Bloomberg View: What Iraq Needs, One Decade Later

Economic growth is the best salve for Iraq’s sectarian wounds
Illustration by Bloomberg View

For many in the U.S., the 10th anniversary of the invasion of Iraq has been an occasion for settling scores and playing “what if” games with history. For Iraq, the anniversary underscores the need for Prime Minister Nouri al-Maliki and his government to find a new sense of responsibility and engagement. Otherwise, the country’s future may be as dark as its recent past.

The latest crisis in Baghdad stems from the resignation of Finance Minister Rafi al-Issawi at a March 1 rally of fellow members of Iraq’s Sunni minority. They were protesting what they view as efforts by Maliki, a Shiite, to trample their rights.

Can anything compel Maliki to forge an accommodation with Sunnis, his Shiite rivals, and the increasingly independent Kurds? Certainly not the U.S., which despite giving billions of dollars in aid ($57 billion from 2003 to 2012 and about $2 billion this year) has virtually no influence in the country it tried to remake.

It’s possible, however, that market forces have a shot. Maliki’s government is sustained by oil-fed graft—Iraq surpassed Iran as the Organization of Petroleum Exporting Countries’ second-largest exporter last year. If the flow of oil revenue dries up, so will the government’s political support. So it may be good news that when the government took bids on a fourth round of oil licenses last year, none of the major Western companies bothered to show. Among the reasons: corruption, political instability, bureaucratic hassles, and the failure of the government to rebuild its crumbling pipelines and storage facilities, as well as fears about security in the capital.

Maliki must realize that his bid to be Iraq’s founding father is doomed unless he improves the economy. A first step would be to offer friendlier terms to foreign oil companies. Instead of insisting on technical service contracts, in which the companies get only a flat fee per barrel, Maliki should agree to share the oil that comes out of the ground, as the Kurds do. (To his credit, he did discuss this with ExxonMobil Chief Executive Officer Rex Tillerson in January in Baghdad.) A bigger step would be for the government to pass a comprehensive deal to share the nation’s oil revenue—an initiative that’s been stuck in the legislature since 2007.

Without ignoring what’s gone wrong, this anniversary is best used to decide what Iraq can do right. Economic growth is the key, which requires Maliki to ensure the human and political rights of the Sunnis and reach an accord with the Kurds. If his common sense and political pragmatism seem to be waning, perhaps the oil markets can help set him straight.

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