Sunday, August 27, 2006

Unified Iraq: A Political (dis)Solution?

About five or six paragraphs into this weekender from the New York Times, one of those random, “call me crazy, but …” thoughts crept into my head: Exactly why is a unified Iraq so important to the United States? Judging by quantitative and anecdotal data, unification appears to be a political solution desired by few, if any, Iraqis. And the U.S. has been perfectly content to let other nations splinter into factions, reference Eastern Europe, the former Soviet Republics and much of sub-Saharan Africa. If it's permissible for those groups to splinter into countries the size of Rhode Island, why are we so obsessed with keeping Iraq glued together?

Historically, Iraq has been a synthetic country, with outsiders frequently drawing its political borders for it. The Umayyads ruled it from Damascus from the seventh century until 1258, when the Mongols devastated Baghdad. The Ottoman Turks ruled it until World War I, when the Ottomans bet on the wrong horse – Germany – and were driven out of the area by Great Britain. The League of Nations then made the area a mandate of Britain, which granted independence in 1932. Between then and 2003, the area was under the thumb of the Hashemite monarchy and Saddam Hussein’s regime, with a few military coup d’etats sprinkled in between.

In essence, Iraq has been a Mexican standoff of warring tribes that have only ever been united under the thumb of remote or domestic dictatorship.

The party line from the Bush Administration has been that a unified Iraq promotes the spread of democracy in a region that has never known democracy. Right. Because, as soon as despots to the right and left of Iraq see how well democracy is working there, they'll happily hand over power to the people and not give a second's thought to destabilizing a viable threat to how they've done business for decades. Regardless, there are innumerable reasons why the optimal conditions that have nurtured democracy in the West aren’t apparent in Iraq or the Middle East, but that’s a separate debate. Instead, let’s look at what democracy has borne out so far:

In October of last year, over 63% of eligible Iraqis voted on whether to accept or reject the new constitution, which passed with a 78% overall majority. So far, so good. But support varied widely between the country’s three ethnic territories, with Shia and Ķurdish communities overwhelmingly backing it and the Sunnis overwhelmingly rejecting it. For reference, Shiite Arabs make up 60% of Iraq’s population and the Kurds and Sunnis take 20% apiece.

Two months later, per the terms of the new body of law, the country conducted nationwide parliamentary elections, in which the overwhelming majority of all three major ethnic groups in Iraq voted along ethnic lines. Resembling more of an ethnic headcount than a competitive election, the vote set the stage for the division of the country along ethnic lines. So if you’re looking for clear, quantifiable evidence that unification is not a preferred solution in the minds of most Iraqis, the December 15 election should serve as a credible data point. Some will note that desegregation's prospects in the Deep South didn't seem so promising in Reconstruction's immediate aftermath and that worked out alright. Yeah, and it only took roughly a century for the cross burnings and mass lynchings to stop.

An equally glaring data point is Iraq’s roughly $130 billion external debt, which creditors are considering rescheduling or even writing off. The Paris Club, an informal group of financial officials from 19 of the world’s richest countries (including the U.S.), was owed $42 billion before agreeing to write off 80% of that total in November 2004. Oil has traditionally provided roughly 95% of the Iraq’s foreign exchange earnings, which makes oil doubly important in Iraq: the world has a lot of cash sunk in Iraq and, if it is to get any of that cash back, Iraq needs to be able to sell its oil.

As an aside, one of my reasons for questioning the strategic benefit of a unified Iraq had to do with maintaining a diversity of oil suppliers. Surely, I reasoned, our Harvard MBA President recognizes the risk of one supplier gaining leverage over us by becoming the source of a disproportionate amount of our oil (see Venezuela and Saudi Arabia). But it should be noted that the U.S. has derived between 4-7% of its crude oil imports from Iraq between 2000 and 2005 and thus isn’t particularly dependent on Iraq for its oil per se. A unified and thus more competitive Iraq could drive down oil prices, so there goes that argument.

So a case could certainly be made that the rest of the world needs Iraq to be unified so that its oil supply chain can be optimized, such that reserves in the oil-rich Kurdish north can flow undisturbed down a major oil pipeline through the oil-poor, Sunni center of the country and the oil-rich, Shiite south and finally out for export via the Persian Gulf. (See image; source: Stratfor) With that economic backbone intact, the country can attempt to rebuild its economy, stimulate foreign direct investment and pay down its debt.

Certainly, allowing Iraq to be split three ways would make for a messy debt resolution process. What portion of the balance should be placed on the shoulders of each faction? How would the oil-poor Sunnis pay their share?

Privatization could lead to a solution, as taxes on the assets and income of companies that harvest and sell Mesopotamian oil could go towards debt service, but, again, according to what split? Amer Ziab el-Tamimi of Beirut’s Dar Al Hayat offers one possible solution:

“This debt could be resold to investors as proprietary rights in a number of Iraqi companies in major fields. This way the privatization process could go on in line with the process of developing these companies and without any harm to the national interests.”

In other words, turn Iraq's debt into a proxy for equity in one or more for-profit oil companies operating there. By resolving the debt issue, the three tribes under its yolk could go their separate ways if it were in the national interest, as it appears to be.



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