The Iraq Study Group Report
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Hashimi and Dhari
The influence of Sunni Arab politicians in the government is questionable. The leadership of the Sunni Arab insurgency is murky, but the following two key Sunni Arab figures have broad support.
tariq al-hashimi: Hashimi is one of two vice presidents of Iraq and the head of the Iraqi Islamic Party, the largest Sunni Muslim bloc in parliament. Hashimi opposes the formation of autonomous regions and has advocated the distribution of oil revenues based on population, a reversal of de-Baathification, and the removal of Shiite militia fighters from the Iraqi security forces. Shiite death squads have recently killed three of his siblings.
sheik harith al-dhari: Dhari is the head of the Muslim Scholars Association, the most influential Sunni organization in Iraq. Dhari has condemned the American occupation and spoken out against the Iraqi government. His organization has ties both to the Sunni Arab insurgency and to Sunnis within the Iraqi government. A warrant was recently issued for his arrest for inciting violence and terrorism, an act that sparked bitter Sunni protests across Iraq.
Iraqi Kurds have succeeded in presenting a united front of two main political blocs—the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK). The Kurds have secured a largely autonomous Kurdish region in the north, and have achieved a prominent role for Kurds within the national government. Barzani leads the Kurdish regional government, and Talabani is president of Iraq.
Leading Kurdish politicians told us they preferred to be within a democratic, federal Iraqi state because an independent Kurdistan would be surrounded by hostile neighbors. However, a majority of Kurds favor independence. The Kurds have their own security forces—the peshmerga—which number roughly 100,000. They believe they could accommodate themselves to either a unified or a fractured Iraq.
Barzani and Talabani
Kurdish politics has been dominated for years by two figures who have long-standing ties in movements for Kurdish independence and self-government.
MASSOUD BARZANI: Barzani is the leader of the Kurdistan Democratic Party and the President of the Kurdish regional government. Barzani has cooperated with his longtime rival, Jalal Talabani, in securing an empowered, autonomous Kurdish region in northern Iraq. Barzani has ordered the lowering of Iraqi flags and raising of Kurdish flags in Kurdish-controlled areas.
JALAL TALABANI: Talabani is the leader of the Patriotic Union of Kurdistan and the President of Iraq. Whereas Barzani has focused his efforts in Kurdistan, Talabani has secured power in Baghdad, and several important PUK government ministers are loyal to him. Talabani strongly supports autonomy for Kurdistan. He has also sought to bring real power to the office of the presidency.
Key Issues
NATIONAL RECONCILIATION. Prime Minister Maliki outlined a commendable program of national reconciliation soon after he entered office. However, the Iraqi government has not taken action on the key elements of national reconciliation: revising de-Baathification, which prevents many Sunni Arabs from participating in governance and society; providing amnesty for those who have fought against the government; sharing the country's oil revenues; demobilizing militias; amending the constitution; and settling the future of Kirkuk.
One core issue is federalism. The Iraqi Constitution, which created a largely autonomous Kurdistan region, allows other such regions to be established later, perhaps including a “Shi ‘astan” comprising nine southern provinces. This highly decentralized structure is favored by the Kurds and many Shia (particularly supporters of Abdul Aziz al-Hakim), but it is anathema to Sunnis. First, Sunni Arabs are generally Iraqi nationalists, albeit within the context of an Iraq they believe they should govern. Second, because Iraq's energy resources are in the Kurdish and Shia regions, there is no economically feasible “Sunni region.” Particularly contentious is a provision in the constitution that shares revenues nationally from current oil reserves, while allowing revenues from reserves discovered in the future to go to the regions.
The Sunnis did not actively participate in the constitution-drafting process, and acceded to entering the government only on the condition that the constitution be amended. In September, the parliament agreed to initiate a constitutional review commission slated to complete its work within one year; it delayed considering the question of forming a federalized region in southern Iraq for eighteen months.
Another key unresolved issue is the future of Kirkuk, an oil-rich city in northern Iraq that is home to substantial numbers of Kurds, Arabs, and Turkmen. The Kurds insisted that the constitution require a popular referendum by December 2007 to determine whether Kirkuk can formally join the Kurdish administered region, an outcome that Arabs and Turkmen in Kirkuk staunchly oppose. The risks of further violence sparked by a Kirkuk referendum are great.
Iraq's leaders often claim that they do not want a division of the country, but we found that key Shia and Kurdish leaders have little commitment to national reconciliation. One prominent Shia leader told us pointedly that the current government has the support of 80 percent of the population, notably excluding Sunni Arabs. Kurds have fought for independence for decades, and when our Study Group visited Iraq, the leader of the Kurdish region ordered the lowering of Iraqi flags and the raising of Kurdish flags. One senior American general commented that the Iraqis “still do not know what kind of country they want to have.” Yet many of Iraq's most powerful and well-positioned leaders are not working toward a united Iraq.
SECURITY. The security situation cannot improve unless leaders act in support of national reconciliation. Shiite leaders must make the decision to demobilize militias. Sunni Arabs must make the decision to seek their aims through a peaceful political process, not through violent revolt. The Iraqi government and Sunni Arab tribes must aggressively pursue al Qaeda.
Militias are currently seen as legitimate vehicles of political action. Shia political leaders make distinctions between the Sunni insurgency (which seeks to overthrow the government) and Shia militias (which are used to fight Sunnis, secure neighborhoods, and maximize power within the government). Though Prime Minister Maliki has said he will address the problem of militias, he has taken little meaningful action to curb their influence. He owes his office in large part to Sadr and has shown little willingness to take on him or his Mahdi Army.
Sunni Arabs have not made the strategic decision to abandon violent insurgency in favor of the political process. Sunni politicians within the government have a limited level of support and influence among their own population, and questionable influence over the insurgency. Insurgents wage a campaign of intimidation against Sunni leaders—assassinating the family members of those who do participate in the government. Too often, insurgents tolerate and cooperate with al Qaeda, as they share a mutual interest in attacking U.S. and Shia forces. However, Sunni Arab tribal leaders in Anbar province recently took the positive step of agreeing to pursue al Qaeda and foreign fighters in their midst, and have started to take action on those commitments.
Sunni politicians told us that the U.S. military has to take on the militias; Shia politicians told us that the U.S. military has to help them take out the Sunni insurgents and al Qaeda. Each side watches the other. Sunni insurgents will not lay down arms unless the Shia militias are disarmed. Shia militias will not disarm until the Sunni insurgency is destroyed. To put it simply: there are many armed groups within Iraq, and very little will to lay down arms.
GOVERNANCE. The Iraqi government is not effectively providing its people with basic ser-vices: electricity, drinking water, sewage, health care, and education. In many sectors, production is below or hovers around prewar levels. In Baghdad and other unstable areas, the situation is much worse. There are five major reasons for this problem.
First, the government sometimes provides services on a sectarian basis. For example, in one Sunni neighborhood of Shia-governed Baghdad, there is less than two hours of electricity each day and trash piles are waist-high. One American official told us that Baghdad is run like a “Shia dictat
orship” because Sunnis boycotted provincial elections in 2005, and therefore are not represented in local government.
Second, security is lacking. Insurgents target key infrastructure. For instance, electricity transmission towers are downed by explosives, and then sniper attacks prevent repairs from being made.
Third, corruption is rampant. One senior Iraqi official estimated that official corruption costs Iraq $5-7 billion per year. Notable steps have been taken: Iraq has a functioning audit board and inspectors general in the ministries, and senior leaders including the Prime Minister have identified rooting out corruption as a national priority. But too many political leaders still pursue their personal, sectarian, or party interests. There are still no examples of senior officials who have been brought before a court of law and convicted on corruption charges.
Fourth, capacity is inadequate. Most of Iraq's technocratic class was pushed out of the government as part of de-Baathification. Other skilled Iraqis have fled the country as violence has risen. Too often, Iraq's elected representatives treat the ministries as political spoils. Many ministries can do little more than pay salaries, spending as little as 10-15 percent of their capital budget. They lack technical expertise and suffer from corruption, inefficiency, a banking system that does not permit the transfer of moneys, extensive red tape put in place in part to deter corruption, and a Ministry of Finance reluctant to disburse funds.
Fifth, the judiciary is weak. Much has been done to establish an Iraqi judiciary, including a supreme court, and Iraq has some dedicated judges. But criminal investigations are conducted by magistrates, and they are too few and inadequately trained to perform this function. Intimidation of the Iraqi judiciary has been ruthless. As one senior U.S. official said to us, “We can protect judges, but not their families, their extended families, their friends.” Many Iraqis feel that crime not only is unpunished, it is rewarded.
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3. Economics
There has been some economic progress in Iraq, and Iraq has tremendous potential for growth. But economic development is hobbled by insecurity, corruption, lack of investment, dilapidated infrastructure, and uncertainty. As one U.S. official observed to us, Iraq's economy has been badly shocked and is dysfunctional after suffering decades of problems: Iraq had a police state economy in the 1970s, a war economy in the 1980s, and a sanctions economy in the 1990s. Immediate and long-term growth depends predominantly on the oil sector.
Economic Performance
There are some encouraging signs. Currency reserves are stable and growing at $12 billion. Consumer imports of computers, cell phones, and other appliances have increased dramatically. New businesses are opening, and construction is moving forward in secure areas. Because of Iraq's ample oil reserves, water resources, and fertile lands, significant growth is possible if violence is reduced and the capacity of government improves. For example, wheat yields increased more than 40 percent in Kurdistan during this past year.
The Iraqi government has also made progress in meeting benchmarks set by the International Monetary Fund. Most prominently, subsidies have been reduced—for instance, the price per liter of gas has increased from roughly 1.7 cents to 23 cents (a figure far closer to regional prices). However, energy and food subsidies generally remain a burden, costing Iraq $11 billion per year.
Despite the positive signs, many leading economic indicators are negative. Instead of meeting a target of 10 percent, growth in Iraq is at roughly 4 percent this year. Inflation is above 50 percent. Unemployment estimates range widely from 20 to 60 percent. The investment climate is bleak, with foreign direct investment under 1 percent of GDP. Too many Iraqis do not see tangible improvements in their daily economic situation.
Oil Sector
Oil production and sales account for nearly 70 percent of Iraq's GDP, and more than 95 percent of government revenues. Iraq produces around 2.2 million barrels per day, and exports about 1.5 million barrels per day. This is below both prewar production levels and the Iraqi government's target of 2.5 million barrels per day, and far short of the vast potential of the Iraqi oil sector. Fortunately for the government, global energy prices have been higher than projected, making it possible for Iraq to meet its budget revenue targets.
Problems with oil production are caused by lack of security, lack of investment, and lack of technical capacity. Insurgents with a detailed knowledge of Iraq's infrastructure target pipelines and oil facilities. There is no metering system for the oil. There is poor maintenance at pumping stations, pipelines, and port facilities, as well as inadequate investment in modern technology. Iraq had a cadre of experts in the oil sector, but intimidation and an extended migration of experts to other countries have eroded technical capacity. Foreign companies have been reluctant to invest, and Iraq's Ministry of Oil has been unable to spend more than 15 percent of its capital budget.
Corruption is also debilitating. Experts estimate that 150,000 to 200,000—and perhaps as many as 500,000—barrels of oil per day are being stolen. Controlled prices for refined products result in shortages within Iraq, which drive consumers to the thriving black market. One senior U.S. official told us that corruption is more responsible than insurgents for breakdowns in the oil sector.
The Politics of Oil
The politics of oil has the potential to further damage the country's already fragile efforts to create a unified central government. The Iraqi Constitution leaves the door open for regions to take the lead in developing new oil resources. Article 108 states that “oil and gas are the ownership of all the peoples of Iraq in all the regions and governorates,” while Article 109 tasks the federal government with “the management of oil and gas extracted from current fields.” This language has led to contention over what constitutes a “new” or an “existing” resource, a question that has profound ramifications for the ultimate control of future oil revenue.
Senior members of Iraq's oil industry argue that a national oil company could reduce political tensions by centralizing revenues and reducing regional or local claims to a percentage of the revenue derived from production. However, regional leaders are suspicious and resist this proposal, affirming the rights of local communities to have direct access to the inflow of oil revenue. Kurdish leaders have been particularly aggressive in asserting independent control of their oil assets, signing and implementing investment deals with foreign oil companies in northern Iraq. Shia politicians are also reported to be negotiating oil investment contracts with foreign companies.
There are proposals to redistribute a portion of oil revenues directly to the population on a per capita basis. These proposals have the potential to give all Iraqi citizens a stake in the nation's chief natural resource, but it would take time to develop a fair distribution system. Oil revenues have been incorporated into state budget projections for the next several years. There is no institution in Iraq at present that could properly implement such a distribution system. It would take substantial time to establish, and would have to be based on a well-developed state census and income tax system, which Iraq currently lacks.
U.S.-Led Reconstruction Efforts
The United States has appropriated a total of about $34 billion to support the reconstruction of Iraq, of which about $21 billion has been appropriated for the “Iraq Relief and Reconstruction Fund.” Nearly $16 billion has been spent, and almost all the funds have been committed. The administration requested $1.6 billion for reconstruction in FY 2006, and received $1.485 billion. The administration requested $750 million for FY 2007. The trend line for economic assistance in FY 2008 also appears downward.
Congress has little appetite for appropriating more funds for reconstruction. There is a substantial need for continued reconstruction in Iraq, but serious questions remain about the capacity of the U.S. and Iraqi governments.
The coordination of assistance programs by the Defense Department, State Department, United States Agency for International Development, and other agencies has been ineffective. There
are no clear lines establishing who is in charge of reconstruction.
As resources decline, the U.S. reconstruction effort is changing its focus, shifting from infrastructure, education, and health to smaller-scale ventures that are chosen and to some degree managed by local communities. A major attempt is also being made to improve the capacity of government bureaucracies at the national, regional, and provincial levels to provide services to the population as well as to select and manage infrastructure projects.
The United States has people embedded in several Iraqi ministries, but it confronts problems with access and sustainability. Moqtada al-Sadr objects to the U.S. presence in Iraq, and therefore the ministries he controls—Health, Agriculture, and Transportation—will not work with Americans. It is not clear that Iraqis can or will maintain and operate reconstruction projects launched by the United States.
Several senior military officers commented to us that the Commander's Emergency Response Program, which funds quick-impact projects such as the clearing of sewage and the restoration of basic services, is vital. The U.S. Agency for International Development, in contrast, is focused on long-term economic development and capacity building, but funds have not been committed to support these efforts into the future. The State Department leads seven Provincial Reconstruction Teams operating around the country. These teams can have a positive effect in secure areas, but not in areas where their work is hampered by significant security constraints.
Substantial reconstruction funds have also been provided to contractors, and the Special Inspector General for Iraq Reconstruction has documented numerous instances of waste and abuse. They have not all been put right. Contracting has gradually improved, as more oversight has been exercised and fewer cost-plus contracts have been granted; in addition, the use of Iraqi contractors has enabled the employment of more Iraqis in reconstruction projects.