Potential US sanctions on Iraq

Potential US sanctions on Iraq

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Researcher Shatha Khalil *

Translated by : mudhaffar al-kusairi

After the Iraqi parliament voted on a resolution that obliges the government to work to end the presence of foreign forces in the country, within the repercussions of the killing of the Iranian Quds Force commander Qassem Soleimani and the deputy head of the Iraqi popular crowd Abu Mahdi Al-Muhandis, and pass the resolution with the support of the powerful Shiite bloc close to Iran, noting that the Sunni and Kurdish representatives boycotted voting session.

Although parliament’s decisions are not binding on the government, because it is a caretaker government, and analysts say that if the United States is really forced to leave Iraq, this will give Iran’s appetite for its influence not only on Iraq but the region.

US President Donald Trump said, “If they ask us to leave, if we do not do it in a very friendly way, we will impose on them (and Iraq intended) sanctions, unprecedented before,” adding, “It will make Iranian sanctions look somewhat tame.”

“We have a very expensive air base, it has cost billions of dollars to build it,” Trump said. “We will not leave unless they pay us for it.”

The sources indicate that these sanctions will be economic and can be used by the White House to try to isolate and punish any person, entity or government, including to impose sanctions on American companies in the event they work with another Iraqi ones , and to prevent any person or entity from dealing with the economy and the financial sector in the United States , it can be a very severe punishment.

A collapsed economic situation : Despite the country’s many and varied riches, such as mankind, for example, Iraq is one of the wealthy countries , rich with energies of its youth , capable of building the greatest societies, but it did not find the opportunity and the land suitable for exploitation and investment, and the material wealth such as oil, gas, minerals, agriculture, and other countless resources, but it suffers because of failed administration to manage those riches.

Iraq is classified as the second largest oil producing country in OPEC, and oil constitutes more than 90% of the general budget of the Iraqi state, and is funding the salaries of Iraqis, in addition to corruption in oil contracts that do not serve the national interest that it constitutes a burden on that budget signed and concluded by Hussein Al-Shahristani, responsible for the energy file during the era of former Prime Minister Nuri al-Maliki , foreign companies have a large part of the production returns and impose on Baghdad their expenses, in addition to giving them the right to reject development and exploration plans, and international investigations have revealed evidence of corruption in those contracts.

In addition to stopping most projects, such as construction, petrochemical and oil industries, which resulted in the deficit in energy sources, which Iraq is compensating for by importing them from Iran, and today the infrastructure of the country is almost completely collapsed.

As the energy shortage has become a chronic crisis in a country floating on a lake of oil, and Washington has so far allowed Baghdad to import what it needs from Iran to provide additional hours of feeding per day.

Exposure to economic sanctions exacerbates the problems of Iraq, where one out of every five people lives below the poverty line, and one in four young people suffers from unemployment. According to the Ministry of Planning, the official indicator for measuring the poverty rate approved locally, and in the World Bank, is 22.5%, meaning that about a quarter of Iraqis are poor. in Basra Governorate (south), there are 100,000 families living under the extreme poverty line, it is unreasonable for the province to float on a sea of oil and its children do not get the simplest needs of life, due to failed government policies, which makes job opportunities very difficult.

And the increase in the poverty rate in Al-Muthanna Governorate to a level that caused an increase in the crime rate.

Can the effects of sanctions be avoided, as the problems are intertwined, economic, political and social problems:

In popular and academic circles about the consequences of any measures taken against Iraq, the Iraqi Advisory Council issued a research paper that included 10 solutions to avoid those effects.
In its report, “proposed solutions and remedies to avoid the effects of possible US economic sanctions on Iraq . It is worth avoiding any potential sanctions, direct or indirect, to prevent repercussions that are difficult to realize for decades to come.

It cited examples of recent sanctions imposed by the United States on Iran and Russia, and mentioned what Iraq witnessed in the nineties of the last century, noting that “Iraq was able to overcome horrific famines by implementing the ration card system, in addition to the fact that its population is less than it is today, in addition to its possession of a productive agricultural sector, an industrial base, and infrastructure, despite that, the effects and consequences of the embargo were catastrophic, and Iraq has not recovered from them to this day.

Iraq’s economy is fragile, being rentier due to its dependence on oil exports, its lack of the industrial and agricultural sectors, and its lack of ability to export what it produces to Iraq to increase national income from hard currencies.
It summarized the implications of imposing direct or secondary sanctions on Iraq by “the collapse of the Iraqi dinar, which leads to an increase in the size of cash inflation, an increase in the size of excessive inflation, a decline in the purchasing power of the dinar, an unprecedented rise in the prices of goods and commodities, and a decrease in the value of savings.”

It added, that the global economy depends on the dollar, and if the United States decides to limit or reduce the flow of the dollar to Iraq, it will inevitably not stand up to internal and external challenges, especially as the central bank is directly and closely linked with the American banking system since 2003.

As for the solutions, the advisory council proposed a set of steps, but before mentioning them, Rawabet Center for Research and Strategic Studies through the presented economic studies confirms that any solution is aborted with distinction unless the Iraqi state was run by Iraqi men belonging to Iraq and the soil of Iraq first and not loyalty to another country or religion, doctrine, or party only, thus in this case suggestions, solutions and plans for the country’s revival can be taken.

Among these proposals are : “Diversification of income sources to reduce dependence on oil sales, pay attention to non-oil sectors such as industry, agriculture, and tourism, transferring certain percentages of dollar storage with the central bank to other difficult currencies, and changing the regulations and laws of banks and the central bank law to keep pace with the evolution of banking systems in the modern world, opening channels of dealing with large European banks and adopting them as intermediary banks for financial transfers and opening government bonds.

The most important thing is to follow the food security policy and secure the requirements of this policy for achieving self-sufficiency and encouraging the food industries, packaging, and marketing, which will in turn be reflected in the employment of more Iraqi manpower and the reduction of unemployment.
And encourage professional and technical education, and establish a fund to support small craft projects, develop a diplomatic dialogue with influential countries in the world, activate mutual understanding with them and the United States of America, encourage foreign investment, and establish a sovereign monetary fund by financing it with a certain percentage of monthly oil sales.

And the American-Iranian military confrontation in Iraq raised fears that the country would turn into an open arena of conflict between Washington and Tehran, before the decline of tension in the past few days.
And about 5 thousand American soldiers are deployed in military bases throughout Iraq, as part of the international coalition to fight ISIS, but the Iraqi parliament voted on the fifth of January 2020 , on a decision to expel foreign forces in the absence of Sunni and Kurdish representatives, and as a result, Trump threatened, imposing economic sanctions on Iraq if Baghdad decides to remove American soldiers.

In conclusion… Iraq is still one of the most corrupt countries in the world, according to the Transparency International index, over the past years, and international reports always provide in the presence of embezzlement and waste of public money, and the country ranked 169 out of 180 countries in the corruption index.

Corruption was a major reason for weak government performance, weak decision-making, state fragility and the domination of external forces, such as Iranian interference and the control of Iranian militias over state administration, whether parties or people, and thus loyalty is to Iran and not to Iraq, and Iraqi youth became conscious and angry and took to the street to bring back the homeland to its people.

Economic Studies Unit
Rawabet Center for Research and Strategic Studies