Iraq embracing change amidst challenge

By Samar Rassam- Whitticombe: Dear All, wishing you all well in these challenging times.

There has been quite a bit happening in Iraq over the past six months, so let me begin.

Government appointments

The Iraqi Prime Minister Adel Abdul Mahi had been in power since October 2018, but he resigned in November 2019 as a result of months of chaos and tension.

In April 2020, the Iraqi Parliament confirmed Mustafa al-Kadhimi as the Prime Minister of Iraq and approved his new cabinet after months of deadlock and the withdrawals of several nominees for the office of Prime Minister.  This is a major development for a country that has been in a state of political paralysis since November 2019.  It was a very important step that his candidacy was welcomed by the major Shi’a, Sunni, and Kurdish parties.

15 out of 22 cabinet positions have been approved, but 7 remain unfilled.  These are within the Ministry of Oil, Ministry of Foreign Affairs, Ministry of Justice, Ministry of Migration and Displacement, Ministry of Trade, Ministry of Culture and the Ministry of Agriculture.  It will be a difficult battle ahead to fill these key vacancies, but at least the hurdle of forming a government has been crossed.

It has just been announced that the newly appointed Iraqi Minister of Finance, Ali Allawi, has been appointed Acting Minister of Oil until such time as a new Minister of Oil is approved.

Challenges Facing the New Prime Minister

Al-Kadhimi must present a plan with a realistic agenda that includes a reduction in unemployment, fighting corruption and economic reform.

He has to deal with the consequences to the economy, along with Iraq’s already fragile infrastructure, due to the COVID-19 pandemic.

One of his priorities will need to be the filling of vacant positions within his government and, to that end, he will present the remaining ministerial portfolios before Eid Al-Fitr.

He has already resumed talks with delegates from the Kurdistan Region in order to reach final agreements regarding all outstanding problems between the two parties.

He has already taken action regarding unpaid salaries, especially by government employees, which should mean there will be a cessation of protests about this matter.

Al-Kadhimi has a massive job on his hands.  These are the tasks that he has to deal with on an urgent basis.

  • set the federal budget law
  • launch the salaries of retirees
  • improve the living conditions of low-income and daily workers
  • earn a welfare network grant
  • control the security situation
  • restore the prestige of the state, the security forces and the police
  • uncover those accused of killing protesters and bring them to justice

The Economy

Since October 2019 many people have been injured and have lost their lives due to protest-related violence which has highlighted the rising unemployment figures, the economy, corruption, shortages of electricity and problems with the delivery of basic services.  These issues were exacerbated by a weak government which pushed a struggling economy even further in the wrong direction.

One sector that continued to function was the Oil and Gas sector, which was less affected than other sectors as the oil and gas fields and installation were far from the protests, were in secured areas, and protected by the Iraqi Government.  The situation has now changed due to the global pandemic which is causing economic decline and crashing oil prices.

Oil and Gas Sector

According to the Deputy Minister of Oil:

Iraq announced its intention to cut the import of gasoline for May.  Iraq’s current refining capacity is 600 KBPD.  Operation of the new isomerization unit at Daura refinery to improve gasoline quality is delayed due to Covid-19.

New isomerization and fluid catalytic cracking units at Basra refinery are under construction (86%).  Salahudin-1 refinery in Baiji is producing 70 KBPD.  Salahudin-2 will be rehabilitated at the end of the year.  Damage to Shamal Refinery is under assessment.

Al-Kadhimi has made it clear that paying salaries to retirees is very important to him.  This is in response to a few days delay in their May salaries being released, which was made worse because no official party issued any clarification on the matter.  He added:  “The salaries of retirees will be paid, and Iraq does not neglect the owners of credit for it, who have spent their lives serving the country,” noting that “the government is at their service.”

Electricity Sector

The Electricity sector needs time to be fixed and now faces delays due to the impact of the Coronavirus pandemic on the economy.  The tariff reform is also a priority.

Electricity theft resulted in a loss of $12 billion to the Iraqi government’s revenue last year.  Rebuilding Iraq’s power infrastructure, damaged by decades of war, is high on the government’s list of priorities.  The problems that this crippled utility network has caused has been a key factor behind protests across Iraqi provinces during summer months, when temperatures can easily reach 50°C.

Immediately after the approval of al-Kadhimi as the new Prime Minister, the US granted Iraq a120 day sanctions waiver, allowing them to purchase electricity from Iran.

Iraq is also looking to import electricity from neighbouring Jordan, but although a deal has been negotiated, it will only materialise in 2 years, so Iraq is likely to continue being reliant on Iranian gas for the foreseeable future.

Effects of the Covid-19 pandemic and the Collapse in the Oil Price

The Coronavirus crisis is wreaking havoc on economies around the world.  Unemployment is increasing and a global recession is looming.  Every aspect of our lives has been impacted and we desperately need to find solutions to boost our healthcare systems, secure businesses, maintain jobs and education and stabilise financial markets and economies.

On top of that, oil prices are extremely low and we are faced with a volatile market.  Iraq is OPEC’s second largest producer.  The Organization of Petroleum Exporting countries, Russia and other producers known as (OPEC) plus, have agreed to cut output by 9.7 million barrels per day from 1 May 2020 to combat falling crude prices.

This underlines the difficulties some producers will face in meeting their commitments, and Iraq is no different as it will struggle to cut its output.  The current oil prices are affecting all oil producers but Iraq is one of the most vulnerable countries because of its total dependence on oil revenue. Iraq has also agreed to comply with OPEC measures to cut production by 23% in May and June.

In the wake of the economic impact of the COVID-19 pandemic, global demand has fallen by as much as 30% over the past few weeks, as economies around the world have moved into recession as a result of the lock-down and social-distancing measures designed to slow the spread of the COVID-19 virus. 

Iraq’s revenues are plummeting and fears of economic collapse are raised.  The collapse in oil prices or any form of conflict affects oil exports.

On 1 May 2020, a high-level delegation from the Kurdistan Regional Government (KRG) met with the finance committee of the Iraqi parliament to discuss disputes between Erbil and Baghdad regarding oil exports and KRG’s share in the 2019 federal budget.  The Kurdish delegation also exchanged views on approaches to cope with the 2020 fiscal year.  Previous attempts to resolve this uncertainty have largely failed due to contesting claims and actions about which governmental entity is allowed to explore, extract and market oil.

Summary

Despite everything that is happening, things will get better and we must remain positive.

We need to start doing things in a different way and use online training in order to build Iraq’s health and education sector.  Face to face training isn’t currently possible so we are pleased to announce some interactive short training sessions which will be conducted using WebEx, Zoom or whatever digital platform is suitable.

Until such time as we can go back to normal training practices, we still need to progress and learn. We must focus on marketing, talking with our existing clients and finding new ones.

The substantial challenge is to encourage conditions where Iraq’s human capabilities and institutions can develop.  During this challenging time, it is crucial that we pull together in common endeavour and purpose and make investments in health, education and infrastructure.

Most importantly, stay safe, stay focused and stay positive!

 

 

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