezes Kurdistan deal,” 3/16/12

- “Iraq sets new condition for Exxon on Kurdistan,” 2/10/12

- “Iraq wants Russians to replace Exxon at West Qurna: report,” 10/11/12

- “Iraq’s Luaibi says Exxon freezes Kurdish oil deals,” 4/2/12

- “UPDATE 1-Iraq says Exxon won’t move on Kurdish oil blocs,” 4/18/12

Rudaw, “Kurds Reject Baghdad’s Claim that ExxonMobil has Halted Projects in Kurdistan,” 8/16/12

Schreck, Adam, “Iraq suggests Exxon deals with Kurds could stand,” Associated Press, 4/12/12

Al Sumaria, “Shahristani: Exxon Mobil has pledged to freeze its work until a consensus region of Baghdad and Erbil,” 6/20/12

UPI, “Exxon committed to Iraqi Kurdistan,” 4/6/12

Van Heuvelen, Ben, “Crude Awakening,” Foreign Policy, 1/31/12

Zulal, Shwan, “Baghdad warns ExxonMobil while a deal with Erbil is gathering momentum,” Kurdistan Tribune, 9/21/12

VIDEO: Iraq Jewish Community, 2003

AL JAZEERA VIDEO: Witness - The Last Jew Of Babylon, 7/15/07

VIDEO: Escape From Baghdad Moshen Kahtan's Story

Former Election Commission Chairman Cleared Of Corruption Charges, New Election Commission Appointed

Iraq’s Election Commission is an independent body created by the Coalition Provisional Authority (CPA) to run the country’s voting system. In 2012, the Commission was struck by two political controversies. First, early in the year, the head of the Commission, and some of his staff were charged and convicted of graft. Then, Prime Minister Nouri al-Maliki tried to get more of his followers onto the Commission by expanding the number of commissioners. That attempt failed, and recently the Commission chief’s conviction was overturned. These are two more examples of how the Premier has attempted to assert his control over government institutions.

Former Election Commission head Haydari was convicted of bribery, but then had that overturned by an appeals court. Whole affair seemed like intimidation tactic by PM Maliki (Niqash)

In early 2012, the Election Commission was embroiled in a corruption case. On April 12, State of Law parliamentarian Hanan Fatlawi announced that the Commission chief Faraj al-Haydari, and two of his staff members, Karim al-Tamimi and Osama al-Ani would be arrested on corruption charges. They were said to have given $130 in bonuses to State Property Commission members in return for government land. A court found the three guilty, and they received one year suspended sentences. On October 16, Haydari announced that an appeals court had cleared him of his charges, and overturned his conviction. This was a very unsettling and unusual turn of events. First, the warrants were made public, not by an Iraqi court or judge, but by a lawmaker from the prime minister’s list. Second, Iraq is notorious for corruption. Allegedly giving $130 to some bureaucrats hardly seemed a serious case, especially when it involved the head of the Election Commission. The fact that the conviction was overturned might be a sign that the charges were trumped up to begin with. Haydari told the press that his arrest was an attack upon Iraqi democracy, and aimed at undermining the independence of the Commission. Although he didn’t say it publicly, he was likely pointing the finger at Prime Minister Maliki who has been at odds with the Commission since the 2010 parliamentary elections.

Maliki has been targeting the Election Commission since the 2010 parliamentary vote. To the premier’s shock, his State of Law list came in second place in that round of balloting. He immediately began blaming the Election Commission, accusing them of helping his rival, the Iraqi National Movement, win the most seats in the legislature. Commission members were called in for questioning by parliament afterwards, on what were considered political grounds. In June 2011, Maliki ordered the Commission to suspend its work, so that it could be reformed. It refused to comply however, with Haydari saying that it was an independent body that only answered to parliament. The next month, members of State of Law attempted to hold a no confidence vote against the Commission on corruption charges, but failed. Too many of the other parties in parliament were afraid this was a power grab by Maliki to dismiss the Commission members, and put in his own people. What this chain of events showed was a concerted campaign by the premier to pressure the Commission to comply with his will.

Next, the prime minister attempted to increase the number of commission members, so that more of his followers could be appointed to it. When the Election Commission’s term expired in April, members of State of Law suggested that the number of commissioners be expanded from nine to 15. On September 17, parliament voted down that proposal, and elected eight new members. Ten days later, the final member was appointed. The new chairman was Sarbas Mustafa Rashid who is a member of the Kurdistan Democratic Party (KDP). This was a defeat for Maliki. First, he failed to increase the amount of commissioners. Before, four members of the Commission were from the Shiite religious parties, one from Maliki’s Dawa Party, one from the Supreme Council, one from the Sadrists, and one from the Fadhila party. That number remained at four on the new Commission, although Dawa now has two seats, instead of one. That still does not give it much say. Second, the KDP belongs to Kurdish President Massoud Barzani who is one of the strongest opponents of the prime minister. His election to be the new chief meant either a Sadrist or Supreme Council member of the Commission voted for him, two parties that are nominally aligned with State of Law. Parliament therefore was not willing to go along with Maliki’s suggestion of expanding the Commission, and the premier’s own allies were unwilling to give him carte blanche over future elections either.

For the last few years, Prime Minister Maliki has attempted to increase his sway over the government. His moves against the Election Commission were just another example. He tried to disband the Commission after his list lost the 2010 election, the Commission head was arrested and convicted, and then State of Law tried to appoint more of its members as commissioners. Even though Maliki failed at all these moves, it will make the Commission think twice before it makes a decision that might cross the prime minister. If they do, they could come under the same type of relentless pressure that the old commissioners faced. In this game of hardball politics, Maliki is relying upon intimidation as much as anything. If he can’t win outright, he can always coo and cajole his opponents, in the hopes that they will relent, and not stand in his way. If he’s able to do that with the Election Commission it could be a dramatic step backwards for the Iraqi government since it might have a negative affect upon future balloting in the country.

SOURCES

Abdul-Zahra, Qassim, “Iraq lawmakers pick commission for next elections,” Associated Press, 9/27/12

Abu-Bakir, Idris, “Electoral Commission rejects Maliki’s suspension order,” AK News, 6/23/11

Agence France Presse, “Iraq election chief gets prison sentence for graft,” 8/28/12

- “Iraq ex-electoral chief says cleared of graft,” 10/16/12

Ahmed, Hevidar, “Parties Strategize Over Expected Changes to Electoral Commission,” Rudaw, 9/11/12

AIN, “Sadrist MP accuses SLC of working to postpone elections,” 4/17/12

- “Urgent …. Mustafa elected new head of IHEC,” 9/26/12

Arango, Tim, “An Arrest Casts a Shadow Over Elections in Iraq,” New York Times, 4/16/12

Brosk, Raman, “Electoral Commission considers third extension of its work as “inefficient,” AK News, 8/7/12

Dunlop, W.G., “Maliki’s ‘calculations’ plunge Iraq deeper into political tension,” Middle East Online, 4/14/12

Habib, Musafa, “head of iraqi election commission: ‘there is real risk of a new dictatorship,’” Niqash, 5/30/12

Harissi, Mohamad Ali, “Iraq political blocs accuse PM of dictatorship,” Agence France Presse, 4/14/12

Hassan, Rebin, “Electoral commission’s term will not be re-extended, says MP,” AK News, 7/26/12

National Iraqi News Agency, “Breaking News – the eight names of the Electoral Commission,” 9/17/12

- “Parliamentary source confirm differences within the IS,” 9/22/12

Rao, Prashant, “Iraq political row threatens future polls,” Agence France Presse, 8/29/12

Reuters, “Iraq election commission chief released from jail-official,” 4/15/12

Shafaq News, “Parliament extends the Electoral Commission work for 15 days,” 9/3/12

Sowell, Kirk, “Inside Iraqi Politics No. 36,” 4/18/12

- “Inside Iraqi Politics, No. 46,” 9/19/12

- “Inside Iraqi Politics No. 47,” 10/3/12

Visser, Reidar, “Iraq’s New Independent Electoral Commission: Some Initial Thoughts,” Iraq and Gulf Analysis, 9/17/12

Surprise Charges Against Central Bank Of Iraq Officials Raise All Kinds of Questions

The latest controversy in Iraq involves the country’s central bank. In October 2012, arrest warrants were issued for the governor of the Central Bank of Iraq along with sixteen of his staff. They were charged with various cases of corruption. Immediately, people interpreted this as a power grab by Prime Minister Nouri al-Maliki who has disagreed with some of the bank’s decisions in the past, and has tried to exert his control over government agencies. 

The circumstances surrounding the charges against the Central Bank officials were controversial to say the least. On October 15, 2012, the Integrity Commission issued arrest warrants for the head of the Central Bank of Iraq, Sinan Shabibi, his deputy Mudher Arif, and 15 others. The next day, the cabinet named the head of the Board of Supreme Audit Abdul Bassit Turki as the interim governor of the bank until the investigation was over. The Board looks into the government’s finances. A member of Prime Minister Nouri al-Maliki’s State of Law list who was on parliament’s integrity committee told the press that Shabibi and the others were being looked at for their instructions to private banks on the amount of reserves they needed, and the financing of imports. The lawmaker for example, claimed that from January to August 2012, the Central Bank issued $27 billion for imports, but only $4.5 billion in goods were delivered. Media reports also mentioned money laundering. The Integrity Commission is the main anti-corruption agency in Iraq. In September 2011 however, the head of the Commission quit, and Maliki named an interim head, despite complaints from parliament that only it had that power. That has given the premier sway over the Commission, and led to accusations that the arrest warrants were simply his way of manipulating the law to achieve his political goals vis a vis the Central Bank.

One of the Prime Minister’s main complaints against the Central Bank has been its attempt to revalue the dinar. Bank Governor Shabibi has talked about eliminating three zeros from the dinar for years now, and officially announced his plans in June 2011. The premier and his staff disagree with this move. One of Maliki’s advisers for instance, said that the revaluation should not happen until the next decade. That led to the cabinet issuing an executive order in April 2012 freezing any changes to the currency. Later it was revealed that the order was issued directly by Maliki without the cabinet. This led to lots of criticism with various politicians claiming that the prime minister was attempting to interfere with the independence of the Bank. Shabibi has talked about the need for a stronger dinar to reverse decades of keeping the currency weak to facilitate state control of the economy. Iraq has also begun to earn huge amounts of cash as its oil exports have increased, which would support increasing the value of the dinar. Maliki seems to want to maintain the status quo. With Shabibi out of the way, the prime minister could win this argument.

The premier also attempted to assert direct control of the Bank before. In January 2011, the Federal Supreme Court ruled that that the Central Bank was no longer under the jurisdiction of parliament, but rather under the cabinet. The Bank issued a statement condemning this decision. The institution is one of the independent bodies set out in the constitution. The Federal Court is widely believed to be under the sway of Maliki, and the decision was one of the most glaring examples of it doing his bidding. The Bank did not go along with the Court, but it did reveal the prime minister’s attempt to control the nation’s offices.

Some of the accusations against the Bank officials seem superfluous as well. For one, the Central Bank has demanded that the private banks in the country increase their reserves to $213 million by 2013. The Bank began setting out these rules back in 2009 in a step to increase banking services. Currently, banks mostly serve the state rather than the public. Shabibi wants to reverse that process, so that people can get easier loans for example to start businesses or help with transactions. Private banks need to have larger amounts of reserves on hand if they are going to increase their lending. A State of Law politician claimed that these rules have been muddled, but international institutions such as the World Bank have supported the Bank’s moves. Second, Shabibi and his associates are being charged with money laundering during the recent run on dollars in currency exchanges across the country, which occurred at the beginning of the year. A source in parliament however, told Ur News that bank officials associated with Maliki’s State of Law were involved in laundering, and ordered Shabibi to take no action against them. Corruption is rampant in Iraq, and having unscrupulous staff in the Central Bank is not out of the question. At the same time, the Bank is one of the most respected institutions in the country, and has worked hand in hand with international organizations and banks to push economic growth and reform. It would be a huge surprise then if the Bank governor was personally involved in any illegal activities.

Given recent history, it would be no surprise if this move against Governor Shabibi was an attempt by Premier Maliki to wrest control of the Central Bank. He tried to do it legally before with the Supreme Court decision. The Bank refused to go along with that order, and has gotten into a number of disputes with the prime minister since then. Iraq has weak state agencies after many of them had to be put back together or created anew after the fall of Saddam Hussein. Maliki has tried to strengthen the central government and his own hand, by gaining influence over many of these institutions. That’s why many pointed to him when the news broke that the Central Bank Governor had an arrest warrant out for him. It’s impossible to tell how this will play out, but it’s likely to go down as another example Maliki trying to impose his will over the government.

SOURCES

Abedzair, Kareem, “Commission orders arrest of Iraqi Central Bank Governor on corruption charges,” Azzaman, 10/15/12

Agence France Presse, “Iraq cabinet names interim central bank governor: spokesperson,” 10/16/12

AK News, “Share of banking services per capita in Iraq is low, says Central Bank,” 6/11/12

Alsumaria, “Iraq Central Bank urges explanatory ruling,” 1/25/11

Brosk, Raman, “Iraqi Central Bank accuses banks of “fraud” over hard currency sales,” AK News, 5/17/12

Dagher, Sam and Nabhan, Ali, “Iraq Dismisses Central Bank Chief Amid Investigation,” Wall Street Journal, 10/16/12

Habib, Mustafa, “dinar woes: iraqi currency traders break Syria, iran sanctions,” Niqash, 5/17/12

Harissi, Mohamad Ali, “Iraqi dinar casualty of Iran, Syria sanctions,” Agence France Presse, 4/12/12

International Crisis Group, “Iraq’s Secular Opposition: The Rise and Decline of al-Iraqiya,” 7/30/12

Al-Jaff, Wissam, “Central Bank’s independence compromised by Federal Court ruling says official,” AK News, 1/23/11

Kami, Aseel, “Iraq tries again to buoy dinar, stem dollar flight,” Reuters, 6/6/12

Muhammad, Barzan, “Erbil Currency Traders Lose Out as US Dollar Value Fluctuates,” Rudaw, 5/27/12

Peel, Michael, “Iraq bank moves to allay laundering fears,” Financial Times, 4/2/12

Reuters, “Iraq centbank slams ruling placing it under cabinet,” 1/24/11

Saleh, Khayoun, “Deputy Premier warns against attempts to meddle in Iraqi Central Bank’s affairs,” Azzaman, 4/16/12

- “Iraq hard cash reserves exceed $60 billion,” Azzaman, 4/10/12

Sami, Zeena, “Central Bank fails to stem Iraqi dinar’s weakening vis-à-vis the dollar,” Azzaman, 4/17/12

Sowell, Kirk, “Inside Iraqi Politics No. 39,” 5/29/12

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/11

- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/12

Ur News, “Sources at the Central Bank: Al-Shabibi retains documents signed by Maliki to protect the corrupt,” 10/15/12