Serj Panchuk
The experience of Iraq is going to become some kind of a manual for political scientists and investors. It will be cited again and again. This time it is the so-called Libyan “dictator” Muammar Kaddafi who has become the target of the “Western democracy”. The international coalition keeps bombing Libya and killing people, yet they say it is done to save the people of Libya from dictatorship and to give them democracy. The White House doesn’t conceal any more that the war is being waged to overthrown Kaddafi.
What will Libya really get after this “export of democracy”? Will the intervention end up with the disintegration of the country with many years of chaos and violence? (It is said that wherever the Americans come the population suddenly gets divided into Shiites and Sunnites). It is difficult to avoid drawing such parallels, especially as it has been 8 years since the Allied Forces headed by the US started a war against Iraq.
In order to avoid inconvenient comparisons numerous Western politicians and political scientists are trying to prove that there is nothing in common between the past war in Iraq and the current military campaign against Libya.
Politics: what is the current situation in Iraq?
In 2003 the Western coalition was sure (or just pretended) that the overthrow of Saddam Hussein would almost automatically start democratic changes in Iraq, which in its turn will become a role model for all the other countries of the Middle East. In connection with this the following changes were made after the war:
· The one-party system was replaced with a multi-party system and democratic voting
· According to the new Iraqi constitution (2005) ¼ of places in the parliament are allocated for women, which is obviously a brave step for the Middle-East country.
· They managed to find a fragile balance between different ethnic and religious groups of the Iraqi population: Sunnites (20%), Shiites (55-60% and Kurds (15-20%). They managed to find a magical formula of national unity: the Prime Minister is (the key post in Iraq) is a Shiite, the President is a Kurd and the Chairman of the Parliament is a Sunnite.
· It is a great success that the Sunnites that boycotted the previous election campaign took part in the parliamentary elections of 2010.
· The Iraqi mass media also underwent serious changes. Today there are over 100 newspapers and magazines, dozens of private radio stations and TV channels, including satellite TV, which was forbidden under the rule of Saddam Hussein.
So, experts note that at first sight the exported political model of “Western democracy” confirms that the USA is quite successful in overthrowing the disliked political regimes. However the real situation in Iraq looks gloomy, if not dangerous. Let’s take a look at the major political problem of the present-day Iraq:
· 8 year later the political situation is still critical. These are the consequences of the US intervention:
ü Numerous deaths and casualties among the civil population. According to preliminary estimations, over 1M people died, a couple of millions were injured, 3.4M left the country. So the Iraqi people are unlikely to forgive the US for that.
ü Iraq has been on the verge of a civil war ever since. Terrorist acts have almost become a routine. Only in January-February 2011 nearly 300 people became the victims of the terrorist chaos.
ü Baghdad has become a military camp. It is divided by 1500 check-points and blast-proof concrete walls, disfiguring one of the most beautiful cities in the world (the Baghdad authorities say that the US government must pay $1B of compensation for the damage done to the city during the war). The Iraqis say that the whole country resembles a top security prison.
Over the last 8 years the US army hasn’t managed to change the security situation for the better.
· Political instability. Last year’s parliamentary elections are called democratic only by Americans and their allies.
ü They were held from March till May (!) with crying “selection” of the disliked candidates and their elimination
ü As these elections didn’t define the evident winner, the disagreement between the Shiites and Sunnites was aggravated. It took 6 months to summon a new parliament and almost a year to form a new government. However, such posts as the minister of defense, internal affairs and national security are still vacant.
ü Weak centralization of power. It is still hidden in the so-called green zone. Such a government cannot control even Baghdad, not to mention the entire country.
ü Most people do not trust the authorities. And there is nothing strange about that. Every government that comes to power as the result of an overturn or a revolution is initially compromised. Moreover the current Iraqi government is unskillful and passive.
ü Islamist radicalization. The Sunnites and Shiites extremist groups have become more active. The Iraqi branch of Al-Quaeda attacks the police and civil population, which means that the authorities cannot ensure security in the country. According to some analysts, another danger is the so-called “iranization” of Iraq. The political and economic ties between Iraq and Iran are getting closer.
· The absence of law and order. The security forces are weak. Civil people own tons of weapons. Every day people are killed and kidnapped. So, the local authorities are probably unable to control the situation without the US military forces. Indeed, what is going to happen with Iraq after the remaining 50000 American soldiers are withdrawn from the country at the end of 2011? The Iraqi authorities say they won’t be able to control the situation on their own until 2020. It is highly probable that upon the request of the Iraqi government the US troops will stay in Iraq for a longer period.
· Corruption. According to Transparency International Iraq comes 175th (the last one) in terms of struggle with corruption. Corruption scandals hit the country rather often. $40B has recently disappeared from the Development Fund.
· The unstable balance between different ethnic and religious groups. Any elections in the country resemble population census, Kurds vote for Kurds, Sunnites vote for their representatives and the same holds true for Shiites. And it is very difficult to take into account the interests of the entire population. For example, there are serious disputes between the Iraqi Shiites and Sunnites about some territories rich in crude oil. Each group is ready to fight for the territories. The country is divided into various religious, ethnic and other communities. The US troops prevent the population from a full-scale interethnic and inter-confessional massacre.
· Mass media problems. At first sight there is freedom of speech in the country. Now it is about the lack of technical equipment, electricity, mass killing of media workers and other problems. Another problem is that numerous TV channels and other media are connected with different political, ethnic and religious groups struggling for power, which only aggravates the disputes between the groups.
· Limited human rights and freedoms. It is sufficient to say that according to some human rights organizations, there are numerous secret prisons with thousands of prisoners being tortured and jailed, and it is done out of court. Labor unions are almost forbidden. The situation with women’s rights has become even worse.
So Iraq teaches the rest of the world another lesson: no war can bring genuine democracy. It should be developed naturally, which takes effort and time.
The Iraqi economy: from bad to worse.
At first the Iraqi economy seems quite stable:
- The GDP is gradually growing - 4,3 % in 2009 and 5,5% in 2010.
- The manufacturing industry is being gradually restored as well
- During the first after-war years the inflation rate reached 66% while in 2009 it was just 6.8%
- The Iraqi Dinar exchange rate is relatively stable
- The huge external debt has been reduced (under Saddam Hussein it reached $200B). It was reduced dramatically, by 90%. Under the US pressure numerous lenders just canceled Iraq’s debts. Russia “forgot” 93% of Iraq’s debt. However, after all the debt remissions Iraq’s sovereign debt already reached $52.5B
- The gold and currency reserves keep growing. They have already reached $46B (24th place in the world).
- The private sector is being developed as well.
However some experts say that the official data are far from being real. It is not accidental that the data on Iraq are absent in most international reference books and ratings, including The Global Competitiveness Index and others. No credit agencies consider the country’s credit rating as there is no objective information on the current state of the Iraqi economy.
Some experts even assume that the Iraqi economy is almost ruined:
- Most industrial enterprises are still closed or destroyed during the airstrikes.
- Almost all the consumer products are imported.
- The local agriculture is severely damaged. The supplies declined by 40%
- The banking system is still not restored.
In this case what are the reasons for the weak development of the country’s economy?
· International sanctions and wars (1980-1990 with Iran; 1990-1991 with Kuwait). Huge military spending and 12 years of economic sanctions imposed by the UN have had a devastating impact on the Iraqi economy.
In 1991 the UN called Iraq the country of pre-industrial development. The intervention of the allied forces (US, UK) in 2003 literary finished off the country’s economy
· The structure of the Iraqi economy doesn’t meet the modern standards and requirements.
- the Iraqi economy is focused on the country’s agriculture and sector of raw materials
- the industrial sector is not diversified.
- crude oil is the only thing that connects Iraq with the global market.
· Bureaucracy, unfavorable business conditions and the lack of foreign investments. However, the government has recently simplified the business conditions in the country. But still Iraq comes 153th in the rating of business conditions (it is a poor result).
· No business security. The recent report released by WTM Global Trends looks surprising. According to it, the Iraqi tourism is attracting investors in order to build luxurious hotels, airports. Some experts say Iraq will be the next leader in tourist business. In fact the thing is about the growing number Muslim pilgrims who want to visit the main sacred place for Shiites. It is next to impossible to call Iraq a tourist country mainly due to the political and economic instability.
It is all about crude oil.
It is common knowledge that Iraq possesses the reserves of such resources as natural gas, copper, phosphates, brown coal and iron ore. But what is really amazing is the volume of the local crude oil reserves (150B barrels). Iraq has recently moved to the 2nd place in terms of crude oil reserves, yielding only to Iran. The quality of the Iraqi oil is also amazing. The sulfur content is less than 2% (for comparison sake, the Siberian oil contains 60% of sulfur).
Oil is Iraq’s everything. 90% of the country’s income and GDP is made at the expense of crude oil exports. Iraq earns on oil up to $50B a year. For the first time in 20 years Iraq has overcome the level of oil production equal to 2.6M barrels a day. The Iraqi authorities say that by 2017 they are planning to increase the production of crude oil up to 11B barrels a day.
Consequently, potentially Iraq is one of the world’s richest countries. However, the pre-war level of oil production was hardly resumed in 2008. The country managed to stop the import of fuels only in late 2009. It should be noted that before the US intervention Iraq never imported oil products. Even today the country is short of oil products. So what causes numerous problems in Iraq’s oil industry? Let’s mention the main reasons and conditions:
- Severely damaged production infrastructure, and almost nothing is done to restore it. No refinery has been built after the war.
- Oil pipelines keep being assaulted. They are rather rundown.
- No substantial investment aimed at upgrading the infrastructure.
- Oil contraband. The total loss is estimated at $90B.
- No favorable conditions for external investments
As for the USA’s oil interests, experts are divided in their opinions. Some of them say that despite the popular theory the US authorities do not control the Iraqi oil reserves and that a US company has signed only one foreign contract out of 11. Do they mean the US lost thousands of soldiers in Iraq, spent trillions of dollars on the military campaign and didn’t get the Iraqi oil? Others think that the US has always been guided by Henry Kissinger’s precept implying that oil is too precious to leave it to the Arabs and that the US will definitely make up for the expenses on the Iraq war:
- Now they get the Iraqi oil over the counter. The volume has doubled (1M barrels a day) and keeps growing.
- 20-year contracts for oilfield development are granted to 3 British-American companies.
- The Iraqi authorities has already announced about their plans to purchase US arms (tanks, jet-fighter, missiles etc) by 2013 to the sum of $13B. Of course the thing is about the money Iraq will get from the export of crude oil. Only the February protests made the government adjust the plan to spare some money to purchase foodstuffs.
- And finally, the US exercises control over the world’s largest crude-oil producer and exporter and is not going to leave Iraq in the near future.
Social sphere
It is interesting to know that in Iraq (as compared with other developing countries) the average life span is quite high (69 years). However this is probably the only positive thing about the social life in the Arab country because the war has turned Iraq into a country with extremely poor living conditions.
- The healthcare system has become degraded. According to the official data, 24% of children suffer from various diseases. They are undernourished. Thousands have become handicapped.
- The level of education is constantly declining. Not so long ago the Iraqis used to be quite a literate nation. Now the amount of the illiterate people has reached almost 25% (almost 7 million people). A lot of money is needed to get education.
- In 2009 the unemployment rate reached 15.3%
- 25% of the population live below the poverty line
- Food prices are constantly growing while there is food and water deficit.
- Electricity is given for a couple of hours a day.
- 37% of the Iraqis suffer from psychological disorders. Most of them are afraid to leave homes.
To make the long story short, the results of the military campaign in Iraq turned out to be different from the “democratic” goals that were set by the US in 2003.
Market Leader and offer all comers to participate in a survey at the forum of traders and investors:
Do you believe that the democracy imposed by the US on in Iraq is real?
- Yes, I do. The US will manage to build a truly democratic society in Iraq.
- No, I don’t. The democracy imposed by the US is not genuine.
- It is impossible to build a democratic society in Libya and Iraq. Muslims have their own way to “the brilliant future”.
Serj Panchuk
