Archive for December 31, 2009

>Will New Oil Deals Provide Jobs For Iraqis?

Posted on December 31, 2009 by

>Iraq recently completed the second round of bidding on its oil fields, which will hopefully usher in the return of international petroleum companies to Iraq that will bring in much needed investment and know how. This round went much better than the first with deals for seven of the ten fields up for auction. Iraq’s Oil Minister Hussain Shahristani believes that Iraq could reach 12 million barrels a day in capacity in six years as a result, which would make it a rival to the world’s largest producer Saudi Arabia. With such high expectations, many Iraqis, especially in southern Iraq where most of the oil resides, are hoping that this wealth will trickle down in the form of jobs and better services.

Currently southern Iraq has some of the poorest sections of the country despite the huge petroleum reserves. A recent report by the government’s Central Organization for Statistics and Information Technology, found that 49% of the population in Muthanna and 41% in Babil lived in poverty, the highest rates in Iraq. Residents of Dhi Qar told Agence France Presse that they didn’t expect much from the new oil deals, feeling that the best jobs would go to those that had political connections or paid bribes. In contrast, the Italian head of Dhi Qar’s Provincial Reconstruction Team, U.S.-funded groups that are aimed at improving the political and economic development of Iraq at the local level, believed that there would be plenty of job opportunities, and the complaints about corruption were overblown. Provincial officials in Basra also expressed similar optimism.

If jobs do appear, they will have to be from spin-offs such as construction and services, because its estimated that Iraq will only need 40,000 new oil workers by 2015. That’s a drop in the bucket when compared to the 250,000 young Iraqis who enter the job market each year. In Wasit for example, the sole foreign petroleum company currently operating in Iraq, the China National Petroleum Corporation (CNPC), only hired 450 Iraqis since it started working there in late-2008. They have also been accused of damaging farmland that has set off a wave of protests and small-scale sabotage against the corporation.

The problem as ever is that petroleum is not a labor-intensive industry. There will be a flurry of construction early on to improve the oil fields, which could offer opportunities to Iraqis. After that, probably in the best case, the increased revenues from higher exports will give Baghdad the necessary funds to improve services to placate the public. Otherwise the new oil deals will just give people another excuse to complain about their government.

SOURCES

Agence France Presse, “Southern Iraq town hopes for jobs boom after oil auction,” 12/17/09

Aswat al-Iraq, “COSIT: Unemployment, poverty drop in Iraq,” 12/13/09

BBC, “Iraq oil capacity ‘to reach 12m barrels per day,’” 12/12/09

Gunter, Frank, “Liberate Iraq’s Economy,” New York Times, 11/16/09

Al Jazeera, “Iraq’s oil wealth eludes the poor,” 11/4/09

Yackley, Ayla Jean, “Iraqi oil deals mean reams of steel, miles of pipes,” Reuters, 12/10/09

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>United Nations Human Rights Report On Iraq

Posted on December 30, 2009 by

>The United Nations Assistance Mission for Iraq (UNAMI) released its latest human rights report for Iraq covering the first half of 2009. The U.N. noted the decrease in violence in Iraq, but that there were still deaths everyday in the country. More importantly, it recorded continued institutional abuses in the justice system, and reminders of the old regime.

The number of deaths and unidentified bodies found are down greatly. In the last half of 2008 for example, 434 people were found dead in the streets, compared to 210 in the first six months of 2009. There were still daily attacks, but the U.N. made an important observation that it is becoming increasingly difficult to tell political violence from ones involving crime, especially because many gangs also work as militias and insurgents. The major targets in Iraq are the security forces, government officials, professionals, Sons of Iraq (SOI) members, and tribal leaders. Two generals were killed and one escaped a car bombing during the first half of 2009, along with four SOI leaders killed or wounded in four areas in Diyala.

Iraq’s minorities are also targets. Yazidis, Sabeans, Shabaks and Christians claim that their numbers have been drastically reduced because of the violence, with many becoming refugees. Yazidis say their population went from 500,000 before the war to 300,000 now. Sabeans reported 35,000 followers in 2003, and 7,000-8,000 now. There were 1.4 million Christians in the 1987 census, and they now believe there are only 500,000-800,000. All of these groups complain about being arrested by the Kurdish security forces, and being pressured to vote for pro-Kurdish parties.

With the dramatic decrease in militant activity, cultural and institutional abuses are gaining more prominence. UNAMI has been focusing upon women’s issues for the last year or two, concentrating upon the Kurdistan region. The U.N has found continued honor killings and suicides due to abuses there. Few of these cases are ever reported to the police, as they are considered family matters. Journalists also say they face regular harassment by the security forces and politicians’ bodyguards. One NGO reported 64 cases of abuse in 3 days in Baghdad, Basra, Babil, and Anbar. The Kurdistan Regional Government (KRG) has also arrested and convicted journalists for criticizing the authorities.

Most importantly the U.N. reports that Iraq’s justice system remains overwhelmed by the number of detainees, and its reliance upon confessions leads to widespread abuses. From January to June 2009 the number of prisoners held by the government increased from 27,466 to 29,871. Detainees are regularly held for long periods of time without charges or seeing a lawyer. Torture and beatings are common, and this includes against children held. That led to a series of protests by prisoners in June 2009 against corruption, lack of trials, and abuses in Maysan and Qadisiyah provinces. That same month, the Interior Minister announced that 43 police officers were going to be prosecuted for abuses. Similar conditions and treatment are also prevalent in Kurdistan. UNAMI interviewed people who were held for 5 years or more in the region without charges or trials, while noting that the KRG has begun a program to renovate and improve conditions in its prisons.

Finally, the authorities are finding remains of the Saddam era. In May and June 2009 dozens of mass graves were found in Qadisiyah, Najaf, Basra, Karbala, and Tamim. Most of those contained hundreds of Kurdish victims of Saddam’s Anfal campaign, while two sites were found in Karbala that had Kuwaiti prisoners of war that were killed during the Gulf War. The Ministry of Human Rights believes that they may be 270 unopened mass graves throughout the country.

Iraq remains a troubled nation. The insurgency has been largely defeated, but there are still terrorist attacks everyday that continue to take a human toll. With the fighting largely over, other problems are coming to the fore including overcrowding and abuses in Iraqi prisons and the justice system, lack of rights for women, and limits on press freedom. This shows that Iraq remains a fragile, developing state, with a large terrorist threat.

SOURCES

United Nations Assistance Mission for Iraq, “Human Rights Report 1 January – 30 June 2009,” 12/15/09

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>Oil Production Down in Nov. 09, But Exports Up

Posted on December 29, 2009 by

>The latest numbers for Iraq’s oil industry are out, and they show that while production declined in November 2009, exports actually increased. Last month, Iraq produced an average of 2.36 million barrels a day of petroleum, while exporting 1.99 million barrels a day. In October Iraq produced an average of 2.50 million barrels, and exported 1.89 million barrels.

Iraq’s oil industry has never had steady output, and constantly goes up and down. So far this year, Iraq is average 2.39 million barrels in overall production, the second highest since 2003, while exporting 1.91 million barrels, marking a post-invasion high. Both are below marks set by the Oil Ministry and 2009 budget however. The Ministry wanted to achieve 2.50 million barrels a month this year, which was only achieved in September and October. The 2009 budget called for 2.00 million barrels in exports each month. That only happened in July, 2.08 million barrels, and August, 2.00 million barrels. This has led to a deficit, which is going to continue into next year, especially because the new budget calls for 2.15 million barrels of exports per day. Iraq’s economy is still largely state-run, and relies upon oil for almost all of its revenue, so these deficits are holding up reconstruction and development of the country. The first two rounds of bidding on Iraq’s oil fields will not help in the short-term either as the new production is not likely to come on line for several years.

Monthly Averages of Iraqi Oil Production/Exports in Millions of Barrels Per Day

2003 2004 2005 2006 2007 2008 2009
Jan. 2.44/1.53 2.10/1.36 1.73/1.05 1.66/1.30 2.24/1.93 2.15/1.91
Feb. 2.27/1.38 2.10/1.43 1.83/1.47 2.08/1.50 2.39/1.93 2.32/1.77
March 2.43/1.82 2.09/1.39 2.10/1.32 2.08/1.58 2.38/1.93 2.37/1.81
April 2.38/1.80 2.14/1.39 2.14/1.60 2.14/1.50 2.40/1.88 2.37/1.83
May 0.3/0.0 1.88/1.38 2.10/1.30 2.13/1.51 2.03/1.64 2.60/1.96 2.41/1.90
June 0.675/0.2 2.29/1.14 2.17/1.37 2.30/1.67 2.00/1.47 2.52/1.96 2.43/1.96
July 0.925/0.322 2.20/1.40 2.17/1.55 2.22/1.68 2.07/1.71 2.54/1.85 2.48/2.08
Aug. 1.44/0.646 2.12/1.11 2.16/1.50 2.24/1.68 1.91/1.69 2.50/1.70 2.48/2.00
Sep. 1.72/0.983 2.51/1.70 2.11/1.60 2.23/1.65 2.3/1.90 2.37/1.65 2.50/1.95
Oct. 2.05/1.14 2.45/1.54 1.91/1.23 2.26/1.55 2.34/1.91 2.37/1.69 2.50/1.89
Nov. 2.10/1.52 1.95/1.32 1.98/1.16 2.10/1.44 2.38/1.88 2.40/1.88 2.36/1.99
Dec. 2.30/1.54 2.16/1.52 1.92/1.07 2.15/1.45 2.42/1.93 2.35/1.73
Yr. Avg. 1.44/0.795 2.25/1.47 2.07/1.36 2.11/1.50 2.11/1.66 2.42/1.84 2.39/1.91



SOURCES

Bureau of Near Eastern Affairs, “Iraq Status Report,” U.S. Department of State, 12/16/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United Sates Congress,” 10/30/09

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>Iraq Still Has Problems Spending Its Money

Posted on December 27, 2009 by

>The new Special Inspector General for Iraq Reconstruction report to Congress was released at the end of October 2009. It notes that Iraq is still having problems spending its budget. By June 2009 50% of Iraq’s $58.6 billion budget had been released, but only $16.4 billion, 27.9%, had been spent as of that month. $1.6 billion of that was for capital projects that are investments in infrastructure and services. The provinces had $16.4 billion, and only spent 30% of that during the same time period.

80% of the 2009 budget is for operational costs such as salaries, pensions, and the food ration system. Of the money spent in the first six months of the year, 90.3% came from the operational budget. That’s because from 2005 to 2008 Iraq’s spending increased each year and the ministries and agencies went on a hiring spree. In 2005 for example, there were 1.2 million government employees. By 2008 that had more than doubled to 2.8 million. Last year the country was also flush with money due to high oil prices and doubled most salaries for public employees. Now Iraq has no money to cover those costs because the global recession has caused a drop in the oil market, which is the nation’s main source of revenue.

Since Iraq got its official sovereignty back in 2005 its budgetary expenditures have gone up and down, with the majority of spending going to operational costs. In 2005 Iraq did its best, spending 73% of its $30.2 billion budget. Then followed 67% in 2006, 65% in 2007, and 69% in 2008. Barely any of the capital budgets were spent during those years, while the majority of the operational budgets were. In 2005 91% of the operational budget was spent, compared to 23% for the capital budget. In 2006 it was 83% operational versus 19% capital, 2007 it was 80% operational versus 28% capital, and in 2008 Baghdad did its best job spending 39% of its capital budget. Iraq’s major ministries responsible for security and services did an even worse job. In 2005 they spent 14% of their budgets, in 2006 13%, 2007 11%, and 2008 23%.

Iraq is now facing the triple pressures of reduced American and international aid, low to moderate petroleum prices, and increasing government costs. The bureaucracy, centralized control, and lack of trained staff has gotten no better since 2005, which are some of the main reasons why expenditures have so many problems. What that’s leading to is a bloated government, with limited money for development to raise the standard of living for its public.

Iraq’s Budget Expenditures
2005 73% of total budget, (4) 91% of operational budget, 23% of capital budget
2006 67% of total budget, 83% of operational budget, 19% of capital budget
2007 65% of total budget, 80% of operational budget, 28% of capital budget
2008 69% of total budget, 39% of capital budget

Budget Expenditures By Security and Services Ministries
2005 14%
2006 13%
2007 11%
2008 23%

SOURCES

Cockburn, Patrick, “Collapse in Iraqi oil price shatters hope of recovery,” Independent, 3/20/09

Department of Defense, “Measuring Stability and Security in Iraq,” June 2009

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09
- “Quarterly Report to the United States Congress,” 10/30/09

United States Government Accountability Office, “IRAQ Key Issues for Congressional Oversight,” March 2009
- “Iraqi Revenues, Expenditures, and Surplus,” August 2008
- “Progress Report: Some Gains Made, Updated Strategy Needed,” June 2008

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>U.S. Reconstruction Coming To An End

Posted on December 25, 2009 by

>Since the invasion of Iraq in 2003 the United States has promised the country $52.8 billion in reconstruction funds. That was the largest rebuilding effort in American history. Now this program is expected to end by 2014.

Of the $52.8 billion made available to Iraq, $43.57 billion of it has actually been obligated to specific projects, and $39.54 billion has been spent. The Obama administration has asked for $800 million for the 2010-2011 Fiscal Year. There is also $1 billion in supplemental funding for 2010 and $1.5 billion in 2012. The reconstruction effort is already winding down as only $58 million of the $1 billion in 2010 money has been obligated as of September 2009, and only $300,000 has been spent. That’s largely the result of the beginning of the withdrawal of U.S. forces. With less troops out in the field and the planned drawdown of the Provincial Reconstruction Teams, there are fewer opportunities for new projects to be planned. The Special Inspector General for Iraq Reconstruction (SIGIR) estimates that by 2012-2014 all of the money currently in the pipeline for Iraq will run out. After that the U.S. will continue to provide aid, but not in the large amounts that it has in the past.

The largest chunk of reconstruction funds ended up going to security. In total, $24.52 billion was allocated for various security endeavors, with $20.72 billion actually being spent. Creating a new Iraqi Army is considered the one success of the U.S. effort. There are 245,000 Iraqi soldiers, and over 400,000 police. They now have control of all of Iraq’s 18 provinces, are in the lead of the country’s counterinsurgency program, and the Army is considered competent enough to handle internal security. The police are more open to political and local influences, thousands have not been trained, and are still considered a work in progress. Both forces remain almost completely dependent upon the U.S. for logistics and procurement however, and Iraq is not capable of protecting itself from outside threats.

In comparison, $21.2 billion was spent on the economy and government. $12.36 billion was allocated for infrastructure, $7.28 billion for governance, and $1.56 billion for the economy. Of that, $18.83 billion has actually been spent. The sectors that got the most money were electricity, $5.16 billion, water and sanitation $2.74 billion, government capacity $2.50 billion, oil and gas $2.06 billion, and developing democracy and civil society $2.03 billion.

There is still over $11.6 billion in on-going projects. Baghdad has the most with $2.92 billion, followed by $543.46 million in Basra, $362.23 million in Tamim, and $1.11 billion across the country. In terms of sectors, there is $5.07 billion in electricity projects, $3.08 billion in water and sanitation, $1.77 billion in oil and gas, $1.27 billion in transportation and communication, and $467.97 million in governance and infrastructure.

Reconstructing Iraq’s infrastructure and government has run into many problems. While things like electricity production is at an all time high, it is still not meeting demand. There are also millions of dollars worth of projects that are either not operating at capacity or have been abandoned because Iraqis cannot staff, supply, or afford them. Most importantly, just over half of the money got diverted to security rather than developing the country. 

Overall, the SIGIR believes that the U.S. failed in this endeavor because of a lack of pre-war planning and coordination, bad contracting practices, and building projects that Americans wanted, not Iraqis. Another major problem was that the lack of security derailed many projects, and led to huge cost overruns. That’s seen in the fact that as the reconstruction effort winds down, more money was spent on the Iraqi military and police than the economy or government. There are some successes like the Iraqi Army, but many continuing problems like the lack of adequate services. The U.S. invasion ended the dictatorial rule of Saddam, but the $52.8 billion reconstruction effort is leaving behind a rather typical, dysfunctional Third World country.

Status of Major U.S. Reconstruction Funds

Area Sector Allocated Obligated Expended
Security Equipment $7.29 bil 6.82 bil 6.03 bil
Training $6.11 bil $5.68 bil $5.45 bil
Infrastructure $5.81 bil $5.55 bil $4.84 bil
Sustainment $2.55 bil $2.41 bil $2.17 bil
Rule of Law $1.50 bil $1.48 bil $1.27 bil
Related Activities $1.27 bil $1.15 bil $0.97 bil
Subtotal $24.52 bil $23.09 bil $20.72 bil
Infrastructure Electricity $5.16 bil $4.99 bil $4.86 bil
Water and
Sanitation		 $2.74 bil $2.63 bil $2.47 bil
Oil and Gas $2.06 bil $1.92 bil $1.91 bil
General
Infrastructure		 $1.25 bil $1.24 bil $1.24 bil
Transportation and
Communication		 $1.15 bil $1.09 bil $0.99 bil
Subtotal $12.35 bil $11.88 bil $11.47 bil
Governance Capacity
Development		 $2.50 bil $2.29 bil $1.91 bil
Democracy and
Civil Society		 $2.03 bil $2.04 bil $1.66 bil
Public Services $1.93 bil $1.91 bil $1.73 bil
Humanitarian
Relief		 $0.82 bil $0.82 bil $0.75 bil
Subtotal $7.28 bil $7.06 bil $6.04 bil
Economy Economic
Governance		 $0.82 bil $0.80 bil $0.74 bil
Private Sector
Development		 $0.74 bil $0.74 bil $0.57 bil
Subtotal $1.56 bil $1.54 bil $1.32 bil
TOTAL $45.72 bil $43.57 bil $39.54 bil

Remaining Infrastructure Projects by Province

Province Electricity Water and
Sanitation		 Oil and
Gas		 Transporta-
tion and
Commun-
ication		 General
Infra-
structure		 Total
Baghdad $1,504.22 mil $755.31 mil $40.6 mil $282.17 mil $341.68
mil		 $2,923.97 mil
Basra $543.46 mil $238.32 mil $558.55 mil %171.8 mil $8.39 mil $1,520.52
mil
Tamim $362.23 mil $42.87 mil $187.39 mil $21.09 mil $8.47 mil $622.05
mil
Dhi Qar $106.67 mil $399.69 mil $0.43 mil $21.42 mil $13.06 mil $541.26
mil
Salahaddin $311.19 mil $59.51 mil $71.52 mil $65.75 mil $7.37 mil $515.36
mil
Anbar $251.58 mil $188.88 mil - $70.15 mil $3.92 mil $514.53
mil
Ninewa $118.74 mil $126.87 mil $0.08 mil $66.06 mil $6.97 mil $318.72
mil
Iirbil $102.54 mil $201.67 mil $0.08 mil $5.07 mil $2.46 mil $311.82 mil
Diyala $80.66 mil $143.47 mil $2.89 mil $23.79 mil $6.24 mil $257.05 mil
Muthanna $15.02 mil $189.79 mil $0.07 mil $19.12 mil $3.87 mil $227.87 mil
Babil $121.65 mil $47.63 mil - $36.01 mil $3.49 mil $208.78 mil
Najaf $72.79 mil $60.84 mil - $14.26 mil $4.43 mil $152.31 mil
Qadisiya $86.78 mil $30.46 mil - $21.75 mil $2.65 mil $141.63 mil
Maysan $76.31 mil $20.26 mil $0.06 mil $14.06 mil $6.32 mil $117.01 mil
Wasit $45.38 mil $30.21 mil - $19.18 mil $10.23 mil $105.01 mil
Karbala $46.99 mil $39.0 mil - $4.88 mil $1.58 mil $92.45 mil
Dohuk $61.4 mil $8l.34 mil - $0.93 mil $7.63 mil $78.3 mil
Sulaymaniya $49.03 mil $15.28 mil - $2.98 mil $1.06 mil $68.35 mil
Nationwide
& Regional		 $1,115.1 mil $487.18 mil $916.14 mil $418.14 mil $28.16 mil $2,964.71 mil
TOTAL $5,071.73 mil $3,085.58 mil $1,777.81 mil $1,278.6 mil $467.97 mil $11,681.69 mil

 

SOURCES
Cordesman, Anthony, “Assessing the Readiness of the Iraqi Security Forces,” Center for Strategic and International Studies, 8/12/09
Special Inspector General for Iraq Reconstruction, “Hard Lessons,” 1/22/09

- “Quarterly Report to the United States Congress,” 10/30/09

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>Electricity Output Reaches Post-Invasion High, But System Still Plagued By Problems

Posted on December 24, 2009 by

>The Special Inspector for Iraq Reconstruction reported that for the fifth straight quarter Iraq’s average electricity supply increased from August to October 2009. For the 3rd quarter of 2009 Iraq produced 6,439 megawatts, a post-invasion high. That was a 10% increase from the 2nd quarter. In 2007 Iraq produced 4,488 megawatts, with 4,198 coming from the Ministry of Electricity, and 290 being imported. In 2009 the Ministry was responsible for 5,209 megawatts, 669 megawatts came from other countries, and 560 were from private generators. Iraq saw a 1,951 megawatt increase over those two years.

The growth in power supply comes from multiple sources. Half of the increase came from working on existing power plants at a cost of more than $2 billion in U.S. reconstruction aid since 2003. 29% of the increase was from two new private power plants opening in the Kurdistan Regional Government. 19% of this quarter’s increase came from importing electricity from Iran and Turkey. In 2007 Turkey was the main supplier, providing 60% of imports, but since then Iran was eclipsed them, now accounting for 80%. The Electricity Ministry has also been able to make some small increases in its capacity. It has added two power plants on boats in Basra in 2009 for example, run by a Turkish company. They have a combined capacity of 250 megawatts.

The Ministry has bigger plans in store as well. In 2009 they finally got funding to buy turbines from General Electric and Siemens. These will be installed in twenty locations throughout the country. Every province except the three in Kurdistan will get at least one new power plant out of the deal. Construction is expected to begin in late 2010 or early 2011, and the new capacity will come on line in 2-6 years. When finished, the turbines will add an estimated 10,000 megawatts. There is a major problem with this plan however. Iraq’s power grid cannot handle this increase. The transmission and distribution systems need to be renovated, but there are no plans to do so. There are also questions about whether the government will be able to provide fuel for all of these new plants adequately. The Electricity’s Ministry promises therefore, may never be fulfilled. Baghdad will also have a hard time coming up with any extra money as it is facing a second year of budget deficits due to moderate oil prices, which provide almost all of its revenue.

Despite the recent increases, the national grid still does not meet the country’s demands. The Special Inspector General believes that the gap between supply and demand is twice what it was in 2003, although it has been slightly reduced since 2007. Based upon estimates it’s believed that the Electricity Ministry served 69% of the national demand in the 3rd quarters of 2009. In the 3rd quarter of 2007, it only met 54%. In terms of the provinces, Sulaymaniya, Basra, Irbil, and Diyala in that order did the best supplying electricity, meeting anywhere from 83% to 99% of demand. That’s because those governorates either have their own power plants or import large amounts from Iran. At the opposite end of the spectrum, Wasit, 51%, Maysan, 53%, Babil 56%, Ninewa and Najaf at 58%, do the worst serving their people. Because Iraqis cannot rely upon the government for its power, most rely upon private generators.

Electricity Supply And Demand By Provinces

Province Avg. Daily Electricity Load Served (MW) Avg. Daily Estimated Electricity Demand (MW) Avg. Daily Demand Met
Sulaymaniya 352 357 99%
Basra 806 929 87%
Irbil 356 411 86%
Diyala 196 236 83%
Dhi Qar 289 405 71%
Salahaddin 275 385 71%
Tamim 222 325 68%
Muthanna 137 202 68%
Anbar 219 329 67%
Baghdad 1,718 2,571 67%
Dohuk 132 203 65%
Karbala 164 273 60%
Qadisiyah 150 253 59%
Najaf 216 375 58%
Ninewa 491 851 58%
Babil 240 425 56%
Maysan 145 273 53%
Wasit 155 304 51%

Iraq’s generators also do not operate up to their capabilities. Nameplate capacity is how much a generator should be able to produce in ideal conditions. Feasible capacity is how much it can produce given the actual conditions. Iraq has a nameplate generating capacity of 15,300 megawatts, and a feasible capacity of 11,150. Both were 4% increases from the 2nd quarter of 2009. However in the 3rd quarter Iraq only operated at 38% of nameplate capacity and 52% of feasible capacity. The Qudas power plant in Baghdad for example, which the U.S. spent $250 million to renovate, has a nameplate capacity of 910 megawatts, but only averages 429 megawatts of actual production, 47% of its nameplate capacity.

After the overthrow of Saddam, Iraqis went on a buying spree of consumer electronics. This has greatly increased demand for power, which has not been met by the increase in production. The lack of adequate funds, the inability of the Electricity Ministry to spend what it gets, not enough skilled and trained personnel, poor maintenance and aging equipment, along with subsidized energy and a large black market in generators encourages use rather than conservation. These all mean that demand will continue to increase in the near future, and even with the new power plants and renovations, the power system will still probably be running a deficit.

SOURCES

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09

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>2nd Round of Bidding On Iraq’s Oil Fields Ends As A Success

Posted on December 19, 2009 by

>The second round of bidding on Iraq’s oil fields ended on December 12, 2009. It was much more successful than the first round that occurred in June 2009. That auction only produced one successful contract, although two more were negotiated afterward. This round garnered seven deals for the ten fields up for bid.

Initially, the second round did not get off to a good start. On the first day, December 11, only two bids were accepted. The next day went much better with five more. If all of the companies are able to meet their projections, Iraq has the potential to add 4,765,000 extra barrels to its production total, which is currently averaging 2.39 million barrels a day in 2009. The deals from the first round could add an additional 6,075,000. Within thirteen years these oil companies are promising Iraq up to 13.23 million barrels a day in capacity, which would make it the largest oil producer in the world. Oil Minister Hussain Shahristani was even more optimistic, claiming that Iraq could reach 12 million barrels a day in six years, while noting that actual production would be determined by demand.

There are many that doubt Iraq’s ability. Oil analysts believe that all of the new facilities required to develop this potential would set off inflation in services, and be hard for the government to complete. Iraq has also not had to follow OPEC production quotas since it was placed under international sanctions after the 1991 Gulf War. Iraq is working to ends those, and thus would eventually have to comply with the organization’s prescriptions again. Some Oil Ministry officials however, are talking like they would not have to. The CEO of France’s Total oil company said in November that 10-12 million barrels a day in Iraqi production was “crazy.” He believed a much more realistic potential was 7-8 million barrels a day. Other experts believe that Iraq’s increased production would hurt it in the long run. The Director of the Center for Global Energy Studies in London, England for example, believes that greater petroleum production would lead to a fall in prices and profits for Iraq in the long run. Even Prime Minister Nouri al-Maliki’s oil adviser said recently that Iraq could not reach the 10-12 million barrel plateau, and thought 6 million barrels was more achievable.

Whatever the final outcome is, Iraq is finally garnering the foreign investment and expertise it desperately needs to boost its oil production. Since the U.S. invasion the country has become more dependent upon petroleum than ever before as the other sectors of the economy have faltered due to American and government polices and violence. It needs to garner as much money as possible from its one major resource so that it can develop and sustain itself. As always, it’s up to the bureaucracy to fashion this into a successful venture. This may be a Catch 22, as other oil producing countries do not provide much hope. Few have diversified their economies, and remain tied to one industry that does not provide much employment. The development of petroleum could thus make Iraq even more reliant upon it.

First Day Deals December 11, 2009

Halfaya
Reserves: 4.098 billion barrels
Winner: China’s CNPC, Malaysia’s Petronas, and France’s Total
Terms: $1.40 for each extra barrel produced, will boost production to 535,000 barrels a day
Losing Bids:
1. Norway’s Statoil and Russia’s Lukoil – Asked for $1.53 per extra barrel and promised 600,000 barrels a day output
2. India’s ONGC and India Oil, and Turkey’s TPAO – Asked for $1.76 per extra barrel and promised 550,000 barrels a day output
3. Italy’s Eni, South Korea’s Kogas, U.S. Occidental Petroleum, Angola’s Sonangol, and China’s CNOOC – Asked for $12.50 per extra barrel and promised 400,000 barrels a day output

Majnoon
Reserves: 12.58 billion barrels
Winner: Anglo-Dutch Shell and Malaysia’s Petronas
Terms: $1.39 for each extra barrel produced, will boost production to 1.8 million barrels a day
Losing Bids: France’s Total and China’s CNPC – Asked for $1.75 per extra barrel and promised 1.405 million barrels a day output

Qayara
Reserves: 807 million barrels
Winner: Angola’s Sonangol
Terms: $5 per extra barrel produced, will boost production to 120,000 barrels a day
Losing Bids: None

Second Day Deals December 12, 2009

Badra
Reserves: 109 million barrels
Winner: Russia’s Gazprom, South Korea’s KoGas, Malaysia’s Petronas, and Turkey’s TPAO
Terms: $5.50 per extra barrel produced, will boost production to 170,000 barrels a day
Losing Bids: None

Garraf
Reserves: 863 million barrels
Winner: Malaysia’s Petronas and Japan’s Japex
Terms: $1.49 per extra barrel produced, will boost production to 230,000 barrels a day
Losing Bids:
1. Turkey’s TPAO and India’s ONGC – Asked for $2.76 per extra barrel and promised 200,000 barrels a day output
2. Kazakhstan’s KazMunaiGas, South Korea’s KoGas and Italy’s Edison – Asked for $2.55 per extra barrel and promised 185,000 barrels a day output
3. Indonesia’s Pertamina – Asked for $7.50 per extra barrel and promised 150,000 barrels a day output

Najmah
Reserves: 858 million barrels
Winner: Angola’s Sonangol
Terms: $6 for each extra barrel produced, will boost production to 110,000 barrels a day
Losing Bids: None

West Qurna 2
Reserves: 12.876 billion barrels
Winner: Russia’s Lukoil, Norway’s Statoil Hydro
Terms: $1.15 for each extra barrel produced, will boost production to 1.8 million barrels a day
Losing Bids:
1. Malaysia’s Petronas, Indonesia’s Pertamina, Vietnam’s Petro Vietnam – Asked for $1.25 per extra barrel and promised 1.2 million barrels a day output
2. France’s Total – Asked for $1.72 per extra barrel and promised 1.43 million barrels a day output
3. British Petroleum and China’s CNPC – Asked for $1.65 per extra barrel and promised 888,000 barrels a day output

Fields Receiving No Bids

East Baghdad
Eastern Fields
Middle Furat

SOURCES

BBC, “Iraq oil capacity ‘to reach 12m barrels per day,’” 12/12/09

Brock, Joe, “Firms overstate Iraq oil potential – govt adviser,” Reuters, 12/7/09

Bureau of Near Eastern Affairs, “Iraq Status Report,” U.S. Department of State, 12/9/09

Canty, Daniel, “12 million barrels a day is unrealistic for Iraq,” Arabian Oil and Gas, 11/17/09

The National, “Iraq oil deals,” 12/12/09

Williams, Timothy, “Oil Companies Look to the Future in Iraq,” New York Times, 12/1/09

Yackley, Ayla Jean, “Iraqi oil deals mean reams of steel, miles of pipes,” Reuters, 12/10/09

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>Is The Security Situation In Iraq Getting Worse?

Posted on December 18, 2009 by

>

Every time there is a massive, headline-grabbing bombing in Iraq, it sets off a wave of reports and commentaries in the West about how the security situation in the country is getting worse. The most recent such attack was on December 8, 2009 when four targets in Baghdad were assaulted resulting in 127 deaths and 448 wounded. In August and October there were similar bombings of government ministries and the Baghdad provincial council building. A typical response was by John McCreary of AFCEA Intelligence who wrote on December 8 that, “Day by day, the security situation is deteriorating.  This should surprise no Readers and it will get much worse in the next few months.” Thomas Ricks, author of the books The Fiasco and The Gamble, member of the Center for a New American Century think tank, who runs the Best Defense blog on the Foreign Policy website, is another who has an on-going series of posts called “Iraq, the unraveling” that argues things are going downhill in the country. The problem with these writers is that they appear to be basing their writings purely upon press reports, which focus almost exclusively on violence. As reported before, that gives a distorted picture of the situation. What they lack is any kind of research or background into the larger trend in violence that can put these attacks into context.
First, there is no direct correlation between large bombings and the overall security situation. In June 2009 for example, there were 14 mass casualty bombings that resulted in 174 deaths and 517 wounded. The next month there were 35 such attacks that led to 180 dead and 655 wounded. According to Iraq Body Count however, there were more deaths in June, 488, than July, 395, even though the latter had more bombings.

Comparison Of Bombings and Overall Deaths In Iraq – June vs July 2009

June 2009
Mass Casualty Bombings: 14
Deaths Caused By: 174
Wounded Caused By: 517
Overall Monthly Death Count: 488

July 2009
Mass Casualty Bombings: 35
Death Caused By: 180
Wounded Caused By: 655
Overall Monthly Death Count: 395

Second, even if one were to judge Iraqi security by multiple fatality bombings, they have been declining since their peak in 2006. The Brookings Institution’s Iraq Index tracks such attacks from May 2003 to the present. According to their numbers, there were an average of 5.1 of these bombings a month in 2003, 13.5 in 2004, 29.1 in 2005, before they reached their highest point in 2006 with an average of 50.9. After that there was a steady decline with an average of 38.5 bombings a month in 2007, followed by 21.0 in 2008, and 15.5 this year from January to November 2009.

Average Number of Mass Casualty Bombings 2003-2009
2003: Avg. 5.1
2004: Avg. 13.5
2005: Avg. 29.1
2006: Avg. 50.9
2007: Avg. 38.5
2008: Avg. 21.0

2009: Avg. 15.5

Third, attacks overall are down to their lowest levels since 2004. From January to March 2004 there were around 250-300 security incidents each week. Attacks took off as the sectarian war started with the bombing of the Samarra mosque in February 2006 peaking at 1,800 per week in May 2007. After that point, weekly attacks steadily decreased with a few up-ticks. Since July 2009 they have averaged below 200 per week.

 Some thought that the U.S. withdrawal from Iraq’s cities on June 30, 2009 would negatively affect security, but that hasn’t happened either. From mid-February to June 30, 2009 there were an average of 250 security incidents per week. From the withdrawal date to early November 2009 there has been an average of just under 200 attacks per week. The number killed has also seen a very slight decrease from before and after the pullout.
Like bombings, there is also no correlation between overall attacks and casualties in Iraq. As the chart below shows, security incidents reached their highest level at the middle of 2007, yet the number of deaths had been declining since the very end of 2006.
  
Regarding deaths, 2009 has seen the fewest number since the Iraq war began. From May to December 2003 when the invasion ended and the insurgency was just beginning, there was an average of 578.8 deaths per month according to Iraq Body Count. In comparison, from January to November 2009 there have been an average of 388.7. In fact, August 2009 was the only month this year that casualties reached the 500 mark. Deaths reached their highest levels in late-2006 to early-2007 when over 3,000 were being killed a month. Since then they have seen a steady decline, with November 2009 having the fewest fatalities since 2003.

Iraqi Monthly Deaths 2003 vs 2009

2003
May 545
June 593
July 650
Aug. 790
Sep. 553
Oct. 493
Nov. 478
Dec. 529
Avg. Monthly Deaths: 578.8

2009
Jan. 276
Feb. 343
March 416
Apr. 484
May 332
June 488
July 395
Aug. 593
Sep. 299
Oct. 438
Nov. 212
Avg. Monthly Deaths: 388.7

 
Overall, there is nothing to support the thesis that the security situation is worsening in Iraq. Mass casualty bombings, security incidents, and deaths have all gone down since the sectarian war of 2006-2007. The situation has not gotten worse since the U.S. pulled out of Iraq’s urban areas either at the end of June 2009. The major reason for this change is the fact that the majority of the Sunni insurgency gave up and switched sides to join the Anbar Awakening and Sons of Iraq program from 2005-2007. More recently, many Sunnis have decided to join the political process after they boycotted the first election in 2005. There are still militants in Iraq who carry out attacks every day, but their numbers and areas of operation are severely limited. Their violence will likely continue for the foreseeable future however as Iraqi politics are still divided, and some religious zealots still feel that Iraq is their cause. It should also be stressed that despite the drop in deaths and attacks, and the weakening of the insurgency, Iraq remains one of the most violent countries in the world. These incidents need to be put into a larger political context however, instead of the knee-jerk commentary that is currently prevalent.

SOURCES

Cordesman, Anthony, “Iraq: Security Trends,” Center for Strategic and International Studies, 11/19/09

McCreary, John, “Night Watch For the Night of 8 December 2009,” AFCEA Intelligence, 12/8/09

O’Hanlon, Michael Livingston, Ian, “Iraq Index,” Brookings Institution, 12/11/09

RTT News, “Chief Of Iraqi Security Forces In Baghdad Replaced After Deadly Bomb Attacks,” 12/9/09

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>Iraq Lacks Will To Confront Corruption

Posted on December 17, 2009 by

>Iraq continues to be one of the most corrupt countries in the world. In its recent report, Transparency International ranked Iraq the fourth most corrupt nation out of 180, tied with Sudan. While Iraq’s anti-corruption agencies continue their work at the national and provincial level, the real problem is the lack of will and commitment by the country’s leaders to the fight.

From January 1 to August 3, 2009 there were 80 successful convictions for corruption. The problem is that there are 445 other cases waiting to be adjudicated from just this year according to Iraq’s High Judicial Council. Of those found guilty, 45 were in Baghdad, 14 in Ninewa, 6 in Tamim and Babil each, 4 in Wasit, 2 in Muthanna, and 1 each in Karbala, Najaf, and Dhi Qar. In fourteen cases, the value of the crimes together was worth $136,000. The Ministry of Defense was implicated the most with 12 cases, followed by 9 from the Finance Ministry, 7 from Interior, 1 from Oil, 1 from Labor, 1 from Electricity, 1 from Transportation, 1 from Justice, and 1 from Displacement and Migration. A 2008 report by the Integrity Commission, one of three anti-corruption agencies in Iraq, found that the Defense Ministry was one of the most corrupt in the government. In 2008 there were $1.3 billion worth of cases pardoned, most from the Ministry of Defense. The Ministry also accounted for the third most convictions overall in the country last year. A major problem was that 42% of those found guilty in 2009 were absent for their sentencing, probably meaning they had fled.

This year has also seen some of the highest profile cases since the 2003 U.S. invasion. In May the Trade Minister was arrested for corruption charges surrounding the food ration system, which he is in charge of. In September the Deputy Transportation Minister was detained for attempting to obtain a $500,000 bribe from a private security company. The newly elected provincial councils have also indicted a number of people at the local level. In Karbala for example, four officials were arrested for embezzlement. Just recently in November, 13 members of the Baghdad mayor’s office were found stealing $20 million by forging checks for ghost employees.

Despite these successes, the anti-corruption agencies face an uphill battle in Iraq. The greatest impediment is the country’s leadership. Publicly, Iraq’s government says it is committed to dealing with corruption. In June 2009 Baghdad announced it would address bribery in public agencies. The next month the Kurdistan Regional Government said it was creating a program to promote good government and transparency. Then in October Prime Minister Nouri al-Maliki gave a speech warning that political corruption was more dangerous than financial improprieties because it undermine the government. Yet Iraq’s ministries consistently stand in the way of investigations. Article 136B allows any minister to stop an inquiry into corruption. In 2008 210 cases were stopped using 136B, including two involving ministers and one case worth $6 million. Many high government officials also refuse to follow rules and regulations. For instance, only 92 of 275 members of parliament had made their financial declarations this year. Others have also tried to defer blame. Maliki for example, recently answered questions from reporters online, and while he said that corruption was more widespread now than under Saddam, he blamed Al Qaeda and Baathists for spreading fake stories about the government that influenced organizations like Transparency International.

With little to no accountability at the top, lower level corruption is allowed to flourish. In Diyala for example, the two former deputy governors fled after they heard they were going to be prosecuted. A U.S. officer in charge of reconstruction projects there said that he had found several fake projects, or contractors not doing their work because they were paid upfront. Iraqi officials in Diyala also said they suspected the police were extorting money from prisoners.

It’s no wonder than that few Iraqis have any confidence in their public officials taking care of this very serious problem. That is the most costly affect of corruption. It undermines the standing of the authorities, which is especially important in Iraq that is struggling after years of dictatorship to establish a new government. A country is only as democratic as its people want it to be. If they become apathetic or disheartened, then the government assumes more and more power, and becomes more corrupt. This is the situation that Iraq now faces.

SOURCES

Dawlat Al-Qanon, “Al-Maliki Answers Reporters’ Questions Online,” MEMRI Blog, 12/8/09

Inside Iraq, “$1.3 billion is pardoned in Iraq and more,” McClatchy Newspapers, 9/13/09

Al Rafidayn, “Gang steals millions of dollars in Iraq, regardless of names and fake checks,” 11/23/09

Radio Free Europe/Radio Liberty, “Iraqi Deputies Chided For Not Making Financial Declarations,” 10/8/09
- “Iraqi Premier Warns Of Dangers Of Political Corruption,” 10/16/09

Al-Shara, Hazim and Mohamed, Abeer, “Iraqis Critical of Anti-Corruption Efforts,” Institute for War & Peace Reporting, 11/24/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09

Tom, Peter, “Graft the next great hurdle to a ‘new’ Iraq,” Global Post, 10/16/09

Transparency International, “Corruption Perceptions Index 2009,” 11/17/09

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>Baghdad Bombings Set Off Political Bickering Amongst Iraqi Elites

Posted on December 16, 2009 by

>The December 8, 2009 bombings have led to a wave of accusations amongst Iraqi politicians. First members of parliament demanded that the Interior, Defense, and National Security ministers, the head of the Iraqi Intelligence Service, the chief of the Baghdad Operations Command, along with Prime Minister Nouri al-Maliki appear before them for questioning over the lapses in security that have led to the attacks. Interior Minister Jawad al-Bolani said he would do so as long as the hearings were in public, while members of the Dawa Party said that the Prime Minister would never be questioned by the legislature because that would only serve his detractors who want to attack him.

Maliki also dismissed the Baghdad Security Chief General Abboud Qanbar, who is a close ally of the Prime Minister. At the same time, Maliki is calling for the resignation of Interior Minister Bolani for the bombings. A Dawa parliamentarian said that Bolani is responsible for the attacks, and that he had filled the Interior Ministry with members of his Constitution party, which prevented him from firing incompetent people. Bolani countered by saying that Maliki is at fault since the Baghdad Operations Command answers directly to his office, not the Interior or Defense ministries. Bolani also implied that some of Iraq’s political parties were involved in yesterday’s incident.

The 2010 parliamentary elections loom in the background of these charges. Maliki and Bolani are rivals, and head separate political list that are competing against each other. Maliki and his Dawa Party are in the lead of the State of Law coalition, while Bolani’s Constitution Party is part of the Unity of Iraq Alliance that also includes Sheikh Ahmad Abu Risha of the Anbar Awakening Conference, the head of the Sunni Endowment Ahmed Abed al-Ghafur al-Samarraie, and the former speaker of parliament Mahmoud Mashhadani of the National Independent Trend. One of Maliki’s main campaign points is that he has brought security to Iraq. The August, October, and December bombings have severely tarnished his image. In response, the Prime Minister has focused upon blaming others, at first Baathists in Syria for the attacks, and now Minister Bolani to defer responsibility. The Iraqi public doesn’t seem to care about the political attacks, and are increasingly blaming the entire government for failing at their job to protect the people.

SOURCES

AK News, “Parliament will question Premier as well over bombings,” 12/9/09

Ali, Ahmed, “Iraq’s Elections Challenge: A Shifting Political Landscape,” Washington Institute for Near East Policy, 11/20/09

Alsumaria, “Iraq Interior Minister set for accountability,” 12/9/09
- “MP blames blasts on Iraq Interior Ministry,” 12/9/09

Roads To Iraq, “Current situation and the three options,” 11/19/09
- “Al-Sadr’s election campaign, questioning Maliki is the next political crisis,” 12/9/09

RTT News, “Chief Of Iraqi Security Forces In Baghdad Replaced After Deadly Bomb Attacks,” 12/9/09

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