Post victory over Daesh: The struggle for Iraq’s market

Salah Nasrawi , Saturday 17 Feb 2018

The business of conflict is common practice, and nowhere are business interests trying to get rich from civil wars more than in Iraq

Rex Tillerson
US Secretary of State Rex Tillerson arrives to attend the Kuwait International Conference for Reconstruction of Iraq, in Kuwait City on February 13, 2018 (Photo: AFP)

When Iraqi Prime Minister Haider Al-Abadi declared victory over the Islamic State (IS) group in December, attention immediately turned to how soon his government would start efforts to rebuild the Sunni-populated cities destroyed by the war against the group.

These efforts are seen as vital for the stabilisation of the country and to prevent the re-emergence of the militants who have lost their Caliphate but may return to their guerrilla roots.

Much of the focus has been on how much the international community will contribute to the construction projects in order to help Iraq emerge from the rubble of the war and start building a better future for its people.

But major donors led by the United States at an international reconstruction conference in Kuwait this week stunned many Iraqis by claiming that their country was rich enough to pay the cost of the war and that it should not expect a blank cheque for the rebuilding drive.

The United States proposed that Iraq, which sits on the world’s third-largest oil reserves, should use its revenues from energy to finance private-sector investment.

Washington argued that combined with international and regional business interests, Iraq’s own resources should be able to meet the country’s long-term reconstruction needs.

While the declaration reflects US President Donald Trump’s abhorrence of the US being involved in nation-building, the strategy reflects the broader perspective of how making money and making war have long been related businesses.

The move has underlined what has been known since the US-led invasion of Iraq in 2003 that the ensuing civil war has a strong commercial element from international and regional powers willing to profit from the prolonged conflict in Iraq.

With efforts to kick-start a national programme to rebuild Iraq now depending largely on investment and not donations, the question of how far geopolitical and commercial factors will affect the reconstruction process remains open.

One way to understand the post-IS reconstruction is to look back at Iraq’s neo-liberal economic policies after 2003 and how far these have shaped the country’s economy, which depends mainly on its vast oil revenues.

These free-trade and free-market policies were imposed by the US Occupation Authority in Iraq, and they have destroyed Iraq’s domestic production sectors and made the country depend completely on imports.

The import-based economy has not only turned Iraq into a dumping ground for finished and mostly cheap consumer goods, but it has also made it a playground for competing regional and international powers for profits and markets.

Even after oil prices collapsed in 2013, Iraq remained using the bulk of its petroleum revenues on imports. According to the CIA Fact Book, a summary produced by the US intelligence agency, Iraq’s imports amounted to $43.27 billion in 2016, or nearly half its oil income.

Most of the money coming from oil exports went to a handful of countries heavily involved in Iraq’s geopolitics. While China has been Iraq’s biggest supplier, with exports of some $7.9 billion amounting to 24.3 per cent of Iraq’s overall imports in 2015, Turkey and Iran remain the biggest regional exporters.

Turkey’s exports to Iraq amounted to $8.6 billion, or 26.2 per cent of its overall imports, and Iran’s share in exports to Iraq stood at 19.7 per cent in 2016-2017, or $6.1 billion, according to Ibrahim Rezazadeh, in charge of the Iraq desk at the Trade Promotion Organisation of Iran.

Among other neighbours that have benefited from the on-going conflict in Iraq is Jordan, whose trade sector has grown rapidly since the US-led invasion thanks to regional instability, especially in Iraq.

In 2013, before the rise of IS and the closure of the border with Iraq, Jordan’s exports to Iraq amounted to around $822 million, or 9.5 per cent of its overall exports.

After the collapse of IS and the liberation of Iraq’s major cities, Jordan secured an agreement with Iraq to exempt some 541 Jordanian products from customs fees, mostly on agricultural products and fertilisers.

Last month, the Jordanian cabinet approved a framework agreement with Iraq for a 1,700-km pipeline that will transfer Iraqi crude oil from Basra to the Jordanian port city of Aqaba at a cost of about $18 billion. The pipeline will transfer about one million barrels of oil per day for export.

Under various preferential deals Jordan has intermittently been receiving oil from Iraq, either for free or at well below market rates.

Saudi Arabia has joined countries eyeing business ties with Iraq as a way of furthering their geopolitical interests in the beleaguered country.

Recently the Sunni Arab powerhouse started building its ties with Iraq in what is seen as an endeavour by the oil-rich Kingdom to move Iraq away from Iran’s sphere of influence.

Saudi Minister of Commerce and Investment Majid Al-Qassabi said in October that Saudi-Iraqi relations were entering a new era with an “ambitious programme of unlimited trade, economic and investment activities.”

The Saudi Arab News newspaper quoted Al-Qassabi as saying that the bilateral trade volume between Saudi Arabia and Iraq had reached SR23 billion ($6.13 billion) over the 10 years from 2006 to 2016.

In 2016, Saudi Arabia‘s exports to Iraq amounted to SR2.2 billion ($586 million), while Iraq’s exports to the Kingdom amounted to only SR24 million ($6.4 million), the minister said.

The United States, European nations and Australia, as well as Syria, Egypt, Kuwait and the United Arab Emirates, are among Iraq’s other key trade partners.

All this profit-making business speaks volumes about how regional and foreign countries have been benefiting from Iraq’s turmoil and the failure of its governments to build an economy that works and to stop sapping its national resources.

The international conference in Kuwait could have been the best opportunity for better and more honest global action to help Iraq end the cynical conflict that has plagued its people for 15 years.

Yet, the United States, which is primarily responsible for Iraq’s destruction and misery, is refraining from contributing to its reconstruction and is alternatively proposing a private-sector investment plan to develop the country’s battered economy.

By suggesting that the aim of the plan is to push Iraq’s Gulf neighbours, particularly Sunni regional heavyweight Saudi Arabia, to pour in money as part of a rapprochement with Baghdad to reduce Shia rival Iran’s influence in Iraq, Washington is flipping the ordinary equation and planning to stir a fiercer trade war among Iraq’s neighbours and thus perpetuate the conflict in Iraq.

To be sure, corrupt officials, a weak government, and politicians who want to channel any money coming from donors towards their local clients and constituents should be denied the opportunity to profit from foreign aid.

But if the international community fails to help financially strapped Iraq to rebuild and provide services and security to its people, the defeat of IS will prove to be meaningless and it could set the stage for IS terrorists to return.

However, turning Iraq’s woes into commercial opportunities will not help to bind Iraq’s wounds, but will rather create a playing field for many foreign governments, greedy traders and businesses willing to profit from civil strife.

It may sound cynical, but the rise of IS has opened up opportunities for Iraq’s neighbours to increase their influence and economic presence in the country. They may now even hope that the same movie will be played again.

*This story was first published in Al-Ahram Weekly  

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