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Report Highlights "Troubled" Year for Iraq

By Daniel J. Graeber | Fri, 02 November 2012 00:30 | 0

A report from a U.S. inspector general on Iraqi developments confirmed crude oil output has reached its highest level since 1990. Electricity production, meanwhile, has improved, though most Iraqis still don't have power 24 hours per day.  The national economy, supported in large part by the oil sector, is bustling along at a double-digit growth rate. Nevertheless, the oil sector supports few jobs in Iraq, political divisions are problematic and al-Qaida, less than a year after U.S. combat forces left the country, is on the rise.

U.S. Special Inspector General for Iraq Reconstruction Stuart Bowen, in his quarterly report, finds that Iraq crude oil production during the third quarter of 2012 topped 3.0 million barrels for day for the first time in more than 20 years. That development was supported in part by progress made this year in settling long-standing disputes between the semiautonomous Kurdistan Regional Government and the central government in Baghdad. Early this year, the U.S. State Department had warned multinational energy companies about the political risks associated with working in the Kurdish provinces, where companies like Exxon face a backlash for deals in the north that Baghdad sees as illegal. Nevertheless, the International Energy Agency, in its Oct. 9 report, notes that Iraq could produce as much as 6.1 million bpd by 2020. While income generated from crude oil makes up about 60 percent of the country's gross domestic product, however, it supports only 1 percent of the jobs.

In terms of electricity, Bowen's report found that the total supply on the national grid reached an average of around 7,300 megawatts, a record high. The Iraqi Ministry of Electricity has more than 40 power plants under construction and aims to reach a grid capacity of 22,000 MW by 2015. That ministry, however, said the Ministry of Oil was to blame for shortfalls in the country's electricity supply. Some power plants were underperforming, the Ministry of Electricity said, because of the scarcity of oil. While grid capacity was at record levels, Bowen's report found that Iraqi consumers at most had 12 hours of electricity per day.

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The report, meanwhile, found that Prime Minister Nouri al-Maliki's government has "wrestled with unresolved domestic challenges." Political divisions were strained when Maliki called for the arrest of his vice president, Tariq al-Hashimi, on charges of operating a death squad in the country. A "troubled year," said Bowen, was complicated by "corruption, resurgent violence (and) deepening ethnosectarian strains." When Hashimi was sentenced to death in absentia, Iraq suffered its bloodiest day in more than two years. Al-Qaida, meanwhile, is on the rise less than a year after U.S. combat forces pulled out for good in December 2011. Deputy leaders in Iraq told Bowen that al-Qaida was gaining strength because Iraqi intelligence officials were "unable to detect and thus prevent attacks by these organized groups." Apart from that, Bowen said, a string of U.S. civilians, military officials and diplomats were tied to everything from wire fraud to receiving illegal kickbacks from subcontractors in Iraq.

The "polarity" between the economic success story in Iraq and the "variety of politician and security impasses" is getting in the way of the country's development, the inspector general said in his report.

By. Daniel J. Graeber of Oilprice.com

About the author

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Daniel J. Graeber
Company: Oilprice.com
Position: Senior Analyst

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