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Iraq's South Rises Again

October 20, 2013 Topic: Economics Region: Iraq

Iraq's South Rises Again

Iraq’s industrial heartland lies in its southern marshes. Can it survive regional and internal threats, and lead the country forward?

With some exceptions, most Iraq news these days is tucked away in the middle of your daily paper. The postscript to these stories may add that the situation has gone from bad to worse since the U.S. withdrawal. Remember “the surge,” anyone?

Maliki has managed to co opt the few and isolate the many, while north to south Sunnis and Shias protest over any number of issues. If the protesters were united that might be positive but mostly they are not, and Al Qaeda is thriving. The news seems so grim that Americans might just want to move on and forget it altogether.

Indirectly, Iraq still looms large in the news, as it struggles to escape the Syrian conflict and push forward its energy boom, it may well be the most strategically important country in the Middle East, as Gen. James Jones recently remarked. The EU are waking up to this, but it has taken a ferocious alliance of Syrian and Iraqi Al Qaeda fighters to spur the United States into action.

The reasons for this belated interest are many, from Maliki’s autocratic posturing to Obama’s disinterest with “Bush’s war.” As Obama left a once ambitious State Department mission to flounder in the U.S. embassy, who in Washington really cared? Enjoying a lull in violence and a surge in nationalism, Iraq had sent the United States packing, while Obama felt that the mission was as good as accomplished. Pacific pivots and the Afghan surge beckoned.

Crucially, recent news has consistently portrayed Iraq as falling to pieces “like a cheap suit,”as General Anthony Zinni famously predicted. The violence is all too real of course, but the bigger picture is far more nuanced, even as the gargantuan U.S. embassy continues to shrink in staff numbers. Perversely, just as the Office for Security Cooperation-Iraq looked set to wind down, 2013 saw Kerry back in Baghdad and joking with Maliki.

Talk of revitalising a once tired looking Strategic Framework Agreement has become reality, and there is good reason. Maliki’s credibility is reeling from the increased violence, while Amb. Zebari was at pains to sell Iraq’s plight on a recent trip to Washington. This time, renewed relations seem mutually desired, a very different picture from two years ago. Quiet diplomacy on issues such as Iraq’s Chapter 7 obligations, oil revenue sharing and the Syrian war has been gaining momentum.

This is important, because 200 miles south of Baghdad, Iraq’s four “marsh governorates” still enjoy an impressive swelling of foreign investment that has proven largely resilient to Al Qaeda led violence further north. Is the stability of the southern governorates Iraq’s last hope? Quite possibly, and this is where the West will have to tread carefully. Events in Syria could already have repercussions as far south as Basra, where a local MP Jawad al Bazuni recently remarked how “the U.S. was supporting Al Qaeda in Syria and Iraq.”

While nonsensical, this is not an uncommon view among Iraq’s Shia, and calls into question America’s ability to strategically communicate its support for the Iraqi people. Meanwhile, many Sunnis feel abandoned by the United States, left to the mercy of both Al Qaeda and an autocrat in Baghdad. These views won’t change easily. But revitalised U.S.-Iraqi security cooperation aims to refine Iraqi counterterror capability and stem the terror attacks that are radicalizing young Shias.

That risks rewarding Maliki’s failures and lacklustre attempts at political reconciliation, and some have argued a better Iraqi army is one that learns the hard way: unassisted. Nonetheless, continued deterioration in security risks handing political gains to parties with long established militia ties, and that would be a losing situation for everyone. Much-needed counterterror assistance is already in the pipeline, on top of a Foreign Military Sales program that has already topped $14 billion—almost equivalent to Turkey’s defence budget for 2013.

 

Megaprojects

Iraq retains immense allure to foreign corporations. In June, Citigroup opened an office in Baghdad. In August Mitsubishi opened an office in Basra, and even in the turbulent province of Anbar, Korean firm KOGAS secured a $700 million dollar contract to develop the huge Akkas gas field. Significantly, all of this has occurred after a huge spike in violence. And while much of this interest is energy related (with some twelve firms currently bidding to build a new refinery in the southern province of Dhi Qar) other sectors still attract big interest. Zaab Sethna of Northern Gulf Partners explains,

 

“The main areas to focus on in Iraq's economic resurgence are of course energy and infrastructure as well as areas which will benefit from rising incomes and consumer spending. Per capita GNP has tripled in the last ten years and is on track to double again in the next four years and double in the four after that. Sectors such as telecoms, food and beverage, consumer products, financial services, health and education will all see huge demand.”

Aside from the much publicised boom in Iraqi Kurdistan, the rest of Iraq desperately needs this kind of growth. Two potential beacons of hope stand out in the south, apart from the energy sector: the vast Al Faw port project and the potential for a tourism, unlikely as that may sound.

Al Faw is already underway and when complete will be the world’s third-largest port, a site of global strategic significance. Planned rail routes will take freight to Europe via Turkey, bypassing the Suez canal and reinforcing the importance of the Middle East as a major hub of international commerce.

Regarding tourism, there is currently only one European operator in southern Iraq. But the marsh governorates are rich in sites yet to be discovered by intrepid tourists. Fifty
Italian pilgrims will visit in November, and anyone interested in seeing Maysan’s ancient Marsh Arab culture or the “cradle of civilization” may soon follow. Najaf and Karbala are already sustained economically by Iranian pilgrims, might more Christian visitors from the West soon follow? Certainly, the vast majority of Iraqis in the south have no quarrel with Christianity and would welcome the trade.="#axzz2hosoxns9">="#axzz2hosoxns9">

This was exactly the picture painted by American businessman William Johnson when I spoke to him last month. Johnson has frequently visited friends across southern Iraq without security while working on a construction project run by his firm, Iraq Dream Homes LLC. After twenty-eight years in the military and some eight years serving in Iraq as a civilian during the war, Johnson is not a man who would take unnecessary risks.

If southern Iraq retains its current stability, tourism and foreign ventures could comprise a significant percentage of the local economy. Azzam Alwash, who began the revival of the southern marshes that he remembered from childhood (following their infamous annihilation by Saddam) explains that the marshes are a long-term prospect, with careful management:

“the development of ecotourism centered around the marshes will soon enough make it clear to the locals that they will get better income from protecting the environment than from harvesting it. ”

Whose victory?

Alwash’s and Johnson’s stories do not fit the dominant media picture. Even as Iraq’s struggle rages, another popular story has emerged depicting China as the winner of the Iraq conflict. The United States sacrificed “blood and treasure,” but Chinese state owned oil firms won the contracts. This is a simplification, and belies the significant scope of international involvement in Iraq, particularly from France, Japan and Turkey. According to the IEA, Iraq’s increased oil production put downward pressure on global prices, something that helps everyone, including U.S. allies in Asia who are still dependent on Middle Eastern oil.

Others claim the big winners are the Kurds, Turkey or Iran, but these theories are also simplistic. Iraq and Iran have a complex relationship, certainly a close one, but by no means a strategic partnership. Ultimately, Maliki values his relationship with the United States too much to get close to Khamenei, while Iraqis in government have continually stressed a desire for greater U.S. business relations, including the pro-Iranian transport minister Hadi al Amiri, a man who simultaneously condemns “American propaganda” while praising U.S. investment in Basra.

Maliki is also on record expressing his distrust of Iran and dislike of Assad. But he flirts with pro-Tehran groups for his political ends, and Iran seems satisfied enough with his premiership. Would he tolerate radicals as a threat to the state, or if they started shelling the U.S. Embassy? Given Maliki’s past intolerance of anyone who threatens his core interests, he can be expected to draw red lines. Other Iran-friendly groups, such as the Islamic Supreme Council of Iraq, are Maliki’s political rivals, but still open to Western investment.

What did we gain?

If Americans feel aggravated by a lack of palpable gain from the Iraq war, they are not the only ones. Anna Prouse of Caerus Associates will soon lead a delegation of Italian companies to the south to investigate the viability of more Italian trade with a nation whose economic growth has consistently reached 10 percent. The trade mission arose from Italian frustration, Italy having led efforts in the province of Dhi Qar for most of the war, as Prouse explains,