The premiership of the staunchly pro-Iran Prime Minister Al-Maliki coincided with booming oil exports and global oil prices averaging up to double today’s rate. In that period, hundreds of billions of dollars went missing from state coffers, as later confirmed by the Iraqi Parliament’s Finance Committee. One of the former prime minister’s close associates is believed to have transferred more than $6 billion to a single overseas bank account. Once Iran’s involvement in the war against Daesh in Iraq — mostly via the Popular Mobilization Units — and against the armed opposition to Syria’s Bashar Assad intensified, Iraqi government money was also reportedly channeled to the Iranian and Syrian regimes to fund the war effort of the so-called Axis of Resistance.
This week, 2,000 corporations from around the world, as well as regional and international organizations and government representatives, gathered in Kuwait City for the International Conference for the Reconstruction of Iraq to focus on development and investment in the aftermath of the war against Daesh. At the conference, Iraqi ministers estimated the funds needed for reconstruction would be between $88 and $100 billion, roughly half of Iraq’s GDP. After years of plunder by previous government officials, these funds will have to come from foreign investors.
During the event, Iraq showcased feasibility studies and licenses for more than 200 critical investment projects in housing, energy and transport infrastructure, electricity, agriculture, water and sanitation, including 80 projects in Iraqi Kurdistan. On the event’s third and last day, participants made their support pledges. Kuwait, which co-hosted the event with Iraq, the UN, the EU and the World Bank, promised a loan of $1 billion, plus another billion in direct investment, while Saudi Arabia will assist with $1.5 billion, the UAE with $500 million and Turkey with a $5 billion credit line.
However, the total pledged during the conference falls more than $50 billion short of the Iraqi government’s declared needs. This is because potential investors are naturally cautious and, after years of conflict in Iraq and neighboring Syria, there is donor fatigue.
The country’s recent trajectory does leave some room for cautious optimism. Under Al-Maliki’s successor, Haider Abadi, the Iraqi government has managed to build an image of a more moderate and competent administration, with the national interest and confessional unity placed above personal enrichment plans and sectarian agendas.
The return of Al-Maliki to the premiership is a dreadful and not far-fetched prospect that would put many foreign investors on the back foot following their pledges at this week’s reconstruction conference in Kuwait.
Dr. Manuel Almeida
In December, following the liberation of Mosul from Daesh, Abadi declared victory over the radical group. Despite the overwhelming pro-independence vote in the Kurdistan Regional Government’s referendum last September, the formal territorial fragmentation of Iraq has been averted. Another important milestone in the works, but one that is yet to be completed, is the planned disarmament of the PMU’s fighters and integration of many of them into the regular army.
On the economic front, Abadi’s government saw the UN Security Council lift the sanctions imposed for Saddam Hussein’s invasion of Kuwait in 1990, which was essential to attracting foreign investment. A crucial step was the deal reached with the Kuwaiti government to pay the remainder of war-time reparations through gas exports via Basra.
However, none of these gains should be taken as a certainty, especially with an unpredictable legislative election looming in May. Among the leading contenders is Al-Maliki himself, heading his State of Law Coalition, while several PMU leaders — some loyal to Tehran — have joined new Shiite coalitions. There have also been rumors that Masoud Barzani, the head of the Kurdistan Democratic Party and former KRG president, has been testing the possibility of an alliance with Al-Maliki. This alliance would constitute a major challenge to the current prime minister’s re-election. Last month, Abadi announced his re-election bid at the head of a cross-sectarian bloc, the “Victory Alliance,” which collapsed after less than 48 hours.
The return of Al-Maliki to the premiership is a dreadful and not far-fetched prospect that would put many foreign investors on the back foot. The current vice-president remains a widely influential figure and leads the largest bloc in parliament.
But the key challenges facing the future Iraqi government and its hopes of building a much-needed investor-friendly environment do not end with the people’s leadership choice in a few months’ time. Corruption will remain a cause of major concern, and the related matters of transparency, accountability and even the existence or otherwise of qualified local staff to deliver the various projects will define success or failure.
The proposed areas for foreign investment could tackle issues that preceded the rise of Daesh, such as water scarcity, poor housing and food insecurity, and that are crucial for the stabilization of the areas where the terrorist group had the greatest impact. After this week’s landmark conference, the ball is back in Baghdad’s court.
Dr. Manuel Almeida is a political analyst and consultant focusing on the Middle East. He is the former editor of the English online edition of Asharq Al-Awsat newspaper and holds a Ph.D. in International Relations from the London School of Economics and Political Science. Twitter: @_ManuelAlmeida