Iraq’s Juggling Act

Iraq’s new Prime Minister, Mustafa al-Kadhimi, faces a wide range of political, economic, and security issues with few resources at hand and support from other countries in doubt. After a prolonged political crisis, Iraq’s new prime minister is attempting to pull his country together after a civil war and is now faced with a COVID crisis that demands scarce resources and is hitting medical professionals particularly hard. Some groups within Iraq – both ISIS and new Shiite militia offshoots – are continuing violent efforts to destabilize the country. However, the two regional antagonists who often use Iraq as grounds for their own proxy war – Iran and Saudi Arabia – each are contending with their own crises and therefore less active at the moment, perhaps giving Iraq some respite. The downside is that Riyadh and Tehran also likely have fewer resources they want to commit outside their borders. Finally, Iraq is contending with an aggressive Turkish government that is again attacking what Ankara views as Kurdish terrorists in northern Iraq.

Iraq continues to recover from the authoritarian rule of Saddam Hussein, the U.S. invasion, clashes among its various ethnic and religious groups, the depredations of ISIS/Daesh, and the destruction of cities to take areas back from the terrorist group. The Prime Minister, finally installed in May after lengthy wrangling among the various political groups, would have a difficult task rebuilding the country if those were his only challenges. He is attempting to bring together a country now that has had its main revenue source, oil exports, drop precipitously. Meanwhile, Iraq is dealing with a rapidly rising rate of COVID infection with medical personnel being particularly hard hit. All this can do is further slow any economic advancement.

Even with the recent recovery in oil prices due to decreased OPEC+ supply and increased demand, Iraq will not see revenues of the size it needs to support rapid rebuilding. Iraq’s compliance with the OPEC+ agreement depends on the contribution of IOC’s operating the country’s biggest fields and, historically, OPEC countries with foreign company operators have struggled to meet OPEC targets. So, it is not surprising that in May, Iraq only reached about 40 percent of its commitment to the OPEC+ agreement for May-June output. Only after Saudi Arabia made a July extension of the May-June targets a quid pro quo for greater compliance by Iraq and others, has Iraq prevailed on the IOCs to cut production further. With so many issues on the new Prime Minister’s plate and a dire need for oil revenues, Iraq’s compliance with OPEC+ may continue to underwhelm in the months ahead.

Whether or not Iraq fully complies with the OPEC+ deal, the newly-formed government is unlikely to receive much in assistance from partners near or far. On the one hand, Saudi Arabia and Iran have used Iraq as one of their battlegrounds for influence in the Middle East. The oil price decline, COVID-19, and Saudi and Gulf Arab state squeamishness after Iran’s attack on Saudi petroleum infrastructure mean that the geopolitical contest between Tehran and Riyadh may have quieted somewhat. This is good news for Iraq, which may get breathing room.

On the other hand, revenue shortfalls and COVID plus governance issues in Saudi Arabia and Iran also mean that there is less attention and revenue available for foreign assistance to Iraq. In addition, Iraq and the United States are continuing to negotiate the future status of U.S. forces in the country even as Americans continue reductions in Iraq and the broader Middle East. At least through the U.S. elections in November, it is unlikely that Washington will be putting more money into Iraq, and the Trump administration is likely to look at drawing down troops in both Iraq and Afghanistan to bolster its re-election chances. Left without strong patrons, Baghdad is also facing off with a newly aggressive Turkish government who has increased strikes on Kurds in norther Iraq. Iraq’s new government has very little leverage in it talks with Ankara, and yet it must hold on to its Kurdish coalition partners. The new Prime Minister has an unenviable job ahead.

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