The Other Battle in Iraq

Editor’s Note: The last year saw a rare bit of good news in Iraq, as the government there expelled much of the Islamic State from its territory. However, many problems plague the country. Douglas Ollivant of New America warns that the Iraqi government now must take on a far more pernicious foe: corruption. He details the problems this causes in Iraq and offers ideas on how to reduce it.

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The Islamic State has been defeated in Iraq, but another threat continues to have a stranglehold on the Iraqi state—the pernicious corruption that has plagued the country for decades, particularly since the overthrow of the Baathist Saddam Hussein regime. While corruption will never be totally defeated, the government must diminish it significantly in the coming months, both to demonstrate to the Iraqi people that their government intends to faithfully discharge its responsibilities, and to liberate Iraq’s economy to provide for all its people. Failing to address this challenge will put at risk the recent victory over the Islamic State, and it is therefore in the interests of the United States to support this effort however it can.

Prime Minster Haider al-Abadi announced on December 9 that the Islamic State no longer occupies territory in Iraq, and the Iraqi Army now controls the border with Syria, isolating the terrorist organization in that country. Pushing out the Islamic State as an organized force has been a hard-fought victory, one that many analysts predicted could and would not be achieved. And yet the Iraqi military has bounced back from their humiliating rout in 2014 to liberate the entirety of the country.

While victory has a thousand fathers—many of them legitimate—the credit for leadership rightfully goes to Iraq’s chief executive, Prime Minister Abadi. The brave Iraqi soldiers who gave their lives in the grueling ground war have made the ultimate sacrifice, and the suffering of Iraqi families caught in the battles must be acknowledged. At the same time, the training and investment (and airpower) of the United States was a critical piece of the overall victory. But, at the end of the day, had this gone badly, we would be placing the blame at Abadi’s feet, and so in triumph the kudos reflect on the leader.

Abadi has also largely resolved the question of federalism in Northern Iraq. Exploiting deep divisions (read: anger) between the two major Kurdish factions, Abadi has almost bloodlessly regained federal Iraqi territory that was occupied by the Kurdish peshmerga in the wake of the Islamic State’s successful attack through Mosul to the outskirts of Baghdad. While much of this territory does have large Kurdish populations, it is also home to Arabs, Turkomen, and Assyrian Christians, most of whom appear to prefer living as part of federal Iraq rather than under Kurdish control.

Since the internationally rejected and domestically illegal Kurdish independence referendum, Baghdad has “reset” the federal arrangements with the Kurdistan Regional Government (KRG). Previously, the KRG was quite blatantly advertising that no Iraqi visa was necessary to visit Irbil or Sulimaniya, nor a Baghdad business license to work in the northern three provinces. And Baghdad was not receiving any revenue from customs duties taken from the Turkish border crossings at Faysh Khabur and Ibrahim Khalil. Now this special status is at an end. While these changes have frustrated the Kurds, they appear to be quite popular with the rest of Iraq, especially with Sunni Arabs, for whom reconciliation into the Iraqi State is so critical in the wake of the Islamic State crisis.

But the most daunting battle the prime minister now faces is the battle against corruption. This battle is, after all, the battle to impose rule of law on a country that has for decades been steadily corroding as a combination of wars, a cash economy, and weak systems—bureaucratic, financial, legal—have allowed the infection to seep into every level of society. Just as soldiers had to depend on one another to battle house to house to take back Mosul, so too will Abadi have to find close allies that will stand with him as he drags his country back from the precipice and sets in motion the conditions for real progress in this war.

Unlike the battles to defeat the Islamic State and retain the KRG as part of the Iraqi state, in which both the country and the world supported the prime minister, in this fight allies will be uncertain and intrigue constant.

Let’s start with a stubborn fact: The Iraqi state is deeply corrupt, in all sectors and at all levels. The corruption starts in Baghdad and Irbil, but pushes down to the provinces and local governments. It transcends ethnicity and sect, and taints all political parties. Corruption is ubiquitous in contracting, permits, land disputes, services, policing, the judiciary, and the oil sector that provides the bulk of Iraq’s revenues. While projects usually come in on budget, the quality of execution suffers dramatically to compensate for the monies lost to corruption. Iraq ranks near the bottom of Transparency International’s Corruption Perceptions Index. Given the Herculean size of the task, any progress made will be slow, halting, unevenly distributed, and difficult to sustain.

But there are promising signs that Abadi is serious about his anti-corruption campaign—and seeing some initial successes. First, Abadi’s government has engaged in a series of high-level corruption cases, mostly from within his own Shi’a constituency. As corruption provides the de facto campaign finance system for Iraqi political parties, this is a significant step. The most prominent case has been the extradition of the former trade minister, Abdul Falah al-Sudany, from Lebanon on graft charges, with the cooperation of the Lebanese government and Interpol. The governors of Baghdad, Ninevah, and Basra are no longer in office; the first two were removed from office and the third fled after credible corruption charges were brought. The director of Iraqi Airways was similarly removed in August, referred for graft charges. And on the air theme, the Najaf Provincial Council has identified corruption in the Najaf Airport board, but they have yet to be dismissed.

With regards to customs and smuggling, the establishment of the al-Safra checkpoint in Diyala is now ensuring proper collection of tariffs on goods entering from Iraq’s Kurdish north, which previously has been a weak point in enforcement. The checkpoint has confiscated literally tons of contraband, including expired food and counterfeit or diluted medicines, while increasing tariff revenue, one of the major requirements imposed on Iraq by the International Monetary Fund.

The bureaucratic inefficiencies of the Iraqi state fuel the corruption. When getting a permit or license or registration takes months and involves multiple steps and offices, the table is set for an illegitimate transaction. To that end, the prime minister’s office has established a Streamlining Procedures Committee. Small but important gains in common procedures like getting a driver’s license or a business registration have already been accomplished. Taking further, and more significant, strides will require legislation and—more challenging—cultural change. But at least the key problem has been identified, and the low-hanging fruit taken, while the path for further improvement is marked.

The major steps will be hard. The simplest to say but perhaps hardest to execute would be putting all Iraqi government contracts online for transparency’s sake. Contracts could be publicly listed to be put out for bid (not unlike the U.S. government’s FedBizOps website), and all the responding proposals also posted with a justification of why the winning bid was accepted. Award of contracts always has a subjective component, but putting sunshine on the process would almost certainly tamp down the most egregious offenses. And there are, of course, a significant number of Western firms that specialize in e-government and transparency that could help manage this digitization.

Perhaps the most politically difficult task will be ending the complete government control of Iraqi industry, especially the extractive firms that form the basis of the Iraqi economy. The South Oil Company, or Basra Oil Company, is 100-percent state owned, giving little public transparency on its inner workings. Putting a small part of the company—as little as 5-15 percent—on the open market in an initial public offering would necessitate accountability to minority owners, thereby ensuring transparency and significantly reducing opportunities for corruption and graft. The financial disclosure required to list on a major stock exchange would be an important forcing function. And the hundreds of billions of dollars that such an IPO would generate for Iraq’s urgent infrastructure and reconstruction needs would be a significant positive externality (though those funds would have to be closely watched, of course). Other attractive Iraqi assets, such as the South Refineries Company, should also be considered as candidates for minority investor positions, particularly as Iraq waits for a hydrocarbons law that would better define the ownership trail of Iraq’s oil wealth.

The role of the United States and the international community will be a delicate one during this fight. No country wants to hear about the corruption in their own society from an outsider. However, technical assistance can and should be quietly offered.

Prime Minister Abadi’s anti-corruption campaign is necessary to set Iraq on the path to stability. However, we should be under no illusions. This battle will be long and protracted, and it will never reach a definitive conclusion. Abadi—or his successor—will be blocked, countered, distracted, and delayed by his political enemies and allies alike. The stakes are not just money, but political power—and therefore no one will give up easily. But also at stake is the soul of a country that once was the most advanced in the Middle East. The West now has a clear ally to back, one in dialogue with the World Bank and IMF, that is at least willing to try to drain—to borrow a metaphor—the Iraqi swamp.