This Week in Iraq: China poised to capitalize on Sudani’s rise

Where To Find Business Opportunities in Iraq

A message from the Iraq Britain Business Council (IBBC):

There is no better place to build your network in Iraq than the IBBC conference in Dubai. On Nov. 10 and 11, business and government leaders will gather for sessions on finance, hydrocarbons and the energy transition, industry and trade, and the promotion of the private sector and tech. New this year, there's also a day devoted to business opportunities in Basra: oil and gas, utilities, environmental projects, agriculture, and food distribution and processing.
Attendees will include:

the governor of the Central Bank of Iraq

the chairman of the KRG Investment Board

other top Cabinet officials and DGs to be announced
Click here to get more details and to register.

Interview of the Week

Iraq Oil Report spoke with Ali Qays Abdul-Jabbar, director general of the state-owned Iraqi Oil Tankers Company. IOTC is in the process of rebuilding its fleet of vessels and hopes to be able to handle crude oil exports in the future by securing new vessels, including Very Large Crude Carriers (VLCCs), to match the tanker fleets of its Gulf oil exporting peers. The company once operated 25 tankers, but in the 1990s it was limited to handling only transportation of high sulfur fuel oil because of international sanctions on Iraqi crude oil exports. Now a change in policy means that the tankers company can order new tankers and is preparing plans to submit to the Ministry of Oil to enable it to resume crude oil exports. Read the full interview on Iraq Oil Report.

National News

Sudani removes head of Iraqi intelligence, other officials. Al-Monitor reports:

The cabinet voted to cancel all decrees issued by the caretaker government from Oct. 8, 2021. They include the removal of the head of the Iraqi National Intelligence Service, Raid Jouhi, and of the National Security Agency, Hamid Al-Shatri.
Sudani also removed Mushriq Abbas as political adviser to the prime minister. He had been appointed in 2020.
The governors of Babel, Dhi Qar, Najaf and Salahadin were removed as well, in addition to Gen. Hamid Al-Zuhiri as commander of the force in charge of the Green Zone's security. Mayor of Baghdad Ammar Asadi, who was appointed during the caretaker period, has been removed as well.
Unconfirmed reports indicate that for the intelligence service, Sudani is planning to appoint Hamid al-Shatri, a well-known security figure with close ties with the Popular Mobilization Units and the militias affiliated with them.
The Joint Operation Command will go to Major General Qais Al-Muhammadawi, who was part of Abo Mahdi Al-Muhandis's inner circle, according to the reports.

The Central Bank of Iraq has taken over a private bank following a corruption investigation. Raheem Alshamary reports for the Organized Crime and Corruption Reporting Project:

The North Bank for Finance in 2008 issued letters of guarantee to four construction companies who were to rebuild hundreds of schools throughout the country, according to an OCCRP investigation published in September last year into how millions of dollars in public funds were spent on a government project to rebuild schools, but few were ever completed.
After having received advances from the government, none of the four companies finished the job and North Bank was asked to pay the invested money back to the ministry for education, according to the letters of guarantee it issued.
Instead, the bank’s majority shareholder and chairman, Iraqi Kurdish businessman Nozad Al-Jaf, suggested his construction company could take the contract over and finish the schools. Billions of dollars he received from the ministry to conclude the project were misspent and to fill the gaps, Al-Jaf took loans from North Bank with no interest. He never paid back.
... The government said late last year that fewer than half of the 200 schools under this project, originally due to be finished by 2010, were completed to its standards.

Iraq fails to enforce accountability for the murder of journalists. According to a survey by the Committee to Protect Journalists, Iraq ranks fifth on the Global Impunity Index, a list of countries that fail to punish the killing of journalists. CPJ recorded 17 unsolved murders of journalists in Iraq between Sept. 1, 2021 and Aug. 31, 2022.

Commentary and Analysis

A scandal involving the theft of $2.5 billion is unlikely to catalyze real reform or effective anti-corruption measures. Ahmed Tabaqchali writes for the London School of Economics:

The audacity of the embezzlement is matched only by the ease and impunity with which it was carried out.
The funds were taken from a GCT trust account held on behalf of tax payers with Rafidain Bank, which receives deposits from companies that deal with the state as a guarantee for the fulfilment of their contractual obligations.
... Between September 2021 and August 2022, 247 cheques totalling IQD 3.7 trillion were made to five companies, which withdrew the funds in cash as soon as they were deposited into their accounts. These companies did not make any deposits into the trust account, had no authorisations from the companies that made deposits, and at least three of them were formed in the summer of 2021. Nevertheless, the financial report of the GCT’s accounting department, as of 9 October 2022, stated that the balances of the trust account totalled IQD 3.5 trillion, whereas the actual account balances were IQD 0.1 trillion.
... Lacking a sound PFM, the MoF operates without an Integrated Financial Management Information System (IFMIS) which electronically links budget planning, budget execution, accounting and reporting of all government entities; exacerbated by the absence of a Treasury Single Account (TSA), which consolidates all the government’s accounts in a single account controlled by the MoF. As such the MoF has a tenuous control over government entities’ expenditures, and only a partial knowledge of its cash balances.
An IFMIS and a TSA, or even ‘bridging solutions’ till they are fully operational, would have made it extremely difficult to facilitate such an embezzlement, as the two would create an extensive and transparent paper-trail of all transactions.

Buying Time in Baghdad? What to expect from Sudani's government. Bilal Wahab writes for the Washington Institute:

Apart from Sadr’s absence, the powers behind Sudani’s government are the same ones that supported Adil Abdulmahdi’s government in 2018-2020. It is therefore logical to assume that their primary goals remain unchanged—namely, to take over the state, develop the Popular Mobilization Forces (PMF) as a parallel institution to the national military, and join Iraq and Iran at the hip (which would also facilitate closer connections with China and Russia).
... Yet the new government’s tactics might be less aggressive and hasty at first, partly due to internal power politics and regional dynamics, and also because of Sudani’s reputation as a clean, capable administrator (albeit one with ample political ambitions). Although his cabinet and personal office include many ministers imposed by entities that have been designated by the U.S. government for terrorism and corruption, he handpicked the key posts of interior and finance minister at least in part to reassure Washington. And regardless of what Sudani does, the militias might not be in a hurry to resume attacks on U.S. targets. They and their backers might also decide to ease their pressure campaign on the Kurdistan Region in order to keep the Kurds in government, perhaps even making overtures to them on oil rights and the Sinjar territorial dispute.
... To coax Biden’s team back into deeper passivity, the powerful militia and political figures behind Sudani’s government may offer the tactical truce and surface calm that Washington desires—while giving themselves enough time to quietly reestablish their hold over Iraq’s military, financial, and judicial institutions. Although U.S. officials were wise to engage the new government early on lest they default to anti-American elements from day one, many Iraqis were shocked by the perceived warmth and unrestrained rapidity with which Washington accepted Sudani and, by extension, the hostile and corrupt forces that elevated him.

Iraq's real estate boom and the affordability crisis. Anas Morshed writes for IRIS:

Iraq’s real estate market is booming, but this boom has come at a cost for ordinary citizens. In Baghdad’s central locations, the price per square meter is currently between $1,000 and $2,000 US Dollars (USD). Due to the exorbitant cost of housing, even middle-class people have turned to undeveloped areas that lack the most basic amenities like electricity, water, and sanitation. Across Iraq’s major cities, it is often impossible for younger families to own houses – even in the remote outskirts and suburbs.
Political turmoil, the unstable security situation, and lack of laws protecting business owners have made it very risky for investors to put capital towards complex enterprises with delayed and uncertain returns – and so they frequently turn to real estate as a product of the lack of confidence in the broader economy. This imbalance is contributing to massive and ongoing inflation in the real estate market, which is nightmare for the average citizen who desires to purchase a first property or home.
A weak banking sector places ordinary citizens at an enormous disadvantage in amassing the necessary cash to make a home purchase. It is widely known that Iraqis — both investors with high net worth and ordinary citizens — lack trust in banks. Most banks have failed to offer sufficient incentives to attract deposits.
... What about the solution? Thus far, the government is focusing on the housing supply problem. [But] the handful of vertical residential complexes that have recently been constructed in Baghdad have not offered prices that correspond with the earning potential of the middle class.

The shifting trajectory of the Sadrist movement and its implicaitons for Iraq. Renad Mansour and Benedict Robin-D’Cruz write for Chatham House:

This contradiction between reformist discourse and reality reflects a more general trend in the movement. Rhetoric on anti-corruption has been widely viewed as a cover for targeting specific actors and networks. For instance, Sadrist rivals in the SCF have been targeted by the Anti-Corruption and Major Crimes Committee (XO-29)32 which has been lauded by many Western policymakers and analysts for its work in contributing to accountability in the political system. Despite its intended purpose, Sadrist leaders have used this committee to go after opponents, in a bid to acquire further power.
The withdrawal of Sadrist MPs from parliament in mid-2022 was a key turning point. Sadrists argued that the movement could better position itself in readiness for the future by refusing to participate in another ‘status quo government’, instead advancing its reform agenda through reviving protests. The aim, in the words of one influential Sadrist, was ‘to take a short-term risk to achieve the larger goal’.33 Another Sadrist leader explained that ‘elections are not the sole procedure to achieve this objective [the national majority government]. Sadr can capitalize on people, protesters, not just Sadrists but also non-Sadrist groups’.34 But this was not because a new and transformative type of politics was being driven forward against an anti-reformist establishment: rather, it was because the Sadrists were taking increasingly desperate risks in a bid to break the unity of the so-called ‘Shia House’, so that it could be rebuilt around Sadrism. In other words, the aim of the Sadrists was to displace Shia-centricity with Sadrist-centricity.
... Despite ‘quitting’ at the end of August 2022, Sadr is by no means ‘done’ with politics. His move back to an agenda of street protests is part of a strategy to garner more votes, further empowering him in a future election and government formation process. However, the attempted shift from Shia-centric to Sadr-centric state-building, and growing dissatisfaction with status quo politics within his base, are now pushing Sadr’s model of controlled (or contained) instability to breaking point. The result is a more unstable and reactionary Sadrist politics and a great Sadrist proclivity for risk-taking – and, consequently, a proliferation of miscalculations and missteps by Sadr (such as withdrawing his MPs, or criticizing his own followers for the escalation of violence in Baghdad’s Green Zone in late August 2022). Ultimately, a less stable Sadrist movement means a tilt towards greater instability for Iraq’s political system.
Many Western policymakers were surprised and upset with Sadr’s increased appetite for risk. The rhetoric quickly changed from ‘reformist’ to ‘hostage-taker’, with many asking the authors of this paper how Sadr could hold the country hostage. Sadr was an unreliable ally to pursue certain Western interests and reform Iraq’s political system. Despite notions held in foreign capitals that Sadr was ‘anti-Iran’ or ‘pro-reform’, the reality of Iraq’s elite networks is more complicated. Sadr, like any other political leader, navigates across the political spectrum and cannot be boxed into any single category. This reality means that policymakers cannot depend on Sadr or any other individual within Iraq’s political system to channel reform. At times, their support – even if tacit – fuels power plays in the local context. Instead of picking favourites or ‘winners’, policymakers should focus on building coherent institutions that hold to account the entire network of elites.

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Where To Find Business Opportunities in Iraq

Interview of the Week

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