ENDLESS CRISIS

Political crisis in Iraq due to the inability of main political forces to form a new government still worries the Iraqi and international communities. There is no principal agreement between the conflicting parties, and the crisis threatens to escalate into a new hot phase.

In his address at the 77th session of the UN General Assembly, Iraqi Prime Minister Mustafa al-Kazimi said that the political blocs and parties in Iraq must use the opportunities of national dialogue to bring their positions closer and resolve the ongoing crisis in the country. Yet there is little hope that his calls come true.

The mass protests in Iraq were triggered by the popular Shiite preacher Muqtada al-Sadr known for his irreconcilable attitude to the interference of external forces in Iraq's affairs, who said that he was leaving Iraqi politics.

Afterthisstatement, hundreds of people stormed the Palace of the Republic, the main venue for meetings between Iraqi politicians and foreign counterparts, to carry out large-scale pogroms. Iraqi authorities then declared a nationwide curfew to contain the protests.

Unexpected result

Back in October 2021, according to the officially announced results, al-Sadr and his supporters won a majority of seats in the parliament. However, they were unable to form a new government due to the numerical superiority of their opponents, who were heavily influenced by representatives of the pro-Iranian Coordination Structure bloc.

Subsequently, the al-Sadr bloc walked out of parliament and demanded its dissolution to hold new elections, to no avail though. Then in July, al-Sadr's supporters stormed the parliament building to protest the nomination of Mohammed al-Sudani as prime minister by the Coordination Structure. It was possible to stabilise the situation only thanks to the involvement of security forces.

At the end of August, al-Sadr decided to withdraw from politics altogether, making it clear that he saw no way to participate in politics if there was no chance of countering Iran's growing influence. Notably, he made the announcement after Ayatollah Qadhim al-Khaeri from Qom, Iran announced that he would step down from spiritual leadership in Iraq and called on his followers to support Iran's Ayatollah Ali Khamenei.

Al-Khaeri is not the highest Shiite authority in Qom or Najaf, but he had close ties to the great Ayatollah Muhammad-Sadiq al-Sadr, Muqtada's father, who named him as his successor in his will. Even before he was assassinated in 1999 for opposing Saddam Hussein's rule.

Al-Khaeri effectively questioned al-Sadr's authority, making it clear that he lacked the Sharia qualifications to exercise top political leadership. This was the trigger for al-Sadr's resignation and subsequent events.

However, after the bloodshed and curfew, it became clear that the situation was spiralling out of control. Feeling responsible for the unfolding situation, which threatened the country with the most fatal consequences, the cleric ordered the protesters to stop the lawlessness immediately and within an hour to leave the parliament building and the government area, the ‘green zone’ in the centre of Baghdad. He also threatened to quit the Sadrist movement and said he was disappointed with the events.

The outcome of the unrest is indeed gruesome. According to local sources, it took the lives of 30 people leaving more than 700 injured. Apparently, the preacher did not expect the situation to take such a dramatic turn. That it could lead to a deepening rift within Iraq's Shiite community, the largest community in the country.

Complex dilemmas

It is difficult to say whether al-Sadr hoped to see the Iraqi authorities make concessions when he decided to announce his intention to leave politics. But it was a trigger that compelled the Iraqi authorities to announce the start of a dialogue with the opposition as soon as possible. Anyway, so far the events are unfolding as he wanted. A new government led by al-Sudani has not been formed and pro-Iranian forces are still unable to take full control of the country's political field.

The threatening situation is forcing the current Iraqi leadership led by Prime Minister Mustafa al-Kazimi to initiate a national dialogue. However, in the current difficult conditions and amid the insurmountable contradictions between the leading political forces, only few believe in the success of this move, especially after a failed meeting held in early September between representatives of rival political groups.

Meanwhile, the neighbouring countries are afraid that stronger Iran can lead to the fragmentation of Iraq and create necessary conditions for the resurgence of terrorist groups such as ISIS. Egypt has demonstrated interest in converging the views of leading Iraqi politicians. Thus, earlier this month the President of Egypt, Abdel Fattah al-Sisi, had a series of telephone conversations with the Iraqi prime minister and president.

We have yet to see a response from the Iraqi side to the mediation proposal of Egyptian authorities. But we can assume that both the Sadrists and the leadership of the Coordination Structure are not particularly enthusiastic about it. The former believe that any external interference in the internal political life of Iraq is unacceptable, while the latter are generally very suspicious of the Egyptian leadership. Al-Sisi is an opponent of Iran, while the Iranian sympathisers generally adhere to the principle ‘the enemy of my enemy is my friend’.

Remarkably, during the two days of chaos in Iraq, the Iranian authorities remained relatively silent about developments in the neighbouring country. Tehran has mainly focused on ensuring the safety of thousands of Iranian pilgrims travelling to Iraq to participate in events marking the holy month of Maharram for Shiites.

After the situation in Iraq has somewhat settled down, the Iranian Ministry of Foreign Affairs issued a statement thanking the government and people of Iraq for ‘eliminating a major insurgency’ thanks to patience and prudency. "Ensuring security and stability in Iraq can only be facilitated through dialogue among all political factions in the country on the basis of the constitution and with an intention to reaching consensus to form a new government," said the Iranian President Ebrahim Raisi in his address to his Iraqi counterpart.

The above statement also implies Iraq's capacity to solve its problems with its own resources. It also can be interpreted as a cautious hint at the ability of Tehran-backed Shiite political circles to deal with the crisis on their own, provided Western countries do not intervene. "Iraq's initiatives and efforts to improve the atmosphere of cooperation among regional countries without foreign intervention will be effective in strengthening regional rapprochement," Raisi said criticising the US and Western presence in Iraq and throughout the region.

Economy as a political victim

Iraqis claim that the tense political situation in the country is a result of high unemployment rate and acute economic crisis, although Baghdad is enjoying record oil revenues because of high prices.

Recently, Iraqi finance minister, Ali Abdul-Amir Allawi, resigned amid the ongoing political crisis. Prime Minister Mustafa al-Kazimi, who was reluctant to Allawi’s resignation, eventually accepted it. Allawi's argument was that no government in the world can function without a budget. After all, of the 28 months of the al-Kazimi government, it had a federal budget approved for six months only.

Iraq's oil-dependent economy was hit hard in 2020, when oil prices fell to historic lows severely affecting the country's budget. Iraq's GDP contracted by 11.3% in 2020 before it grew by 1.3% in 2021, after the recovery of global oil prices.

Eventually, each political crisis in Iraq in recent decades has affected the Iraqi economy, causing its oil revenues to barely compensate for the economic instability.

Iraq's youth unemployment rate currently exceeds 35%, while the government revenue growth due to a surge in oil prices during 2022 is offset by weak governance and ineffective redistribution. Experts believe that the country's economy will remain prone to instability and turbulence as long as political tensions persist, and its prosperity remains dependent on the oil industry alone.

Despite a projected average annual growth rate of 5.4% in 2022-2024, Iraq's economic prospects are subject to significant risks, not only because of its exceptional dependence on oil, but also because of its inflexible budget. Another reason is the delay in forming a new government that could take responsibility for adopting a new, more effective budget.

If the delay in forming a government and ratifying the 2022 budget continues, it could lead to a slowdown in economic growth.

Iraq now has a unique opportunity to undertake urgent, large-scale structural reforms using oil revenues. Deteriorating health and education indicators exacerbated by the recent pandemic have also worsened Iraq's human capital development. In the absence of reforms, economic growth will continue to be constrained by the economy's limited absorptive capacity. 

Analysts believe that a reorientation of public spending towards stimulation programmes to boost human and physical capital will be crucial for diversification and job creation, as well as for addressing acute social problems.

However, the Iraqi government's White Paper, which sets out a comprehensive reform programme aimed at economic diversification still remains only an ‘ambitious plan’. The ongoing political crisis impedes the country’s potential to solve the piling problems.