Ramadan Begins In Iraq

Wednesday August 11, 2010 marks the official beginning of Ramadan for Iraq's Sunnis. The country's Shiites will join in the next day. Despite warnings by the U.S. military that insurgents may step up attacks during this period, average Iraqis are going about their business, stocking up on food to be eaten after the day of fasting. Of more importance is the fact that this summer has seen extreme heat up to 120 degrees each day and electricity shortages continue, which will make it extremely difficult to not drink water during the day as part of their religious observances.

SOURCES

Agence France Presse, "Ramadan to start in Iraq on Wednesday: Sunnis," Khaleej Times, 8/11/10

Araff, Jane, "Iraq attacks likely to increase during Ramadan, says US," Christian Science Monitor, 8/9/10

Associated Press, "Iraqi Sunni Muslims embrace other," 8/10/10
- "Residents shop of fasting month of Ramadan," 8/9/10

Aswat al-Iraq, "Citizens rush for markets to avoid price hikes during Ramadan," 8/5/10

Inside Iraq, "First day of Ramadan," McClatchy Newspapers, 8/11/10

Background To Iraq’s Power Protests This Summer

Protest against power shortages in Basra, June 2010

At the beginning of the summer in June 2010 angry Iraqis took to the streets to protest the lack of electricity. Basra, which saw clashes leading to two deaths, Dhi Qar, Anbar, Wasit, and Diyala all saw demonstrations. The causes were the extremely high temperatures this year, and an increase in the gap between power supply and demand.

Electricity output in June 2010 was the highest monthly average ever due to high domestic production and record high imports, but that wasn’t enough. All together, the national grid put out 6,721 megawatts for that month. The problem was that at the same time there was a record high demand, an estimated 10,800 megawatts. The June supply only met 62% of the public’s needs as Iraqis faced temperatures between 110-120 degrees each day. In many parts of the country people only got four hours of power per day as a result.

Overall, output in the second quarter of 2010 was down from January to March, the first time that had happened since 2004. From April to June 2010 the government produced an average of 6,202 megawatts per day. There was a 4% decrease in output from power plants. Planned maintenance, shortages of fuel and water for generators, technical issues, mechanical failures, and the weather also resulted in the loss of 1,625 megawatts of capacity.

As a result of the protests, Prime Minister Nouri Al-Maliki was forced to sack his Electricity Minister and appoint Oil Minister Hussain Shahristani as a temporary replacement. Shahristani promised to increase output, cut special power privileges for politicians, and told the security forces to crackdown on people illegally tapping into the electricity network. As ever the root of the problem is the fact that Iraqis continue to buy consumer good such as refrigerators and air conditioners, the government hardly charges users for their power consumption, and the entire system is mismanaged. While there have been no more demonstrations since June, there are anecdotal stories in the press about popular discontent still being high, and the power system is no closer to being fixed then before.

SOURCES

Myers, Steven Lee, “A Benchmark of Progress, Electrical Grid Fails Iraqis,” New York Times, 8/1/10

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/10

AL-BAYAN CARTOON: The Iraqi Government

Source: Al-Bayan, United Arab Emirates

Continued Problems Integrating The Sons of Iraq

The new Special Inspector General for Iraq Reconstruction (SIGIR) report to Congress notes continued problems integrating the Sons of Iraq (SOI). In 2009 the Americans transferred control of the SOI to Baghdad. The Iraqi government promised to give 20% of them jobs in the security forces, and the other 80% employment in other government positions. Since then there have been questions about Baghdad’s commitment to hire, pay, and support the SOI.

Iraqi officials claim around 41,000 of 94,000 SOI, approximately 45%, have been offered jobs. This is a change in rhetoric from previous SIGIR reports because in April 2010 it revealed that Baghdad counts any SOI that has been offered a government position to be transitioned whether they get the post or not. Therefore, no publicly available number exists for how many have actually found a position.

The hiring of SOI has also been on hold. All 94,000 were supposed to be integrated by the end of 2009, but the government said because of budget problems and the March 2010 parliamentary elections, that would have to be delayed. There has been little progress since the vote. The Finance and Interior Ministries are arguing over whether the SOI are included in a hiring freeze imposed in the 2010 budget law, and in May the Ministry of Defense said that it would halt all integration of SOI until the security situation improved. SOI leaders have also complained that the jobs that they have gotten are often menial.

In the meantime the government continues to have problems paying SOI. In 2009 Baghdad expended more than $270 million on the SOI program. Up to July 2010 they had only spent $75 million. March salaries were not paid until the end of May. By the end of June, only 85% of SOI in the country had received their money. 50% of the Sons of Iraq in Baghdad did not get their April and May paychecks. An unknown number of SOI have left their posts as a result to look for other employment, while those still at their posts feel increasing resentment.

Americans working with the Iraqi security forces have also noted little support for the SOI in the field. They’ve said that Army and police units do not provide security or logistics for SOI at checkpoints for example. The most brazen example was a June decision to disarm the SOI in Diyala. The government claimed that the SOI were civilians, and therefore had no right to carry weapons. The SOI have complained that they feel defenseless as a result.

All of these problems boil down to mistrust between the Shiite run government and the majority Sunni SOI, and a lack of government capacity. The authorities don’t trust the SOI, have rejected some because of their tribal affiliations, and continue to arrest SOI members. Many SOI are also young and uneducated, and therefore are not qualified for most jobs. Further problems are the lack of logistics, resources, and budget to integrate all of the SOI. Baghdad has not conveyed these problems to the SOI, nor their commitment to continued integration. The Sunni SOI in return, feel that the government is out to persecute them rather than support them. This is leading to increasing sectarian tensions. Al Qaeda in Iraq is attempting to take advantage of this division by continuing attacks upon the SOI to intimidate them, while also offering them more pay then the government to try to turn them back to the insurgency. A few SOI leaders claim that the lack of government assistance and pay is creating incentives for lower level SOI to turn towards Al Qaeda, and some actually have.

Despite the many pronouncements by U.S. and Iraqi officials, it never appeared likely that most of the SOI would ever be integrated. The Maliki government always considered the SOI an American creation, and never believed in it. As a result, Baghdad has always played with the numbers and pay. With U.S. troops withdrawing there is even less incentive for the authorities to follow through with their promises. In the end, some SOI will get government jobs, but the majority will be left to their own devices. With attacks down, the security forces stronger, and the Americans departing, Maliki appears to be willing to sacrifice the SOI. That will impact both the security situation in Iraq, and efforts to reconcile Sunnis and Shiites. Exactly how much is yet to be seen.

SOURCES

Harari, Michal, “Uncertain Future For The Sons Of Iraq,” Institute for the Study of War, 8/3/10

Hendawi, Hamza, “Al-Qaida in Iraq offers cash to lure former allies,” Associated Press, 8/6/10

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/10

On Going Issues With Iraq’s Economy

On May 25, 2010 the Special Inspector General for Iraq Reconstruction met with officials from Iraq’s Central Bank. The two sides went over issues that currently face Iraq’s economy. The Inspector General came away with four key areas that needed to be addressed: the budget, public sector jobs, oil, and banking.

First, the government can’t track its own funds because of a lack of accounting and transparency within the bureaucracy. That means officials don’t know how much money is actually spent, what is wasted, and what goes unused.

Second, the government employed three million people, which was around 10% of the population. That was the highest amount ever. The number of public employees has doubled since 2005. Private sector jobs have increased in recent years as well, but are still low pay and insecure. Baghdad has talked about free market reforms for years, but has presented no specific plans on how to do so. Until then, private businesses face a difficult environment. 

Third, the Oil Ministry has ambitious plans to boost its production this year by 150,000 barrels a day with the help of foreign companies. The Central Bank and Inspector General questioned whether that was possible due to aging infrastructure and decreasing output from northern oil fields. The Central Bank also claimed that oil smuggling had decreased, but in a separate meeting the Oil Ministry’s Inspector General said that was not true.

Last, the private banking sector was still struggling. In March 2010 the Finance Ministry criticized them, claiming that they had not helped develop the country and needed stricter regulations. As a result, the Finance Ministry cut ties with them and refuses to take their checks. There are also legal and technological issues, which are disincentives for foreign banks to operate in Iraq. 

Iraq still has a state-run economy. That means the public sector continues to dominate everything from jobs to oil to banking. At the same time, that huge bureaucracy is inefficient, holds up development, and impedes the private sector. Iraq’s 2010 National Development Plan is supposed to address some of these issues, but still depends upon petroleum revenues and the government. Until there is a real commitment to economic reform in Iraq, it will continue to face these problems.

SOURCES

AK News, “Finance ministry rails against private banks in Iraq,” 3/28/10

Daood, Mayada, “what’s the plan? fears of renewed central control,” Niqash, 5/25/10

Department of Defense, “Measuring Stability and Security in Iraq,” 2/15/10

Hafidh, Hassan, “Iraq Seeks 150,000 Barrel A Day Rise In Oil Output By Year End,” Dow Jones, 7/26/10

Inter-Agency Information and Analysis Unit, “Iraq Labour Force Analysis 2003-2008,” United Nations Office for the Coordination of Humanitarian Affairs, January 2009

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/10
- “Quarterly Report to the United States Congress,” 4/30/10

Iraq’s Abrams Tanks Arrive

Abrams tanks recently delivered to Iraq (2Space)

In early August 2010 the first 11 M1A1 Abrams tanks from the United States arrived in Iraq. As reported before, Baghdad has ordered 140 Abrams and recovery vehicles, which are to be delivered by the end of this year. 60 Iraqi crews have been under going training on the Abrams since 2009 in anticipation. The tanks went to the Besmaya military base, southeast of Baghdad, where they will join the 9th Mechanized Division. The unit currently has refurbished Hungarian T-72 tanks, and U.S. M113 armored personnel carriers. 

Hungarian T-72s of the 9th Division (Wikipedia)

In the future, Iraq might have five armored divisions and a brigade. If the government has the money it may order a total of 700 Abrams in five consignments by 2020. Those would go to equip the 3rd and 5th Divisions, as well as the 56th Brigade. The 11th and 19th Divisions may also get tanks purchased from the Ukraine as well as the 9ths T-72s.

These tanks are aimed at giving Iraq the capability to defend itself from foreign threats. Currently, Baghdad depends upon the Americans for protection as the Iraqi Army is focused upon fighting the insurgency rather than external defense. Iraq would still rely upon America and contractors however, for several more years for logistics, spare parts, and maintenance, all things that Iraqi forces are notoriously bad at.

SOURCES

Agence France Presse, “Iraq takes delivery of American tanks,” 8/7/10

Defense Industry Daily, “Iraq Received T-72s & BMPs – With Another Armored Brigade Planned,” 11/21/05

Elliott, DJ, “Iraqi Security Force Update August 2010,” Montrose Toast, 8/3/10
- “SWAG on Iraqi Armor Distribution,” Montrose Toast, 7/19/10

How Much Oil And Refined Petroleum Products Does Iraq Actually Produce? No One Knows

Iraq is an oil dependent country. 95% of its revenues this year will come from the sale of petroleum. It recently signed twelve deals with international energy companies, which it hopes will boost its oil production from 2.4 million barrels a day currently to 12 million barrels by 2011. Later this year the country also plans to put up four planned refineries and its existing ones for auction to boost its output of gas, diesel, etc. How much Iraq is able to produce of these products then, is of outmost importance to the country’s financial well being. The problem is no one is sure how much oil is being pumped, and how much fuel is being made because of a lack of oversight and widespread corruption.

One major issue that Iraq’s oil industry faces is the lack of adequate metering. In 2007 the Oil Ministry began setting up meters across the country to measure how much petroleum and refined products were produced. A December 2008 audit found that only 33% had been installed by then. A July 2009 report discovered that the situation had barely improved. At the North Oil Company only two of 34 meters were functioning. The Maysan Oil Company, the South Refinery Company, and the Dhi Qar refinery had none. 59 meters were supposed to be installed in the refineries in southern Iraq, but there was no letter of credit to purchase them. There have been press reports that at the Baiji refinery in Salahaddin province the meters either didn’t work or were fixed by corrupt workers. In early 2010 the Oil Ministry presented a plan to finish all of its metering work by the end of 2011, but that has now been delayed. Even when and if Iraq installs all these devices it will not solve its problems. The country uses three types of meters that are not integrated, are not always calibrated, and have low reliability. Without good reporting of its production rates, there’s no way Iraq can fully account for its oil industry. Meters are supposed to solve this problem, but there are questions about whether they will ever be fully installed, and even if they are, can they be trusted.

Corruption also plagues the petroleum business. The Inspector General of the Oil Ministry reported that the industry suffers from a lack of management, control and oversight. That opens up plenty of opportunities for theft, bribery, and other illegal activities. One example is that the falsification of documents within the Ministry is the norm, so there are always questions about what it reports about oil production. That leads to oil smuggling, which has been a major business since the 1990s. Oil and refined products are stolen from pipelines, refineries, and storage facilities. Many times this is done in collusion with government workers who provide forged papers to cover up the theft. In 2007, Iraq announced that between 100,000-300,000 barrels of oil a day could not be accounted for. That was largely due to smuggling. Corruption is another major reason why Iraq’s production numbers are in question. Oil Ministry officials often fake numbers to cover up their own involvement in smuggling and other crimes.

The head of Baiji refinery’s intelligence and internal affairs being arrested in 2008 for corruption and suspected ties to insurgents

Oil is Iraq’s lifeblood. Although the government is supposed to have a monopoly on the industry, there are so many holes in its management that it can never know precisely what is going on. It has no effective measurement devices, oil smuggling is rampant, and the Oil Ministry’s own workers can’t be trusted to keep accurate records. The result is that Iraq is losing billions of dollars a year. There is no sign that this will be solved anytime soon, as no post-Saddam government has been serious about tightening controls over the petroleum business. That’s because many of the political parties benefit from the loose oversight to line their own pockets. Until the country’s elite overcome this issue Iraq will never know how much oil it produces, nor make the profits it should.

SOURCES

AK News, “No substantial change in oil exportation in August,” 7/15/10

Commodities Now, “Iraq Steps Up Efforts to Audit Oil Flows – with UN Help,” 4/9/10

Cordesman, Anthony, “Success or Failure? Iraq’s Insurgency and Civil Violence and US Strategy: Developments through June 2007,” Center for Strategic and International Studies, 7/9/07

Fifield, Anna, “Crime-fighters revive Iraqi refinery’s fortunes,” Financial Times, 2/17/09

Hafidh, Hassan, “Iraq Seeks 150,000 Barrel A Day Rise In Oil Output By Year End,” Dow Jones, 7/26/10

Oppel, Richard, “Iraq’s Insurgency Runs on Stolen Oil Profits,” New York Times, 3/16/08

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09

UN News Center, “Key elements for Iraq’s export-revenue mechanism lacking, Security Council told,” 7/12/10

Williams, Phil, “Criminals, Militias, And Insurgents: Organized Crime In Iraq,” Strategic Studies Institute, June 2009

World Bank, “Interim Strategy Note For The Republic of Iraq For The Period Mid FY09-FY11,” 2/10/09