Can Iraq Find Its Way Out Of Its Current Political Stalemate? An Interview With International Crisis Group's Joost Hiltermann

The International Crisis Group (IGC) is one of the best sources on Iraq. Its reports contain some of the most in-depth analysis of the situation within that country. Joost Hiltermann is the Deputy Director for the Middle East and North Africa at the IGC, and is responsible for much of that coverage. Below is a short interview with Hiltermann about whether Iraq can solve its on going political problems.

1. The biggest issue today in Iraqi politics is the power of Prime Minister Nouri al-Maliki. People inside and outside the country are calling him a dictator. Do you think that he is becoming an autocrat?

With weak institutions, Iraq is unlikely to become a thriving democracy, whoever leads it. The only thing that is keeping Iraq from turning into a dictatorship is the presence of checks and balances, not in the system of government, but in the nature of politics - - at least for now. With the major parties representing ethnosectarian communities, there is huge pressure on all to establish inclusive governments, lest the country descend into civil war. The presence of your political rivals in your coalition government limits your scope of action, and this prevents the emergence of an autocrat. However, prolonged tenure allows a prime minister to accumulate power, as indeed Maliki has done. This is why it is important that the parties insist on a regular rotation of the top leadership.

2. How do you think Maliki’s history as an exile politician has shaped his worldview?

Like most of the exile politicians, Maliki’s worldview was shaped by the need to survive in a most dangerous environment, always the target of the regime’s assassins. To survive, one should trust no one. In a mirror image, Saddam also survived threats to his rule by trusting no one and using one to spy on another. As a result today, paranoia courses through the former-exile class, and power is a zero-sum game.

3. Part of the reason why Maliki has been able to grab so much power is that the parties who are against him, like the Iraqi National Movement and the Kurdish Coalition, are divided, don’t use the tools available to them like the parliament, and appear to be more interested in holding onto office. Do you think they can become a more effective opposition in the future?

I suppose these parties could pose a more effective front against a runaway prime minister if they put their minds to it, but even then, they would not easily overcome the important issues that divide them. It is hard to see, for example, how Sunni Arabs and Turkmen from disputed areas could make common cause with Kurds. Yes, they might forge a joint strategy to get rid of Maliki, but then, faced with the challenge of forming a new government, they would get stuck on the issue that matters most to them, and that has bedeviled Iraqi politics since 2003: the status of disputed territories.

4. Finally, Iraq is due for two more rounds of balloting, the 2013 provincial and 2014 parliamentary elections. Do you think anything will change with those votes, or will the status quo between Maliki and the other parties be maintained?

It is better not to make predictions in a situation as volatile as Iraq, and the presence of significant imponderables that could change everything, such as the Syria crisis or a war between the United States and Iran. Still, all things being equal, the balance between the parties is unlikely to change a great deal, as election results since January 2005 have shown. The question is whether the elections will be deemed free and fair by all major contestants, and whether Maliki will try to cling to power if the election results show he lost.

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Special Inspector General For Iraq Reconstruction’s “Hard Lessons” Chapter 13 “Restarting Oil Production”

Iraq has the third largest oil reserves in the world. That led many in the Bush administration to believe that the country could pay for its own rebuilding after the 2003 invasion. Deputy Secretary of Defense Paul Wolfowitz for instance, told a House subcommittee that Iraq would largely finance its own reconstruction shortly after the start of the U.S. invasion with its oil revenues. Vice President Dick Cheney stated that Iraq could reach or surpass its pre-war production levels by the end of 2003 with only minimal investment. Both views proved wildly optimistic. They were unaware of the fact that Iraq’s petroleum industry was old, in desperate need of repair, and some of it was in decline after years of sanctions. That meant when the Coalition Provisional Authority (CPA) was created to run Iraq, one of its first priorities was to fix the energy sector, and get it up and running again, rather than relying upon it to fund the reconstruction of the country.

Before 2003, Iraq’s oil industry faced a number of major setbacks, which it was just recovering from. In 1980, it was producing an average of 2.514 million barrels a day. The next year, Saddam Hussein decided to attack Iran, and output dropped to 1 million barrels a day. It wasn’t until the last two years of the war that it was able to bounce back, hitting 2.079 million barrels a day in 1987 and 2.685 million by 1988. By 1990, production was slightly down to 2.040 million barrels a day, and again Saddam went to war, this time invading Kuwait. International sanctions were slapped on the nation, and Iraq went down to only 305,000 barrels a day in 1991. It stayed below one million barrels until the Oil for Food Program was started in December 1996. That led to output reaching 1.155 million barrels in 1997, and then peaked at 2.570 million barrels in 2000. Right before the U.S. invasion, Iraq was right around that level with 2.548 million in January 2003, and 2.483 million in February. The country’s refineries were declining during this period as well. By 2003 they were obsolete, and only able to process 55% of every barrel of oil they received. That meant it was not producing enough fuel and cooking gas to meet demand, and had to trade with Jordan and Turkey to make up the difference. Overall, despite Iraq’s export numbers, it was facing major problems. Sanctions cut off supplies of spare parts so the infrastructure began to decline, there was widespread corruption, and smuggling going on. The last two were due to Saddam placing the oil industry at the behest of his regime. The government manipulated the Oil for Food Program, so that it could undermine the sanctions, and earn money for Saddam and his inner circle. The authorities also worked with gangs to illegally export oil. All together, that meant that the petroleum business fell into a state of disrepair after 1991 since Baghdad did not care about its development or upkeep just what it could do for Saddam.

Rusted pipes at a pumping station in 2003 showed the poor state of Iraq's oil infrastructure when the U.S. invaded (AP)

Before the war, the Bush administration seemed ignorant of the state of Iraq’s oil industry, and focused upon what Saddam might due to his fields if the U.S. invaded. War planners were afraid that Iraq would repeat what it did during the Gulf War, and set its oil fields afire. Preparing for such an event was the only concrete planning the Americans did before the invasion, tasking Kellogg, Brown & Root (KBR) with dealing with any potential damage the regime might cause to the petroleum infrastructure. That catastrophe didn’t happen, as there were only nine fires. The real problems started afterward as the fields and facilities were stripped during the looting. The Oil Ministry was also ransacked before American soldiers arrived to guard it. Since Washington’s planning for post-war Iraq was so poor it was no surprise that U.S. forces were not ready for what happened. It wasn’t just that the U.S. did not prepare for the looting that took place after the fall of Saddam, it was that it did nothing while it went on. The military had no orders to deal with it, so let it go on for days with devastating affects, which the Americans would later have to pay for.

Instead of Iraq’s oil paying for the country’s rebuilding, the industry ended up requiring billions to be rebuilt. Before the start of hostilities, the Council on Foreign Relations estimated that $5-$7 billion would be needed to refurbish the energy sector, and another $20 billion to increase production. After the invasion, the Army Corps of Engineers found $1.7 billion in damages done from the war and looting. Those early studies quickly put an end to the hopes that Iraq would pay for its own reconstruction. Instead, the oil industry would become a major project itself.

The first step to getting the oil sector back on track was to put the Oil Ministry back together, and appoint U.S. advisers to it. In May 2003, Thamir Abbas al-Ghadban, who had been the director of planning in Saddam’s era, became the interim Oil Minister. At the same time, Philip Carroll, the former CEO of Shell was appointed to head an advisory board to the Oil Ministry. Together they decided to keep the petroleum business under state control, and made the top priority to get production going again after it had ended with the invasion. In June, 8 million barrels of Iraqi oil, which had been placed in storage in Turkey was sold, and a contract was signed for new exports. In July, the Army Corps of Engineers, the Oil Ministry, the Coalition Provisional Authority (CPA), and KBR came up with a plan to restore capacity to pre-war levels. The Ministry did most of the actual construction using state-run enterprises, while KBR did the buying and importing of parts, supplies, and equipment. The problems they ran into were that there was still looting going on, there was not a steady supply of electricity, and the infrastructure became an early target of the insurgents. 

Iraq’s exports and production did make a recovery, despite some who questioned its ability to do so.  In October 2003 for instance, analysts predicted that the country was nowhere near returning to its pre-war levels. Interim Minister Ghadban however, told a conference in Geneva of oil executives that the oil industry would be repaired and back up to capacity by the spring of 2004. He turned out to be right. From April to July Iraq was only producing a few hundred thousand barrels a day. By August however, it reached 1.050 million barrels, going up to 1.948 million by December, and surpassing 2 million barrels for seven months in 2004. This came despite constant attacks by militants, which shut down pipelines, cut exports, and cost millions in repairs and security. It was due to the diligence of Iraq’s oil workers that the state-run companies were able to get things running again despite the violence.

One part of the industry that did not make a come back after the invasion was the country’s refineries. The Oil Ministry wanted to get them back and running as well. By April 2003, the Dora refinery was processing 40,000 barrels a day, but it had a capacity of 110,000. By the fall, Iraq’s three refineries were mostly shut down because of power shortages and attacks. The result was a fuel crisis. The CPA was forced to import supplies just as the former regime had, and became a major job of KBR. The U.S. went from $24 million in fuel imports to $871 million in just a few months. The refineries were never upgraded, and continued to operate at a fraction of their capacity. This is still an issue that the country faces to this day, as it still has to buy large quantities of refined products from other countries.

As the insurgency took off in the second half of 2003, so did the targeting of the oil infrastructure. In June, there were seven bombings upon three pipelines. From that month to November, lines and facilities were attacked 13 times, which led to cuts in output. That forced the CPA to sign a $50 million contract with a subsidiary of a British security firm to protect the industry. The company ended up getting paid $104 million in two years for its work. The Coalition went on to create the Task Force Shield to oversee the training and control of the new Oil Protection Force, which proved to be badly managed. The new security unit proved too lightly armed to deal with insurgents, and was quickly taken over by militias, and infiltrated by militants, which undermined its purpose. It would take years and millions in investment to adequately protect the infrastructure, but it still comes under sporadic attack to the present day.

The aftermath of an attack upon an oil pipeline in Salahaddin, Aug. 2003. Iraq's oil infrastructure became an early target of the insurgency (Reuters)

Rather than attempting to take over Iraq’s oil industry, the U.S. was mostly concerned with putting it back together and getting it back to its pre-war output levels after the 2003 invasion. The Americans were ill prepared for the state of Iraq’s petroleum infrastructure, and the attention it garnered from the insurgency. Amazingly, they and the Iraqis were able to get production going again although it faced many ups and downs. Today, oil fuels the Iraqi economy. It took years of work and a large infusion of funds for that to happen. Oil did not prove the immediate reward that the Bush administration initially believed. That was just one more example of how the White House’s best-case scenario for postwar Iraq failed when it met reality. Instead of Iraq paying for itself, it turned out to be the largest and most expensive reconstruction efforts in American history.

SOURCES

Banerjee, Neela, “AFTER THE WAR: ECONOMIC LIFELINE: Widespread Looting Leaves Iraq’s Oil Industry in Ruins,” New York Times, 6/10/03

- “Barrels of Iraqi Oil Exported for the First Time Since the War,” New York Times, 6/23/03

Crocker, Bathsheba, “Post-War Iraq: Are We Ready?” Center for Strategic and International Studies, 3/25/03

Dickey, Christopher, “$1 Billion A Week,” Newsweek, 7/21/03

Index Mundi, “Iraq Crude Oil Production and Consumption by Year”

Iraq Survey Group, “Comprehensive Report of the Special Advisor to the DCIA on Iraq’s WMD,” 9/30/04

Kpytoff, Verne, “Black gold at the end of the rainbow,” San Francisco Chronicle, 10/25/03

Rupert, James, “Unlikely Iraq can top oil to pay its way,” San Francisco Chronicle, 11/5/03

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

Did The U.S. Plan On Privatizing Iraq’s Oil After The 2003 Invasion?

A widely held belief is that the United States went to war with Iraq for oil. One variation of this argument is that America wanted to open up Iraq’s oil industry since it had been nationalized in the 1970s, and cut off from the world by over a decade of international sanctions. While there was talk within the White House and think tanks to have foreign oil companies move in after the fall of Saddam Hussein it didn’t happen right away. When the U.S. had its chance to privatize the energy sector under the Coalition Provisional Authority (CPA) it decided not to, because of the possible negative affects that would have upon Iraqi and world opinion, and due to international law. If the United States did not open Iraq’s oil to foreign investment when it had control of the country, it undermines the argument that was a goal of the Bush administration.

Before the 2003 invasion of Iraq, there was some talk about taking advantage of the country’s oil after the fall of Saddam Hussein. In 2002 for instance, the Heritage Foundation argued that the U.S. should open Iraq’s oil to foreign investment. One analyst from that think tank believed that the increased petroleum production that would ensue from major petroleum companies entering Iraq could break the hold of OPEC over the world energy market. That idea was popular amongst some neoconservatives within the administration as well. The State Department’s Future of Iraq Project also brought up privatization, arguing that the state-run system was hindering Iraq’s potential. Elliott Abrams, the Senior Director for Near East and North African Affairs at the National Security Council suggested that the U.S. actually take over the oil industry after the war. In the end, President Bush announced that Iraqi oil would be used for the benefit of the country just before the invasion started in March 2003. Administration officials said that meant petroleum revenue would be used to help rebuild the country. In the end, it appeared that the White House had discussions about what to do about Iraq’s oil, and outside think tanks made their own suggestions as well, but that the only real decision made was that petroleum would help finance reconstruction. That would not be surprising since pre-war planning by the administration was so uncoordinated and ad hoc in nature that it overlooked many important issues the U.S. would be faced with after the invasion.

In April 2003, the Coalition Provisional Authority (CPA) was given control of Iraq, and got down to the business of deciding the fate of Iraq’s oil industry. Initially, the CPA’s first priority was to repair the damage done to the oil infrastructure by the war and the looting that took place afterward, so that exports could resume, and the country could begin to start earning money again for its huge reconstruction needs. Then in May, Philip Carroll, the former CEO of Shell, was appointed to head an advisory board to the Iraqi Oil Ministry. He came in saying that he would not support the privatization of the industry. He told the press that petroleum was such a part of Iraq’s national identity that to privatize it would be an affront to the country. He conveyed that message to the head of the CPA Paul Bremer. CPA officials shared his concern, and were also unwilling to make any major changes to the industry out of fear that it would fuel charges that the war was about oil. In September, these ideas were put into law with Coalition Provisional Authority Order Number 39. It was meant to encourage foreign investment in Iraq, but barred that from happening in natural resources. This was in line with international law, which prohibits occupying powers from giving oil concessions. As a result, petroleum remained a nationalized industry. The CPA ran Iraq for fourteen months. If the goal of the United States was to open up Iraq’s natural resource to foreign corporations there would have been no better time to do it than during the CPA period. Instead, the Coalition kept oil under government control. Some have argued that the U.S. was waiting for the Iraqis to pass their own oil law after the Authority ended its mandate, but that has not happened either, because of political disputes. Instead the Oil Ministry has gone ahead, and held several auctions for oil and gas fields offering service contracts that restrict profits for corporations, while the Kurdistan Regional Government has followed an independent policy. In both cases however, the government remains the manager of the country’s resources.

The argument that the 2003 invasion was about controlling Iraq’s oil appears to be a compelling one, but falters when compared to what actually happened. There were definitely talks both within and without the Bush administration that the U.S. should take advantage of Iraq’s great oil wealth. Ideas were thrown about to privatize the industry, and allow foreign companies to move in. No real decision appeared to be made before the invasion started however. When the Coalition Provisional Authority was created to govern Iraq it decided to maintain petroleum as a nationalized business. While Iraq has tried to shape oil policy since then, it has largely let the Iraqis determine their own policy. That's why when major international firms finally returned to Iraq in numbers in 2009, they signed contracts that greatly favored the government. Then Oil Minister Hussein Shahristani wanted to make sure that the country retained as much of its wealth as possible, and was largely successful. The result is that today, Iraq’s energy sector continues to be part of the state-run economy. . 

SOURCES

Banerjee, Neela, “An American and 2 Iraqis to Assume Key Oil Posts,” New York Times, 5/3/03

Coalition Provisional Authority, “Coalition Provisional Authority Order Number 39 Foreign Investment,” 9/19/03

Crum, Nicole Marie, “Liberalization or Economic Colonization: The Legality of the Coalition Provisional Authority’s Structural Investment Law Reforms in Post-Conflict Iraq,” South Carolina Journal of International Law and Business, Fall 2006

International Law Office, “Energy & Natural Resources – Iraq,” 4/19/04

Khadduri, Walid, “The Iraqi Oil Industry: A Look Ahead,” Middle East Economic Survey, 11/29/04

Mahdi, Kamil, “Iraq’s Oil Law: Parsing the Find Print,” World Policy Journal, 2007

McGeary, Johanna, “Looking Beyond Saddam,” Time, 3/10/03

News World Communications, “Iraqi Oil Strategy Divides State, White House,” 12/28/02

Observer, “Carve-up of oil riches begins,” 11/3/02

Palast, Greg, “Secret US plans for Iraq’s oil,” BBC, 3/17/05

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