Mustafa al-Kadhimi’s Iraq: Challenges and Prospects

The Iraqi Council of Representatives voted to confirm Prime Minister Mustafa al-Kadhimi on May 7, 2020, after two aborted attempts to replace his predecessor, Adel Abdul-Mahdi, who resigned from office under popular pressure. Despite Abdul-Mahdi’s strong start on security improvement and economic planning and significant success on basic services, particularly electricity supply, he faced a wave of protests only weeks prior to what would be the first anniversary of the formation of his government. Protests in Iraq have been commonplace in the post-2003 era; constitutionally protected for the first time after decades of tyrannical rule, they are driven by many political, economic, and social grievances. Successive Iraqi governments have responded to protesters with myriad promises and occasional employment within the bloated public sector, which is oversaturated to the point of crippling the Iraqi rentier state. What had changed under then-Prime Minister Abdul-Mahdi and eventually forced his resignation was the way his government dealt with the protest movement: in October 2019, his security forces cracked down on protesters, leading to hundreds killed and thousands injured.

The protests, and the political instability they generated, represented the first element in the current Iraqi quadruple crisis.

A Quadruple Crisis

The protests, and the political instability they generated, represented the first element in the current Iraqi quadruple crisis. The second came in late December 2019, when the US-Iran conflict took a dramatic turn toward a military confrontation. A series of hostilities that began by a rocket attack on an Iraqi base in Kirkuk (in northern Iraq), which hosted American personnel, led to the death of an Iraqi-American contractor. The United States retaliated against a unit belonging to the Popular Mobilization Forces (PMF), killing and injuring dozens of Iraqi fighters. The PMF responded by placing the US embassy under siege. Before year’s end, Abdul-Mahdi defused the situation, if only temporarily. On January 3, 2020, Washington raised the stakes of its conflict with Iran by killing the commander of Iran’s Quds Force, General Qassem Soleimani, and the field commander of the Iraqi PMF, Abu Mahdi al-Muhandis, in an air raid as they left Baghdad International Airport. At the request of Prime Minister Abdul-Mahdi, the Iraqi Council of Representatives voted unanimously in favor of a resolution requesting the government to expel all US forces from Iraq. This resolution became the pretext for various pro-Iran armed groups to launch attacks on American personnel and the Iraqi contractors who provide them with logistical support.

Even though Iraq started 2020 with high oil revenues and production, the country barely broke even on salaries, mandatory financial obligations, and partial basic services.

The third and fourth components of the Iraqi crisis arrived simultaneously: COVID-19 and a sharp decline in oil prices. Iraq is a rentier state with 93 percent of its budget reliant on oil revenues. Like many oil-producing countries, Iraq has limited control over production quantities and prices. Even though it started 2020 with oil revenues benchmarked near $60/barrel and production at an estimated 4.5 million barrels per day (mbd), including oil used for domestic consumption, the country barely broke even on salaries, mandatory financial obligations, and partial basic services. As the pandemic unfolded late in the first quarter, Iraq produced an average of 4.6 mbd while prices began to decline from $63.65/barrel in January to $55.66/barrel in February and $32.01/barrel in March. The second quarter started with another dramatic price decrease, reaching $18.38 in April and $29.38 in May, before rising to $40.27 in June. Meanwhile, Iraqi production decreased to 4.7 mbd in April and significantly dwindled to 3.7 mbd in May and June, sending the country into a deep financial crisis.

Domestic Political Woes

From the beginning of the coronavirus outbreak, Iraq was identified as a vulnerable state due in part to its fragile administrative system, depleted health care sector, and lack of economic and financial resources. To make matters worse, Iraq’s closest neighbor, Iran, became the second global epicenter of the COVID-19 pandemic after China. When the coronavirus reached Iraq, the country’s vulnerabilities displayed the sobering reality of how broken Iraq truly is. Paralyzed by a shortage of medicine, protective equipment, hospital beds, and medical staff, public health awareness and prevention measures were almost nonexistent—the country had not invested in these important tools of health care preparedness.

When the coronavirus reached Iraq, the country’s vulnerabilities displayed the sobering reality of how broken Iraq truly is.

Amid these unprecedented conditions, Iraq’s Council of Representatives voted on May 7, 2020 to confirm Mustafa al-Kadhimi as Iraq’s fourth prime minister since the ratification of the constitution in 2005. His government was approved to serve for the balance of Prime Minister Abdul-Mahdi’s term, which ends in October 2021. However, Kadhimi included in his government program a promise to prepare for early elections in response to demands from protesters and various political and social bodies, including the powerful Shia religious authority (the Marja’iya). Keeping his promise, Kadhimi announced on July 31, 2020 that an early general election will be held on June 6, 2021. But this is as far as the prime minister’s authority can reach. According to the Iraqi constitution,1 elections are held every four years, or when the Council of Representatives is dissolved by the initiative of one third of its members or a request from the prime minister with the approval of the Iraqi president. Both scenarios require the vote of the Council’s absolute majority.

Kadhimi included in his government program a promise to prepare for early elections in response to demands from protesters and various political and social bodies

Furthermore, there are several legal prerequisites for holding a credible election. These include the passage of a new electoral law to eliminate the exclusive advantages of the ruling political class and to offer all political hopefuls a level playing field. The Council of Representatives passed a new law that was deemed very controversial because of its arbitrary redistricting formula. Another urgently needed reform is the replacement of the Supreme Court with a constitutionally mandated panel—the current court is not compliant with Article 92 (2) of the constitution. If it is impossible to end the deadlock on interpreting the constitutional language regarding the Supreme Court’s composition, at least filling the two vacant seats would have to be accomplished by election time (another gridlock must be overcome to fill these two seats). The Supreme Court’s full panel must be present to certify the election results.

Economic Challenges

The economy represents the greatest challenge for Prime Minister Kadhimi’s government. Three factors undergird Iraq’s economic crisis. The first is the oil-dependent rentier economy that has put the country at the mercy of fluctuating oil prices. Iraq needs oil prices to hold steady at $65/barrel at the current 3.5 mbd of production to break even on paying salaries and running basic government functions; however, the average price for Brent Crude Oil in 2020 has been $41.19 thus far, so the Iraqi government is running a $2 billion deficit every month during the current oil market. It is also important to note that based on a study in 2017 (which I co-authored with Iraq’s current Finance Minister Ali Allawi and former Minister of Electricity Luay al-Khatteeb) and which proposed a ten-year plan for Iraq, we stressed that the country’s economic viability requires a GDP of $500 billion—but the current GDP is projected to be under $220 billion.

Three factors undergird Iraq’s economic crisis; its oil-dependent rentier economy, its bloated unproductive public sector, and mismanagement and corruption across the public sector.

The second contributor to Iraq’s economic crisis is the bloated, unproductive public sector. Iraq has more than 6.5 million government employees and pensioners,2 with over 90 percent of job opportunities in the public sector. To be sure, if this trend continues, it will likely lead to the total collapse of the Iraqi economy. The third factor is the mismanagement and corruption across the public sector. Throughout the post-2003 era, Iraq has been placed among the bottom of the list of countries regarding transparency and efficiency, with only a handful of failed states in worse positions. In 2019, Iraq ranked 162 out of 180 countries on Transparency International’s Corruption Perceptions Index.

To its credit, Prime Minister Kadhimi’s government has worked on a full scale economic review and proposed a White Paper that includes comprehensive economic and financial reforms that aim to shore up the Iraqi economy in the next 3-5 years. Despite its pessimistic general outlook, the White Paper identifies several sectors that need immediate reform and proposes specific measures to address them. However, there are three problems that may undermine the prospects of success. First, some of the proposed measures are extremely unpopular and will certainly cause a major backlash against the government. In the past 17 years (and maybe much longer), Iraqis have looked at subsidies, public utilities, and public sector employment as entitlements. Eliminating—or even reducing—these entitlements is unlikely to be tolerated, especially in the absence of satisfactory alternatives. Second, the White Paper is presented as a reform roadmap over 3-5 years, but the current government has less than a year left and an early election, or two years if the early election is not held. There is no guarantee that the next government will remain on the same path, especially if it becomes highly unpopular. Third, considering the record of Iraq’s government and Council of Representatives, it would take much longer than five years to accomplish some of the proposed reforms, if ever. Indeed, many of the proposed reforms are recommendations and academic prescriptions rather than a realistic plan of action.

Transparency and Accountability

Kadhimi will ultimately be evaluated on his performance on two fronts that matter most at the popular level: fighting corruption and bringing the protesters’ killers to justice. So far, the government has not accomplished any significant progress on either front. The practice of arresting third- and fourth-tier operatives and giving mafia bosses a pass will not impress the Iraqi people. Failing to meet expectations in the war on corruption will cost the government important support from the protesters, the Shia religious authority, and wide segments of the electorate.

Kadhimi’s performance will be evaluated on two fronts: fighting corruption and bringing the protesters’ killers to justice.

Conversely, going after the first and second tiers of corrupt officials and political leaders will cost the government a political defeat because Prime Minister Kadhimi does not have a political majority in the Council of Representatives. This may also be said about prosecuting the killers of protesters and political activists, due in certain cases to their political connections. Protected by powerful political blocs and/or heavily armed militant groups, they often show little interest in reaching compromise. Here, too, the government has taken only symbolic steps that in no way may constitute a faithful effort to establish the rule of law. Government shortcomings on combatting corruption and prosecuting violent actors are unlikely to be endured for protracted periods by the Iraqi people.

Navigating Regional Relations

Iraq-Iran relations continue to pose a major challenge for Iraqi prime ministers. With a shared 1,400-kilometer border, $12 billion trade exchange, and extremely entangled religious and cultural relations, Iran is a mandatory partner for Iraq. To be sure, Iran operates in Iraq under heavily distressing memories from the 1980-88 Iran-Iraq war that devastated both countries; both want to secure a partnership to avoid a repeat of that injurious history. As relations stand, the Iranian challenge is highly aggravated by the interjection of an important exogenous variable: the US-Iran conflict that continues to manifest itself on Iraqi soil. The Iraqi government can negotiate with Iran and secure an equilibrium in bilateral relations, but it cannot do the same in a trilateral conflict that is superimposed by two partners—Iran and the United States—that refuse to respect Iraq’s policy of neutrality. This is particularly true in light of Iraq’s status as the weakest of the three disputants. So far, Iran has the upper hand because it has strong support in the Iraqi Council of Representatives and from several powerful allies in the Iraqi PMF. It also enjoys amicable relations with an assortment of Iraqi Sunni and Kurdish politicians.

The Iranian challenge is highly aggravated by the US-Iran conflict that continues to manifest itself on Iraqi soil.

On the periphery of these entangled regional relations, there are Iraq’s relations with its Arab neighbors. With Syria overwhelmed by continuing internal conflicts and Jordan remaining a neutral trade partner, Iraqi relations with the Gulf Arab states—and Saudi Arabia in particular—are the only challenge. This is particularly true in in the context of the internal Gulf Cooperation Council division that shattered the regional alliance more than any previous dispute since the organization’s inception in 1981. Iraq maintains friendly relations with Qatar and Oman as well as a good measure of amicability with the United Arab Emirates and Bahrain.

Despite bitter relations from1990 to 2003, Iraq and Kuwait have managed to open a new chapter; however, several factors remain, leaving the door open to potential future conflicts. Although the two countries were successful in closing the book on the Iraqi invasion of Kuwait, including Iraq’s compliance with all relevant UN Security Council resolutions, certain post-invasion hostilities and unilateral actions continue to threaten the relationship: border disputes, port competition, and Iraq’s ever-shrinking access to the Arabian Gulf.

The late rapprochement by the Saudi government in 2015 remains focused on courting Iraq toward its side against Iran rather than seeking bilateral relations with Iraq.

As to Iraqi-Saudi relations, the situation is more complicated. Saudi Arabssia lost 12 years in the post-2003 Iraq, after its refusal to normalize relations with Iraq and supporting its destabilization. Seeing that its misguided approach played into the hands of its regional arch-rival, Iran, the Saudi government began to reverse its position in 2015. But this rapprochement may be too little, too late: too late because Iran has exploited the Saudi absence in Iraq to its fullest extent politically, economically, and socially; and too little because of the paucity of Saudi engagement—courting Iraq toward its side against Iran rather than seeking bilateral relations with Iraq for their own sake. With the Iraqi policy of regional neutrality, it is hard to expect that Iraqi-Saudi relations would be fruitful in the foreseeable future. Prime Minister Mustafa al-Kadhimi made a bold move to break away from the tradition of his predecessors and announced that his first foreign visit would be to Saudi Arabia. However, the Saudi government cancelled the scheduled visit after Kadhimi met with the Iranian foreign minister on the eve of his visit to Riyadh. Although citing the sudden illness of King Salman bin Abdulaziz as the reason for the cancellation, the Saudis have yet to reschedule Kadhimi’s visit.

With myriad domestic and regional crises facing Iraq and confronting Prime Minister Mustafa al-Kadhimi, the next few months of his premiership and how he handles those challenges will prove consequential for the Iraqi people and Iraq’s future.

Abbas Kadhim is Resident Senior Fellow and Iraq Initiative Director at the Atlantic Council.

1 Source is in Arabic.
2 Source is in Arabic.