A Year of Mixed Results for Iraq’s Sudani

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A Year of Mixed Results for Iraq’s Sudani

Iraqi Prime Minister Mohammed Shi’a al-Sudani recently completed his first year in office on October 27. His government program, which the parliament approved, had a mixed record of successes and failures. This was largely due to the objective domestic and external circumstances that impacted his program. The program consisted of two parts – the first part was focused on the Prime Minister’s own goals, which were aimed at improving services for citizens. The second part was a political agreement adopted by the State Management Alliance, a post-2022 election coalition that was formed between various political parties including the Shia Coordination Framework (CF), the Sunni Sovereignty Alliance led by Speaker of the House of Representatives Mohammed al-Halbousi, and the two Kurdish parties, the Kurdistan Democratic Party and the Patriotic Union of Kurdistan.

In October 2022, Sudani’s government was formed based on an agreement that incorporated political demands from each of the allies. The agreement outlined five main priorities that included combating corruption, creating jobs, addressing poverty, reforming the economic and financial systems, and improving public services. However, the government document lacked explicit political objectives, which were left to the State Management Alliance’s broader political agreement. This absence may have affected the prime minister’s ability to achieve his government’s goals successfully.

Hit and Miss on the Economy

During his first year in office, Sudani focused on improving services and presented parliament with an unprecedented three-year budget of $153 billion for securing continuity of funding for projects and programs. However, the budget is heavily skewed towards operating costs, with only $38 billion allotted for developmental investment, which has been criticized by many observers due to the imbalance. In order to address unemployment quickly, an additional 600,000 government jobs were created, adding to an already inflated government payroll, in an obvious populist move to gain public approval and avoid renewed protests.

Sudani expanded the social welfare network to help hundreds of thousands of families and individuals in need.

Sudani took measures to alleviate poverty by expanding the social welfare network to include hundreds of thousands of needy families and individuals. He also urged the Ministry of Health to enhance their services in the abysmally broken health sector. The government initiated road and highway projects that can be completed quickly, but these are only short-term solutions to deep economic problems. These problems include a negligible private sector contribution to the gross domestic product, heavy dependence on hydrocarbons and imports, and almost complete reliance on the government as the employer of first resort. However, the situation is compounded by a sclerotic and byzantine bureaucracy and entrenched political interests that hinder progress in long-term and necessary economic reform.

To improve the economic outlook in the medium term, Sudani has been actively pursuing foreign investment, but with limited success. After years of objections by Iraqi politicians, a multi-pronged $27 billion agreement with TotalEnergies to develop Iraq’s oil and gas sectors was finally signed in July 2023. Gulf countries like QatarEnergy have also stepped in, with a 25 percent investment in the TotalEnergies deal. In addition, Saudi Arabia and the United Arab Emirates have each pledged $3 billion dollars in investments in Iraq. These capital-intensive investments serve two important Sudani objectives: to create private sector jobs and to reduce Iraq’s dependence on fuel and gas imports from Iran and other sources. In a more ambitious move, last May, Sudani proposed a “Development Road” project worth $17 billion. This project will link Al-Faw Port in southern Iraq with Turkey, and then to Europe. It is expected to generate $4 billion annually and create thousands of jobs.

Foreign investment in industries like agribusiness or manufacturing is not forthcoming in Iraq due to several factors such as red tape, corruption, an opaque legal environment, and uncertain security. While partnerships in the energy sector are being formed with international corporations, other industries are struggling to attract foreign investment. To make matters worse, the Iraqi dinar has been declining against the dollar, which has created additional economic challenges. Ironically, the government revalued the Iraqi dinar from IQ1,460 to the dollar to IQ1,320 in February 2023 to strengthen the national currency. However, this move backfired in the parallel market, and the dinar fell to 1,560 to the dollar in early October, creating even more profits for speculators. This prompted the Central Bank of Iraq to announce a halt to dollar cash withdrawals starting on January 1, 2024. Despite multiple banking measures, some under pressure from the United States Treasury, dollar smuggling out of Iraq continues unabated.

Inability to Fight Entrenched Corruption

Sudani’s top priority is to combat corruption, but the results have been mixed. While there have been several corruption convictions against former provincial governors and mid-level officials, some of which may be politically motivated, Sudani’s anti-corruption campaign has failed to go after the powerful political parties and individuals who are the root cause of corruption and provide cover to corrupt activities.

Government contracts, whether awarded by federal or provincial authorities, have become a source of personal or party enrichment for many. This has led to a culture of impunity where corruption is rampant. A prime example of this is the infamous “heist of the century” in which a staggering sum of $2.5 billion was embezzled from Iraq’s tax authorities. The case was complicated and involved a businessman, a former member of parliament, and a senior official in the state-owned Rafidain Bank. Despite their admission of guilt and conviction, both the businessman and the former MP were released after paying back only a small percentage of the amount they had stolen. It is rumored that they left the country soon after their release.

Sudani’s efforts to combat corruption have been ineffective in holding accountable the influential political parties and individuals involved. Any spelling, grammar, or punctuation errors have been corrected.

There is a widespread belief that the enormous theft that occurred could not have taken place without the participation of political parties and influential politicians, yet none of them have been identified or charged. This lack of accountability and the government’s inability to address corruption have understandably left the public doubtful of the government’s determination or capability to combat this issue. Corruption has become deeply embedded, and its practitioners receive protection from armed militias. President Sudani, who owes his position to political parties, is unable to confront them, even though corruption undermines almost every aspect of his agenda.

Ambitious but Circumscribed Foreign Policy

There is a gap between Sudani’s goals and political reality, preventing him from achieving them. This gap is also evident in his relationship with Arab neighbors. Sudani has made progress in strengthening economic and security ties with Jordan, Egypt, and the Gulf Cooperation Council (GCC) states, following Mustafa al-Kadhimi’s footsteps. One of his primary aims is to improve the availability of electrical power and reduce dependence on Iran for gas and fuel sources. For instance, Iraq will be joining the GCC Electricity Interconnection Authority’s electric grid by the end of 2024. This move will provide Iraq with much-needed power from GCC surpluses. Furthermore, Iraq has established an electricity link with Jordan to supply electrical power to western provinces in exchange for oil exports to Jordan. Additionally, Iraq has increased its security coordination with Saudi Arabia and Jordan.

There are some Shia political parties and members of the Iran-friendly Popular Mobilization Forces who are not happy with the rapprochement between Arab countries. Although the detente between Saudi Arabia and Iran has made it easier for Sudani to attract GCC countries, there are still suspicions. Militant groups, such as the al-Nujaba Movement, which is closely aligned with Iran, have criticized the construction of the proposed long oil pipeline that would link Basra and Aqaba, Jordan, and Iraqis who support the pipeline. PM Sudani, in his address to the UN General Assembly on September 22, 2023, affirmed Iraq’s commitment to respect UN resolutions, while MPs from the Coordination Framework were criticizing the 2012 agreement with Kuwait over the Khor Abdullah waterway, which the Iraqi parliament ratified. At the same time, the Supreme Federal Court ruled the agreement unconstitutional and void. The backlash from Kuwait and the GCC countries was immediate and unambiguous, which adversely affected Iraq’s carefully nurtured relations.

Sudani must remain vigilant of hardline Shia armed groups within and outside the Coordination Framework.

During his address at the United Nations, the Prime Minister of Iraq declared the country’s determination to maintain an independent and balanced foreign policy while simultaneously preserving good relations with all nations. However, on social media, Shia militia groups were denouncing the presence of the US and NATO in Iraq, accusing them of promoting “moral deviance” and labeling their presence as a form of occupation. Despite attempts by the Prime Minister to achieve some stability and even-handedness in foreign policy, he has to remain cautious of the hardline Shia armed groups both inside and outside the Coordination Framework.

Endless Political Dysfunction

The messaging confusion has raised a question about Prime Minister Sudani’s ability to pursue his agenda. The political agreement that underpins the State Management Alliance and the formation of the current government has not been fulfilled, which has frustrated Sunnis and Kurds. The agreement included a major Kurdish demand for negotiation and approval of a gas and oil law within six months, but by the end of the first year, the law is still stalled, and differences between Baghdad and Erbil continue. Sunni demands for the return of internally displaced persons to their original homes within six months have not been implemented, and the Amnesty Law has met with firm opposition from Shia leaders, which Sunnis were eagerly advocating. Sudani has also been unable to re-deploy paramilitary units out of urban areas, as stipulated in the agreement, and restrict their activities to national defense under his authority as commander-in-chief of the armed forces.

The Coordination Framework parties are using obstructive tactics to exert their authority over their supposed Sunni and Kurdish partners. Soon after the government was formed in October 2022, the parties within the CF launched a vicious campaign to defame and remove Speaker Halbousi from his position. They also attacked crucial Kurdish interests, applauding, if not instigating, two Supreme Court rulings that effectively shut down the Kurdistan Regional Government’s oil sector and revenue. The Kurds have expressed concerns about increasing moves towards centralization. Despite the prime minister’s efforts to avoid political complexities, maintain peace among his supporters, and pursue his service agenda, he is inevitably hindered by political divisions and conflicts.

Over the last year, Sudani has failed to fulfill his promise of bringing armed militias under state control. This has resulted in a situation where it is unclear who is in charge of policy and decision-making. This uncertainty came to a head during the current war on Gaza. On October 19, Prime Minister Sudani wrote an op-ed in a leading Arab daily, condemning Israel’s attacks on civilians and calling for a cease-fire and the delivery of humanitarian aid. He also stressed the need for a unified Arab stance on Palestinian rights. However, after October 17, militias launched several drone and rocket attacks on bases that housed US military personnel. A leading member of the Coordination Framework stated in an interview on October 22 that the Iraqi Resistance Factions (militias) did not need to coordinate with the Iraqi government regarding their positions and actions against the US. They would make their own decisions on operations against the US presence in Iraq. In response, Sudani’s military spokesperson issued a statement on October 23, rejecting attacks on US military personnel and promising to pursue perpetrators. Despite this, militias continued to intensify their attacks against the United States over the next several days, and no government action was taken. Leading members of the Coordination Framework even called for the expulsion of the US ambassador to Iraq and the closure of the embassy, despite the prime minister’s pledge to protect foreign missions. This political and security instability will certainly have severe consequences and undermine what Sudani had set out to achieve a year ago.

Iraq is set to hold its first provincial elections in a decade on December 18. The Coordination Framework, consisting of various factions, will fiercely compete against each other in the central and southern provinces, as well as in some predominantly Sunni ones. The election’s outcome will play a vital role in determining Prime Minister Sudani’s political future, as it is likely to determine the outcome of parliamentary elections in 2025. Sudani’s ability to maneuver between factions may be further restricted depending on the results of the provincial elections. Therefore, the post-provincial elections period will be crucial for Sudani’s political acumen and resolve, and the country’s future as it deals with various challenges under his multi-faceted and ambitious government program.