Iraq faces a difficult 2015 with the battle against Islamic State (IS) and the fall-out from declining oil prices. However, Gerald Butt says these challenges could help the authorities in their efforts to tackle corruption.
The wars and upheavals of various kinds in Iraq over the past decade have contributed to making the country one of the most corrupt in the world. In the latest survey by Transparency International Iraq finds itself in the ignominious position of sixth from bottom, below countries like Libya and Yemen and only just ahead of the two Sudans and North Korea. The new Abadi government has started taking steps to root out corruption. But even if momentum can be kept up it is likely to be a long and slow process – so institutionalised has the misuse of public money become.
But in the current circumstances Iraq needs every penny it can find. It’s fighting a military campaign over vast areas of territory as it seeks to push back IS supporters. This means purchasing weapons from abroad and recruiting and training new personnel to join the armed forces and security services. At the same time the Baghdad government is having to fund the enormous aid programme to meet the needs of hundreds of thousands of families who fled their homes when IS forces advanced and now face a winter of living in makeshift temporary accommodation.
All this, against a background of falling oil prices that are leaving gaping holes in Iraq’s revenue account. Income from oil in May totalled $8 billion. In November it was just $5 billion, down almost $1 billion on October. A belt-tightening programme has begun, but further significant oil price declines will inevitably force huge cuts in public spending in 2015 – given that security and aid for the homeless must be protected. Iraq has already asked the UN if it can delay by a year a payment of $4.6 billion to Kuwait as compensation for damage caused during the Iraqi occupation in 1990-91.
The prospect of dire financial times ahead was clearly an incentive for the governments both in Baghdad and Irbil to reach a partial agreement on oil exports through Turkey. The resulting deal means that the Kurdish Regional Government can sell its oil, in return for an end to the freeze in fiscal transfers from Baghdad to Irbil that lasted for ten months. At the same time, the federal government will start receiving once more badly needed revenue from oil produced in the north of the country. The pipeline carrying crude oil from Kirkuk to Ceyhan and Turkey has been out of action since early March because of IS sabotage.
So 2015 will not be an easy year, even if the oil price collapse bottoms out or prices start to rise again. With money so tight it should be easier for the Abadi government to win both political and public support for its anti-corruption campaign. The country can no longer afford to see state money going into the pockets of politicians and their cliques. Years of rampant corruption have meant that essential infrastructure repairs to power stations and water distribution networks have not yet been carried out. Further delays to the provision of basic services – at a time when public revenue is being stolen – are unlikely to be tolerated by the Iraqi public.
Iraq’s standing in the next Transparency International table is unlikely to be significantly different to the current one. But a period of austerity could mean positive progress in subsequent years – assuming that the campaign to keep IS at bay is successful and that the price of oil stops, what is for Iraq, its calamitous fall.
Gerald Butt, a former BBC Middle East correspondent, is an analyst and author on the region.