A Year of Mixed Results for Iraq’s Sudani

Iraqi Prime Minister Mohammed Shi`a al-Sudani completed his first year in office on October 27 with a mixed record of successes and failures owing to objective domestic and external circumstances that impacted his parliament-approved government program. The program was a hybrid, two-part document. In the first part, Sudani laid out his own goals, which were firmly oriented toward improving services to citizens. The second was a political agreement adopted by the State Management Alliance, a post-2022 election coalition forged between 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.

The agreement embodied political demands made by each of the allies, and provided the basis for the formation of Sudani’s government in October 2022. The program spelled out five broad priorities—combating corruption; creating jobs; addressing poverty; reforming the economic and financial systems; and improving public services—and elaborated steps to address them. What was absent from Sudani’s governing document were the overtly political goals that were left to the overarching political agreement forged by the State Management Alliance, an absence that in the end may have impacted the prime minister’s ability to make headway on his much-vaunted goals of government.

Hit and Miss on the Economy

During his first year in office, Sudani harnessed his energies to improving services and presented parliament with an unprecedented and record-setting three-year budget to secure continuity of funding for projects and programs. However, the $153 billion 2023-2024 budget (about one-third of which is a budget deficit) is heavily weighted toward operating costs, and only $38 billion is allocated for developmental investment, an imbalance criticized by many observers. To ease unemployment quickly, as many as 600,000 government jobs were added to the already inflated government payroll, in a clearly populist move to win public approval and avert renewed protests.

Sudani oversaw the expansion of the social welfare network to include hundreds of thousands of needy families and individuals.

To alleviate poverty, Sudani oversaw the expansion of the social welfare network to include hundreds of thousands of needy families and individuals. He has pushed the Ministry of Health to improve service in the abysmally broken health sector. The government has launched road and highway projects that can be completed quickly. But these remain short term solutions to deep economic problems, such as a negligible private sector contribution to the gross domestic product, heavy dependence on hydrocarbons and imports, and almost total reliance on government as the employer of first resort. What makes this worse are a sclerotic byzantine bureaucracy and entrenched political interests that impede progress in long term and necessary economic reform.

To improve the economic outlook in the medium term, Sudani has energetically pursued foreign investment, but only with some success. The multi-pronged $27 billion agreement with TotalEnergies to develop Iraq’s oil and gas sectors was signed in its final form in July 2023 after languishing for years following objections by Iraqi politicians. Gulf countries have also stepped in: the deal with TotalEnergies includes a 25 percent investment by QatarEnergy. In July also Saudi Arabia and the United Arab Emirates each pledged $3 billion dollars in investments in Iraq. Although these are capital-intensive investments, they will serve two important Sudani objectives: to create associated private sector jobs and to reduce Iraq’s dependence on fuel and gas imports from Iran and other sources. More ambitiously, last May Sudani proposed a “Development Road,” a $17 billion transport project that will link Al-Faw Port in southern Iraq with Turkey, and thence to Europe, and generate $4 billion annually and create thousands of jobs.

While partnerships in the energy sector are forthcoming with international corporations, there is little foreign appetite for investment in industries like agribusiness or manufacturing. Red tape, corruption, an opaque legal environment, and uncertain security are all barriers. To top off challenges to the economy, the Iraqi dinar’s decline against the dollar has persisted. Ironically, in February 2023, the government revaluated the Iraqi dinar from IQ1,460 to the dollar to IQ1,320, hoping to strengthen the national currency. While this rate has officially held, the move backfired in the parallel market: the dinar fell to 1,560 to the dollar in early October, creating even larger profits for speculators, but also prompting the Central Bank of Iraq to announce a halt to dollar cash withdrawals that commences on January 1, 2024. And despite multiple banking measures, some under pressure from the United States Treasury, dollar smuggling out of Iraq continues unabated.

Inability to Fight Entrenched Corruption

On Sudani’s first stated priority, combating the “pandemic” of corruption, the record is patchy. There have been several convictions on corruption charges, some of which may be politically driven, of former provincial governors, mid-level officials, and others, yet Sudani’s anti-corruption drive has failed to target the powerful political parties and individuals who instigate, benefit from, and provide cover for corruption rackets. Government contracts, whether by federal or provincial authorities, are a rich mine for personal or party enrichment. Impunity has reached epic proportions. This was illustrated by what was called the “heist of the century” in which a monumental $2.5 billion sum was embezzled from the tax authorities of Iraq. In this bizarre and convoluted case, three prominent people were convicted: a businessman, a former member of parliament, and a senior official in the state-owned Rafidain Bank. Despite their admission of guilt and their conviction, both the businessman and the former MP were released after returning a modest percentage of the funds they stole, and they are said to have left the country soon after.

Sudani’s anti-corruption drive has failed to target the powerful political parties and individuals.

There is a national consensus that such a huge theft could not have been carried out without the involvement of political parties and influential politicians, yet none has been named or accused. Such impunity and the government’s failure to get to the roots of corruption has made the public rightly skeptical of the government’s will or ability to arrest this scourge. With political cover, corruption is systemic, entrenched, and often backed by intimidation from armed militias. Indeed, Sudani cannot challenge the political parties that brought him to power, despite the fact that corruption undermines virtually every aspect of his agenda.

Ambitious but Circumscribed Foreign Policy

The same gap between Sudani’s goals and the political reality preventing him from realizing them is seen in relations with Arab neighbors. Sudani has successfully advanced the steps taken by his predecessor, Mustafa al-Kadhimi, to strengthen economic and security relations with them, including Jordan, Egypt, and the states of the Gulf Cooperation Council (GCC). A major goal is to improve the availability of electrical power and diversifying sources of gas and fuel away from dependence on Iran. For example, by the end of 2024 Iraq will join the electric grid established by the GCC Electricity Interconnection Authority, providing Iraq with much needed power from GCC surpluses. Iraq and Jordan have also established an electricity connection that will supply electrical power to western provinces in exchange for oil exports to Jordan. In addition to energy cooperation, Iraq has stepped up security coordination with both Saudi Arabia and Jordan.

However, the rapprochement with Arab countries is not welcomed by some Shia political parties and members of the Iran-friendly Popular Mobilization Forces. To be sure, detente between Saudi Arabia and Iran has made it easier for Sudani to woo GCC countries, but suspicions remain. Militias like al-Nujaba Movement, a radical group closely aligned with Iran, has condemned the building of a long-proposed oil pipeline between Basra and Aqaba, Jordan, and Iraqis who support it. Even as PM Sudani, in his September 22, 2023 address to the UN General Assembly, asserted Iraq’s commitment to respect UN resolutions, MPs from the Coordination Framework were decrying the 2012 agreement with Kuwait over the Khor Abdullah waterway, which was ratified by the Iraqi parliament. Simultaneously, the Supreme Federal Court issued a ruling declaring the agreement unconstitutional and void. The backlash from Kuwait and the GCC countries was immediate and unequivocal, infecting carefully nurtured relations with Iraq.

Sudani has to look over his shoulder at the hardline Shia armed groups both inside and outside the Coordination Framework.

In his UN address, the prime minister declared Iraq’s determination to maintain an independent and balanced foreign policy, preserving good relations with all nations. Meanwhile, the social media of Shia militia groups were denouncing US and NATO presence in Iraq as a form of occupation and accusing them of promoting “moral deviance.” While Sudani attempts to achieve some stability and even-handedness in foreign policy, he has to look over his shoulder at the hardline Shia armed groups both inside and outside the Coordination Framework.

Endless Political Dysfunction

Such messaging confusion raises a broader question about Sudani’s freedom to pursue his agenda. To the frustration of Sunnis and Kurds, the prime minister has not been able to, or possibly has not been willing to, fulfill the demands laid out in the political agreement that underpins the State Management Alliance and the formation of the current government. The political agreement stipulated a major Kurdish demand: negotiation and approval of a gas and oil law within six months; by the end of the first year, the law is still stalled and differences between Baghdad and Erbil persist. Sunni demands for the return of internally displaced persons to their original homes within six months have not been implemented, and the Amnesty Law eagerly advocated by Sunnis has met with firm opposition from Shia leaders. Similarly, Sudani has been unable to re-deploy paramilitary units (militias) 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.

Coordination Framework parties are using obstruction tactics to assert their authority over their putative Sunni and Kurdish partners. Shortly after the formation of the government in October 2022, the parties within the CF launched a virulent campaign to vilify and unseat Speaker Halbousi. They also attacked vital Kurdish interests, applauding, if not instigating, two Supreme Court rulings that effectively shut down the Kurdistan Regional Government’s oil sector and Kurdish revenues. The Kurds have complained of increasing moves toward centralization. While the prime minister tries to avoid the labyrinths of politics, keep the peace among his backers, and pursue his service agenda, he is inevitably hampered by political divisions and acrimony.

Sudani has done nothing in the past year to bring armed militias under state control, as promised in his political program. Thus the question of who controls policy and decision-making came to a head over the current war on Gaza. On October 19, Prime Minister Sudani published an op-ed in a leading Arab daily in which he condemned Israel’s attacks on civilians, stressed the need for a cease-fire and delivery of humanitarian aid, and called for a unified Arab stance on Palestinian rights. After October 17, however, militia groups launched repeated drone and rocket attacks on bases housing US military personnel. In an explicit interview on October 22, a leading member of the Coordination Framework stated that the Iraqi Resistance Factions (militias) “do not need to coordinate with the Iraqi government regarding their positions and actions against the U.S., ” and will make their own decisions regarding operations against the US presence in Iraq. As if in response, the following day Sudani’s military spokesperson issued a statement rejecting attacks on US military personnel and promised to pursue perpetrators. Nevertheless, over the next several days, attacks by militias against the United States only intensified, and no government action was forthcoming. Leading members of the Coordination Framework 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. Such security and political instability, a veritable fog of uncertainty, is sure to severely undermine what Sudani set out to do twelve months ago.

On December 18, Iraq will hold its first provincial elections in ten years. These will be vigorously contested, not least among the different factions within the Coordination Framework, several of which will compete against each other in the central and southern provinces and in some predominantly Sunni ones. Depending on the outcome of these elections, Sudani’s ability to maneuver between the factions, as he does now, may be further restricted. Equally unsettling for the prime minister, the outcome of the provincial elections is likely to determine the outcome of parliamentary elections in 2025 and his own political future. It is thus likely that the post-provincial elections period will be a touchstone for Sudani’s political acumen and resolve, as well as an important moment in the history of the country as it deals with the difficulties facing his multi-faceted and ambitious government program.

The views expressed in this publication are the author’s own and do not necessarily reflect the position of Arab Center Washington DC, its staff, or its Board of Directors.

Featured image credit: Twitter/Mohammed Shi`a Al-Sudani