Where did the Iraqi oil money go?

On the eve of the Iran-Iraq war, Saddam Hussein met with his senior officials to discuss the invasion plan. Saddam put forth his justifications for a war against Tehran, and gave what could be considered an accurate analysis of the regional balance of power: “Saudi Arabia wants to balance us out with Iran, and balance us with Syria, and balance us with Jordan. And Jordan wants to balance us with Syria, and wants to balance us with Saudi Arabia, and wants to balance us…All of this is a soap opera”. Unfortunately, this perception of the balance of power still exists to varying extents among the minds of some Iraqi politicians, especially Prime Minister Nuri al-Maliki and his senior aides in the State of Law coalition, even though Saddam Hussein squandered Iraq’s oil wealth in absurd wars that exposed Iraqis to economic sanctions that destroyed the country and its infrastructure. Last week, the International Energy Agency (IEA) issued a report predicting that Iraq’s oil production could more than double by the end of the decade, reaching 6.1 million barrels per day (bpd). These estimates come at a time when Iraq’s production exceeds Iran’s thanks to international sanctions, making Iraq the second largest oil exporter after Saudi Arabia in the Organization of the Petroleum Exporting Countries (OPEC). However, the report also stressed that the Iraqi oil industry requires investments exceeding US$530 billion over the next 25 years to achieve this figure, and oil experts believe that political obstacles inside Iraq, especially disagreements between the central government and the Iraqi Kurds, alongside government corruption and the diversion of revenues to other expenditures, could all disrupt economic growth in Iraq. For these reason, Iraq’s oil has become an obstacle to the country’s political development and natural economic growth. Iraq, like any other oil-rich state, suffers from the “resources curse” – or Dutch disease – named for the problems the Netherlands experienced after the discovery of a huge natural gas field in the North Sea in 1959: when oil or gas is discovered in any country there is a sudden surge in revenues, which often leads to a sharp rise in the local currency, making other sectors such as agriculture and manufacturing less competitive in global markets, leaving oil exports to dominate the economy. However, the “resources curse” is not the biggest problem plaguing Iraq. Iraq’s real crisis lies in its politicians. In 1979 Iraqi oil production exceeded today’s, reaching 3.5 million bpd. However, during the war with Iran, production fell to 900,000 bpd, and following the occupation of Kuwait it slumped to 300,000. Under the UN’s “Oil-for-Food” program, oil production rebounded after 1995, reaching 2.2 million bpd by the end of 2000. Yet instead of rebuilding his shattered country, Iraq’s dictator was busy erecting statues and painting murals to commemorate his imagined victory. Iraq is yet to recover. Al-Maliki’s government, which should be a model of democratic governance in the region, has become a partisan and sectarian monopoly that has further damaged the Iraqi political process. Iraqi oil resources generated US$ 100 billion last year, yet the country’s electricity grid, health services and housing stock are suffering from significant problems, with hundreds of millions of dollars lost in fake projects or on imported equipment that does not work. As a result, the government of Iraq is ranked fourth in the world in corruption. This is not all. His authoritarian tendencies and cooperation with Iran have prompted criticism of his actions and the risks they pose to Iraq’s political future. Although a partnership agreement was signed by al-Maliki with the winning parties after his party came second in the 2010 elections, the Iraqi Prime Minister ignores it and has retained the top security posts for his party: defense, interior and national security. However, al-Maliki’s stance towards the Syrian revolution is the most dangerous, where he rejects the use of foreign intervention to overthrow the regime of President Bashar al-Assad. This is despite the fact that al-Maliki came to office in the first place through foreign intervention, in addition to the fact that in 2008 he accused Damascus of being behind terrorist incidents in Iraq. Several months ago, Syria’s former Ambassador to Baghdad, Nawaf al-Fares, acknowledged that his country was, with Iranian planning, financing and facilitating the entry of terrorists into Iraq. Nevertheless, since the outbreak of the crisis in Syria, al-Maliki has turned a blind eye to Iran using Iraq’s airspace to re-supply the Syrian regime, and has closed the border to Syrian refugees. According to a report published by the Financial Times newspaper, the al-Maliki government is sending monthly fuel shipments to the Syrian regime to support its fight against the rebels (Financial Times, October 8th 2012). Iraqi sources also confirm that dozens of fighters from certain Shiite extremist groups have crossed into Syria in recent months to fight alongside the Syrian regime’s forces (Reuters, 16th October 2012). At a time when the Iraqis are waiting for oil revenues to improve their standard of living, al-Maliki – in a manner similar to Saddam Hussein – is trying to achieve a regional balance of power through an alliance with Tehran. Perhaps for this purpose he recently visited Russia and the Czech Republic to conclude arms deals worth billions of dollars. Iraq has the right to buy weapons in order to defend its borders and its territory, but how can it justify doing so given the dismal living standards of millions of its citizens, some of whom do not even have access to clean drinking water? There is concern amongst some that Tehran will turn to al-Maliki as a subordinate in the event of the fall of the al-Assad regime, and that al-Maliki will use Iraqi funds to implement such an agenda. Al-Maliki himself once said: ““today, the region lives (under) a dangerous wave of challenges, the real root of which is sectarianism…some governments spend large amounts of money on stirring sectarian strife”. These are wise words. Mr. al-Maliki should heed them.  -- The views expressed by the author do not necessarily represent or reflect the editorial policy of Arabstoday.