Iraq once again leaps into the void, but not before political elites secure funding

While the federal Ministries of Finance and Planning are expected to approve, disperse, and follow up on these funds as they traditionally do, the initiative and final say on how they are to be spent will sit with local provincial governors in coordination with the often politically appointed middle management and their complex web of bureaucratic committees.

Hence, this may create ample space for corruption, either through evasive contracting processes or even unnecessary bloating of the payroll via questionable projects and programs. Transparency — or lack thereof — was a major concern for observers in the run-up to the bill’s passage. On the payroll expansion end, the bill swelled it by another $1 billion (6%) by offering employment to temporary and contracted workers and even creating a graduate scheme (see table 1). This amount was almost equal to the $1.1 billion allotted for social security, health and education, war compensation, and the internally displaced.      

There are several reasons for the broad political consensus to pass the bill. In addition to attempting to bypass the legal constraints imposed upon the caretaker government as aforementioned, the bill provides a lifeline for political blocs to continue their stalemate for the months to come. It was hoped that with Iraqis struggling economically and the government unable to tap the oil money, politicians would put the country first and reach a long-awaited grand deal on government formation.

But the emergency spending bill was created with the objective of curbing potential public outcry. It secures wages vital to sustaining Iraqis’ daily lives while providing the funds to alleviate — even if only partially — high food prices, thus allowing all parties to continue their stalemate with minimal popular resistance.

Furthermore, neither the SCF nor the ASH would have dared hinder the bill and risk their position in the continuing standoff. The Kurds, despite their ongoing dispute with Baghdad over the constitutionality of their independent oil sector, were smart enough not to stand in the way and become a scapegoat. Even Mr. al-Sadr only made his move after the bill successfully passed; if his MPs had resigned while parliament was still drafting the bill, the SCF would have branded the Sadrists as obstructionists.

But the far greater consideration for all parties is that how these funds would also help revive the activities of the often-overlooked “economic committees” that each side has established to influence contracting decisions and gain financially as a result. After all, running a political movement in Iraq is not cheap — mouths must be fed, loyalties bought, militias armed, and operations sustained. This is especially the case when traditional foreign backers are either reeling under sanctions or have grown tired of wasting their money on regional adventurism.

The next six months will be a crucial fight for financial survival among the major players, and raiding contracts requires a well-oiled and endowed government. The finances and more crucially employment opportunities will also be key in winning over regular Iraqis. Former PM Nouri al-Maliki’s rebound in the latest elections could be attributed to maintaining his influence in institutions and sustaining a system of favors that won him some popularity after years of blame. The Sadrists undertook a methodical takeover of key government positions in the last three years to counter their rivals’ decade and a half head start. Hence, it was out of question for all involved to even consider resigning — or any major political move — before the emergency financing bill was passed.

Into the political void: What happens now?

There are two considerations to think of in the immediate term. First, what will Iraq’s Independent High Electoral Commission do? And second, have the Sadrists decided to abandon the “political process”?

On the former, the fifth section of Article 15 of the Iraqi House of Representatives Elections Law (No. 9/2020) clearly dictates that “if a seat becomes vacant, the candidate with the highest score in the electoral district shall replace its holder.” This is expected to cause a dramatic change of fate for the SCF, especially in southern provinces where they closely trailed the Sadrists.

With their seats potentially bolstered, the SCF may come closer than they ever have in the past seven months to forming a government. But they still need to bring together at least two-thirds of parliament (220 seats) to do so. Even if the SCF takes all of the clearly affiliated Shi’a seats in parliament — inclusive of the 73 abandoned by the Sadrists — amounting to 151 in total (see table 2), they will still be 69 seats short.

In other words, they cannot form a government unless they ally with what remains of the ASH — the major Sunni and Kurdish political players. Without a doubt this was part of Mr. al-Sadr’s decision making.

 

 

There are two potential scenarios moving forward. The first is for the SCF to attempt to form a government after reaching an agreement with the Kurds and Sunnis. Independents and other seat holders would likely come through as the country overwhelmingly wants an exit from the current gridlock. In such a case, the Sadrists would be left as opposition outside parliament. Thus far, this seems to be where the SCF is heading. On June 14, it voiced “respect for the Sadrist decision” and called for “all Iraqi political parties to join dialogue to form a strong government.”

The risk here for the SCF and the new government is that Mr. al-Sadr — and his hundreds of thousands of loyalists — would bring down such a government in a matter of months after its formation. This is not beyond comprehension. After all, the Sadrists rode the wave of the Tishreen protests in late 2019 that brought down the Adil Abdul-Mahdi cabinet, and a repetition of the “blue hats” experience — when Mr. al-Sadr tasked his followers with protecting demonstrators, only to later abandon them — is very much feasible given Iraq’s sustained socio-economic woes. But even here, the SCF may not be as ill-prepared as some of its key constituents were in 2019. After all, the fall of Mr. Abdul-Mahdi’s cabinet was a lesson to learn from.

The second scenario is for the SCF to mitigate Mr. al-Sadr’s plans and instead offer the Sadrists cabinet positions in the next government. Of course, this would be done as a compromise to unite the Shi’a House and by extension all political players in the country, as well as in recognition of Mr. al-Sadr’s influence and his movement’s rights as the biggest winners in the elections.

This is actually a beneficial scenario for the Sadrists as it allows them deniability of responsibility for the country’s political and economic challenges. Being excluded from government and undermined by other Shi’a parties had always been the line treaded by Mr. al-Sadr and his movement to divert any blame. Had he formed a government, such excuses would no longer work. More importantly, this scenario allows the Sadrists to maintain their grip on key government positions.

But even here, Iraq’s politics are hard to predict. Personal and historical feuds could re-emerge, making it difficult to reach a compromise. The politicking is expected to last longer now and in the worst of cases, if neither party is pleased, the odds of settling things with arms are still not very farfetched.  

Farewell ye year of windfall?

On a final note, Iraq’s politics have once again complicated its economic trajectory. Oil prices are likely to remain at high levels for the next few years. The International Monetary Fund expects them to bring oil exporters in the Gulf around $1.4 trillion in additional revenue over the next four to five years.

While Iraq’s neighbors are preparing to utilize these large sums to diversify their economies and ready themselves for the coming decades where oil’s dominance in the global energy mix becomes increasingly challenged by efforts to reach net-zero emissions, Iraq’s executive branch is being buffeted by a struggle for power among the country’s politicians.

Even the Oil Ministry’s plans to spend $17 billion — directly and through investment — to take oil production capacity to 8 million barrels per day by 2028, basically the lifeline for Iraq’s economic existence, are jeopardized. In the recently passed emergency spending bill, the ministry was only allocated $340 million. Without a budget and a stable government, even the reforms needed to escape oil dependence under Iraq’s ambitious White Paper will have to wait. Increasingly, with all the endless political wrangling that has gone on since 2018, the tenure of an Iraqi cabinet is becoming two years at best rather than four.  

 

Yesar Al-Maleki is an energy economist and consultant with an extensive knowledge of the intertwining subjects of energy, geopolitics, and economics in the region. He is also a non-resident scholar at the Middle East Institute (MEI).

Photo by Iraqi Parliament Press Office/Handout/Anadolu Agency via Getty Images

MEI is an independent, non-partisan, non-for-profit, educational organization. It does not engage in advocacy and its scholars’ opinions are their own. MEI welcomes financial donations, but retains sole editorial control over its work and its publications reflect only the authors’ views. For a listing of MEI donors, please click here.

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