TELEGRAPH VIDEO: Sir Christopher Meyer At The Chilcot Inquiry

VIDEO: The Iraq Chilcot Inquiry - Lord Goldsmith Involvement In The Iraq War

ITN VIDEO: Iraq Inquiry: Goldsmith Talks UN Resolution 1441

The Costs Of Mismanaging Iraq’s Reconstruction

To say that the United States ran into problems trying to rebuild Iraq after the 2003 invasion would be a massive understatement. America was beset by a plethora of difficulties, because it had completely failed to adequately plan for post-war Iraq. After the fall of Saddam Hussein’s government the U.S. ran into even more issues such as the total collapse of the Iraqi administration, the looting, and growing violence. The Americans came up with one organization after another that was supposed to manage all the reconstruction work, but never seemed to be able to get over the hump. There were too many regulations, contradictory chains of command, changing goals and requirements, lack of qualified and adequate numbers of staff, a high turnover rate, poor management practices, huge cost overruns, and a lack of oversight. It’s for those reasons that the American effort to put Iraq back together can be considered a failure.

The U.S. always had problems creating a coordinated management system for rebuilding Iraq. The Americans came up with various offices, each with its own acronym, to deal with the task, but those often created more problems than solutions. For example, the Coalition Provisional Authority (CPA) had the Program Management Office (PMO) and the Head of Contracting Activity. At the same time, the United States Agency for International Development (USAID) and the military ran independent reconstruction efforts. After the CPA ceased operating in 2004, the White House established the Iraq Reconstruction and Management Office (IRMO) and the Project and Contracting Office (PCO). That didn’t end the USAID and military’s work however. To add to the problems there was never one single person in charge. The IRMO for instance, answered to the State Department, while the PCO was under the Pentagon. Each time a new organization was created, it was supposed to centralize control over reconstruction projects, but what they ended up doing was adding another layer of bureaucracy, and never solved the contradictory chain of command.

Many of these offices never had the staff to carry out their duties either. In February 2004, General Stephen Seay took over the CPA’s Head of Contracting Activity. What he found was a body that lacked staff, and was overwhelmed with hundreds of contracts. He was supposed to have 69 employees, but he usually only had two-thirds that number. Many of his workers were also not qualified to with companies. That meant that his office regularly could not come up with good requirements for job orders. As a result, General Seay tried to re-organize the body, and went on recruiting drives to bring in people more suited to the task at hand. He never seemed to get over the hump however as the Head of Contracting never got enough qualified people. These problems trickled down throughout the system.

A typical contract went through a large number of steps that usually led to huge cost overruns. The Pentagon might award a contract to a company. It was then planned and managed by the CPA’s Program Management Office or its successor the Project and Contracting Office. Those two would come up with schedules, budgets, and completion dates for the work. The Head of Contracting Activity would then come up with task orders that the PMO or PCO would give to businesses. Up until 2005, there was no centralized system to keep track of the contracts however. Each agency basically had its own system, which was not shared with the others. That meant the PMO and PCO didn’t have enough information to come up with good requirements for the contracts. All of these offices lacked adequate and qualified staff, which meant they often didn’t have enough people to negotiate with the contractors. At the same time, there were an increasing number of regulations put in place to try to oversee all this work, which dragged out the process. Many companies sat idle waiting for orders to go through, while they were still getting paid. From 2004-2005 for example, five major contractors gave invoices to the U.S. for $62.1 million in overhead costs, and only $26.7 million for actual work. What the U.S. ended up doing in Iraq was creating one bureaucracy on top of another, with each answering to a different master, with more and more rules to follow, and not enough people to carry them out. This dragged out the contracting process, which led to bigger and bigger costs.

The nature of many of the contracts given out in Iraq created another dilemma. The U.S. tended to favor cost-plus contracts for companies working on reconstruction. Those meant the government had to pay for all expenses whether a project was finished or not. That led to increasing costs, and pressure from Baghdad and Washington to fix the issue. The result was a quicker contracting process with different types of deals made, but with many details not worked out with the businesses beforehand. The lack of specifics in turn, led to more waste and bigger bills. Again, another troubling trend in the rebuilding effort was replayed. Each time the U.S. tried to solve one of its problems rebuilding Iraq it seemed to create new ones.

America tried to reform and re-organize its reconstruction effort in Iraq several times throughout the years. Each time, new offices were created, and new regulations were implemented. These tended to add to the difficulties rather than alleviate them. On top of that, the U.S. never seemed to realize the institutional shortcomings of its effort. That was the fact that there was never one person at the top who was in charge of everything. Instead, the Pentagon, State Department, and USAID maintained their own operations that tried to work together, but often clashed with each other. The result was a lot of wasted time and money. Many Iraqis believed that a country as rich and powerful as the United States could rebuild Iraq quickly and efficiently. What they didn’t know was that the Americans created a dysfunctional system that proved not up to the task.

SOURCES

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

Iraq’s Kurdistan Suffering From Rising Expectations, New Survey Shows Rising Dissatisfaction With Services And Corruption

Kurdistan is one of the most prosperous parts of Iraq. It has a better business environment then the rest of the country, thriving trade with Iran and Turkey, although it is mostly one way with the Kurds importing large amounts of consumer goods and foodstuffs, and stability due to the domination of the two ruling parties over politics, the economy, and security. The growing wealth in the region has led to increased expectations amongst the people. That has recently been shown in a Gallup poll that showed widespread dissatisfaction amongst Kurds with services and corruption, even higher than in the rest of the country.

Gallup found that more and more Kurds were unhappy with their situation. The Gallup organization interviewed 700 people over three years in Kurdistan. Amongst the questions asked of them, three were about services in the Kurdistan Regional Government (KRG), and a fourth was on corruption. One was whether people were satisfied with public transportation. In 2010, 46% said they were happy. That went up to 54% in 2011, before dropping to 23% in March 2012. Another was whether people were satisfied with the availability of housing. In 2010, 47% said they were, going up to 53% in 2011, before taking a large fall to 30% in 2012. When it came to corruption, 37% thought it was widespread in the KRG in 2009, 52% in 2010, 61% in 2011, and 81% in 2012. Only with education was there a different trend with 55% saying they were satisfied in 2010, going up to 64% in 2011, and only seeing a slight drop to 61% in 2012. These results show a dramatic turn around in Kurdish public opinion. The KRG has long portrayed itself as the “other Iraq” where the populace is safe and content. The 2010 to 2011 responses on services and corruption, showed that general trend. However, in 2012, all but education saw complete reverses. 

Are you satisfied with education, housing, and public transportation in the Kurdistan Regional Government? 

Is corruption widespread throughout the country?

Many of these turnarounds could have been predicted. There has been a construction boom in houses in cities like Irbil in recent years. Many of these however, have been high priced western style single family homes in exclusive areas. Many average Kurds cannot afford them, and are only open to government bureaucrats and party officials. This has distorted the market, raising prices, while excluding the majority.  The same could be said for corruption. There were months of public protests in the first half of 2011 in Sulaymaniya. One of the driving forces behind these outbursts was the belief that the two ruling parties, the Kurdistan Democratic Party (KDP) and Patriotic Union of Kurdistan (PUK) were involved in graft, bribery, and crooked business deals. The KRG has thus gone through something of a sea change in public perceptions of both the economic opportunities that are open to them, and the willingness to criticize their leaders. With all the talk of the rise of Kurdistan many people seem to be now asking about why specific issues like public services, housing, and corruption have not improved.

American Village housing development in Irbil (Overseas Property Mall)

Levels of discontent amongst Kurds in 2012 were even higher than in the rest of Iraq. When it came to corruption for instance, in 2009 only 37% of Kurds surveyed believed it was a major issue, compared to 79% in the rest of the country. By 2010, the difference between the two had narrowed to 61% saying it was a problem in Kurdistan versus 73% in the other parts of the nation. Finally, in early 2012, the two opinions had flipped flopped with 81% of Kurds and 67% of other Iraqis expressing their displeasure with corruption. Likewise with perceptions of public transportation views went from 54% saying they were satisfied in Kurdistan in 2011 to just 23% in 2012, while in the rest of Iraq it went from 37% to 50%. Again, this showed that many Kurds are unhappy with their situation, and are demanding more of their government. It’s especially surprising, because on issues like corruption, Baghdad has done as little as the KRG to address the issue, yet it is seen as more of a problem in the latter.   

Comparison of dissatisfaction with services Kurdistan vs Rest of Iraq 2011-2012

	Kurdistan 2011	Rest of Iraq 2011	Kurdistan 2012	Rest of Iraq 2012
Satisfied with public transportation	54%	37%	23%	50%
Satisfied with educational system	64%	36%	61%	48%
Satisfied with availability of affordable housing	53%	14%	30%	21%

The Kurdistan Regional Government appears to be suffering from a wave of rising expectations. People there can see the boom in business and construction in the major cities, and feel like they should be benefiting from this growth. The reality seems to be seeping in that the benefits are not being evenly distributed. That is causing the resentment shown in the March 2010 public opinion poll by Gallup. It could cut into the standing of the two ruling parties, unless they put real effort into addressing some of these issues. Already, the PUK has seen a decided loss in its base with the creation of the opposition party the Change List. The KDP has seen no serious challenge to its standing, but it could face the brunt of the public’s mood change in the future. This could be said of the country as a whole, where increased security, and a return to a sense of normality for many is leading people to want more services, jobs, and opportunities, meaning that politicians have to really govern for the first time since 2003, because other issues like the insurgency are not as pressing as before. This will be a real test, because many officials in both Baghdad and Irbil are not used to meeting public demand other than through patronage systems, which are only aimed at their followers to sustain their support. It will be an interesting few years to see if the central and regional governments can adapt to this changing environment. 

SOURCES

Dagher, Sam, “As Baghdad grapples with Sadr City, Iraqi Kurdistan busily builds ‘Dream City,’” Christian Science Monitor, 5/7/08

Dyke, Joe, “DEPRESSION IN KURDISTAN / Iraqi Kurdistan: Death of an Uprising,” Al-Akhbar, 5/29/12

Kareem, Dashti, “erbil’s building boom: favouring the rich, neglecting the poor,” Niqash, 8/4/11

Loschky, Jay, “In Iraqi Kurdistan, Satisfaction With Infrastructure Crumbles,” Gallup, 9/7/12

Mackinnon, Mark, “Corruption: The Dark Underbelly of Kurdistan’s Dream,” Globe And Mail, 3/12/07

Mandalawi, Sazan, “erbil’s unrestrained building boom causes conflicting emotions,” Niqash, 9/14/11

PBS NEWSHOUR VIDEO: Bridging Divides Among Iraq's Shiites, Sunnis and Kurds

Iraq’s Oil Industry Reaches New Highs in August 2012, But Can They Be Maintained?

In August 2012, Iraq benefited from increased oil exports, while prices rebounded. That resulted from three factors. First, the flow of oil through southern Iraq increased. Second, the Kurds re-started their oil exports, and finally, uncertainty in the Middle East caused petroleum prices to once again surpass the $100 per barrel mark. All together that meant the highest exports in decades, and huge profits. The question is whether those levels are sustainable.

Iraq claimed the highest petroleum exports in 30 years in August 2012. For the month, the country averaged 2.565 million barrels a day in exports. That was up from 2.516 million in July. That was due to increased flows through both the southern and northern pipelines. The Basra line saw an average of 2.252 million barrels, a 36,000 increase from the 2.216 million seen in July. The northern line averaged 313,000 barrels a day, up 19,000 barrels from 294,000 the month before. In total, Iraq exported 79.515 million barrels in August, compared to 77.915 in July. Basra has two new mooring points at the port at Al-Faw that has increased capacity through the south. Because of poor planning however, they can’t operate at the same time, because of a lack of pumping stations and pipelines. Southern oil fields are also producing more than Iraq’s infrastructure can handle. In the north, the Kurdistan Regional Government (KRG) announced that it would restart its exports at the beginning of August. The Kurds claimed they have pumped around 100,000-120,000 barrels a day last month. That probably made up for two attacks by the Kurdistan Workers Party (PKK) on the pipeline that occurred within Turkey, which temporarily halted exports. Overall, the southern oil fields and the port at Basra are still the mainstay of the country’s oil industry, and are largely responsible for it surpassing 2.5 million barrels a day in exports three times this year, all of which were record highs since 2003. Iraq could be pumping far more if it had planned better for the supporting infrastructure necessary for its new mooring points there. 

Iraq Oil Exports And Profits 2011-2012

Month	Avg. Exports (Mil/ Bar/ Day)	Avg. Price Per Barrel	Revenue (Bil)
Jan. 11	2.16	$90.78	$6.082
Feb.	2.20	$98.44	$6.064
Mar.	2.15	$107.13	$7.167
Apr.	2.14	$114.26	$7.342
May	2.22	$108	$7.45
Jun.	2.27	$105.17	$7.173
Jul.	2.16	$108.79	$7.3
Aug.	2.18	$104.91	$7.124
Sep.	2.10	$104.89	$6.619
Oct.	2.08	$104.91	$6.742
Nov.	2.13	$106.59	$6.833
Dec.	2.14	$106.18	$7.061
2011 Avg.	2.16	$105.00	$6.913
Jan. 12	2.10	$109.08	$7.123
Feb.	2.01	$112.93	$6.595
Mar.	2.31	$117.99	$8.475
Apr.	2.50	$116.80	$8.8
May	2.45	$103.04	$7.831
Jun.	2.40	$90.09	$6.486
Jul.	2.51	$96.50	$7.5
Aug.	2.56	$106.00	$8.442

 

Oil Exports Through Basra 2012
January 1.711 mil/bar/day

February 1.639 mil/bar/day

March 1.917 mil/bar/day

April 2.115 mil/bar/day

May 2.086 mil/bar/day

June 2.085 mil/bar/day

July 2.216 mil/bar/day

August 2.252 mil/bar/day

Oil Exports Through Kirkuk 2012

January 395,000 bar/day

February 375,000 bar/day

March 400,000 bar/day

April 393,000 bar/day

May 366,000 bar/day

June 318,000 bar/day

July 294,000 bar/day

August 313,000 bar/day

Iraq also benefited from continued tensions in the Middle East. Because of fighting in Syria and the dispute with Iran over its nuclear program prices for petroleum returned to the $100 a barrel mark. For August, a barrel of Iraqi petroleum sold for $106. That compared to the previous two months when it went for $96.50 and $90.09. For sixteen of the last twenty months the country’s oil has gone for $100 a barrel or more. That meant in August, Iraq earned $8.442 billion, the third highest amount since 2011. Iraq is the most oil dependent country in the region, and depends upon these revenues to fund its state-run economy. It’s ironic, because the increase in exports and profits only increases this dependency.

Despite the high marks seen in August, Iraq’s oil industry has never been consistent. One month of record highs can be followed by a decline the next. April 2012 for instance, was the first time in years that Iraq exports an average of 2.5 million barrels a day, but then that amount dropped for the next two months. Iraq is also living off of high oil prices that it has little control over. If tensions in the Middle East were to suddenly subside, prices would drop, and Iraq’s increased oil output would actually help bring them down even more. These are dilemmas that many other petroleum states face. Iraq can only continue with its plans, and hope that the regional situation will remain uncertain, so that it can gain from the high oil prices that are the result. 

SOURCES

Agence France Presse, "Iraq oil exports highest in 30 years," 9/1/12 

Associated Press, "Iraq's oil exports hit highest level in 30 years," 9/2/12

Aswat al-Iraq, "Highest Iraqi oil exports in decades, spokesman," 9/1/12 

Cakan, Seymus, "Fire shuts Iraqi crude oil pipeline to Turkey," Reuters, 8/27/12

Hafidh, Hassan, "Iraq's Kirkuk Oil Flow To Turkey Still On Hold - Shipper," Dow Jones, 8/8/12

Lawler, Alex, "Iraq's south oil exports head for record in August," 8/20/12

Rasheed, Ahmed, "Exclusive: Iraq pipeline delays threaten Shell's Majnoon," Reuters, 8/26/12
- "UPDATE 2-Iraqi Kurdistan to keep pumping oil to Sep. 15-sources," Reuters, 9/1/12

Reuters, "Pipeline blast stop Iraq oil flow to Turkey," 8/6/12