Iraq: Staving Off Instability in the Near and Distant Futures
Iraq: Staving Off Instability in the Near and Distant Futures
Commentary / Middle East & North Africa 11 minutes

Iraq: Staving Off Instability in the Near and Distant Futures

Iraq has a new government after months of delay, but various challenges to stability persist. In this excerpt from the Watch List 2023, Crisis Group explains how the EU and its member states can help support necessary reforms.

A year of tumult in Iraq appeared to quiet when the Council of Representatives, on 27 October 2022, approved the cabinet of a new prime minister, Mohammed Shia al-Sudani. It was a breakthrough in what had seemed an interminable stalemate since parliamentary elections twelve months earlier. The deadlock ended when loyalists of Muqtada al-Sadr, the Shiite cleric and firebrand populist politician, who had been thwarting their adversaries’ government formation plans, withdrew their representatives from parliament. 

But the country is hardly stable. Tensions between Sadr and his Shiite counterparts could easily flare again. Challenges to the ethno-sectarian system – which allocates power and resources among Iraq’s Shiites, Sunnis and Kurds – also persist. It was that system’s inability to provide effective governance that sparked the 2019 Tishreen protests, which in turn precipitated the early elections of 2021. The return of politics as usual with the advent of Sudani’s government represents the system’s triumph over the protests. Yet the gap between citizens and elites has only widened since 2019, as rampant corruption continues to prevent the state from providing adequate public services. In the short term, the Sudani government may try to keep grievances in check through higher spending for services and public-sector expansion, but it can do so only as long as oil prices remain high – which will be difficult, as falling demand is pushing prices down amid fears of a global recession. Meanwhile, Iraq’s population is growing and its water supply dwindling. In the long run, if governance and public services do not improve, the combination of demographic pressure and climate stresses will undermine any attempt at buying stability with oil revenue. 

To top it all off, the autonomous Kurdistan region in Iraq’s north is undergoing its most severe political crisis since the Kurdish civil war in the mid-1990s. Although a return to that period’s violence looks unlikely, heightened enmity between the Kurdistan Democratic Party (KDP) in Erbil and the Patriotic Union of Kurdistan (PUK) in Sulaimaniya is threatening stability in the north. 

Against this backdrop, the European Union (EU) and its member states should: 

  • Engage the Sudani government in a candid dialogue about how best to pursue financial and governance reform to meet global standards and make Iraq less dependent on outside support. In this connection, they should also discuss operational and financial reform of the powerful (and under-supervised) al-Hashd al-Shaabi (Popular Mobilisation) paramilitary coalition;
  • To improve Iraqis’ confidence in government by making it more accountable and responsive to local needs, urge Iraqi politicians to hold long-overdue provincial elections;
  • Encourage dialogue in support of a constitutional review that could prompt better implementation of existing provisions as well as consideration of needed amendments. Such a process could be useful for reforming the muhasasa patronage system that is the source of so much popular grievance and accomplishing security-sector reform.
  • Use its new presence in Erbil to mediate between the two main Kurdish parties, whose feud is complicating discussions with Baghdad over sharing oil revenue, and also leaving the region exposed to external interference.
  • Step up assistance to Iraq’s outdated irrigation system as part of efforts to alleviate water scarcity caused partly by climate change.
People gather to collect water from a cistern amid shortage and high temperature in the village of al-Aghawat in Iraq's central Diwaniya province, on July 18, 2022. AFP / Haidar INDHAR

Crises Contingent and Structural

At the end of August 2022, followers of Muqtada al-Sadr staged protests inside Baghdad’s Green Zone to prevent rival parties from forming a government. The demonstrations escalated into bloody clashes between the Sadrists and pro-Iran elements of Hashd, a collection of paramilitary outfits that, since helping defeat the ISIS in 2017, has become an entrenched political force in both various provinces and the capital. Tensions eased when Sadr’s group, which had scored a surprise election victory in 2021, suddenly pulled its lawmakers out of parliament, paving the way for the pro-Iran factions among the Shiite parties to form a government. Another confrontation seems likely, however. Disputes within the Shiite house (as the amalgam of parties encompassing both Sadr and his Shiite opponents is known) continue to fester, and Sadr may simply be waiting for the government to fail or for people to take to the streets again before he ventures back onto the political scene and tries to form a majority-based government that excludes some of his main Shiite rivals. A call for snap elections will not be well received, either in Iraq or among its neighbours or donors, but it may become unavoidable if a political impasse develops.

The troubles with government formation underscored the extent to which Iraq’s political system is in crisis. The massive Tishreen protests went to the heart of the reason why. They called for an overhaul of the ethno-sectarian apportionment system (muhasasa), which has reinforced a venal elite’s grip on state institutions after every election since 2005. By the unwritten rules of muhasasa, political parties compete not so much to advance a vision for the country as to divide the spoils of state power, for instance allocating plum government jobs to members of the ethno-sectarian community they claim to champion. The system may work for the well connected, but not for the vast majority of Iraqis, who have grown increasingly disaffected with its failures. Particularly vexing is the low quality of public services, for example the state’s inability to keep the lights on or deliver potable water to homes in many southern provinces. Iraq also will have to cope with a rapidly growing population, which is expected to reach 50 million by 2030, an increase of ten million in ten years.

A final looming problem countrywide is worsening water scarcity, a seeming oddity in a country with two mighty rivers, the Tigris and Euphrates, and several others. Dams upstream in Türkiye and Syria have reduced the water flow in both rivers, combining with rising temperatures and droughts to disrupt livelihoods and harm public health. Likewise, Iran has dammed or diverted rivers flowing into Iraq. In the south, in particular, water scarcity has caused health hazards, internal displacement and, at times, violent conflict. But while climate factors are the proximate cause, it is primarily poor governance and corruption that are preventing the country from upgrading critical infrastructure that would blunt the impact. The problem is compounded by the existence of parallel security forces that are only nominally integrated into Iraq’s state apparatus: the Hashd paramilitaries in effect operate under a separate chain of command, and have acted against perceived opponents, including people in the streets clamouring for improved services, with apparent impunity.

None of Iraq’s political, social and economic challenges are insurmountable, but the Sudani government will have to change tack if it wants to secure a better future for the country. Governance by patronage has its limits, namely when it fails to produce a liveable society for the many who lack access to the parties’ distributive system. Lessening the treasury’s overreliance on oil revenues should be a top priority, but it is notoriously difficult to do: when oil prices are high, it is easy to forget that they may fall again, and when they are low, the government is in crisis mode and lacks flexibility to institute necessary reforms. Yet the alternative is worse: endemic social strife that peaks in violent outbursts, as Iraq has seen repeatedly over the past few years. 

The northern Kurdistan autonomous region faces some of the same difficulties, but the biggest worry at present is a quarrel between the so-called yellow (KDP) and green (PUK) zones of party control. These geographic zones, which have no set boundaries, are roughly based on linguistic differences among the Kurds, with the KDP overseeing Badinani-speaking areas hugging the Turkish border and the PUK controlling Surani-speaking provinces neighbouring Iran. The authoritarian KDP has been predominant throughout the Kurdistan region for the past decade as the PUK has fragmented into personality-driven blocs amid popular demand for greater political openness. The precipitating factor in the inter-party dispute was a succession battle within the PUK following the death of party leader (and former Iraqi President) Jalal Talabani in 2017. The KDP has used PUK defectors to further split the latter party and degrade it to a junior partner in the regional government. In response, the PUK has been boycotting cabinet meetings. At the same time, the dispute is preventing elections to the regional parliament, which are six months overdue, while both parties are suppressing dissent in their respective zones. 

Setting the Ministerial Agenda 

EU High Representative for Foreign Affairs Josep Borrell signalled the importance that Brussels is placing on its relationship with Iraq when he attended the second round of the Baghdad conference for partnership and cooperation, held in Amman on 22 December. In his speech, Borrell said the EU is “ready to do more, differently and better to support Iraq”, announcing that a ministerial-level EU-Iraq meeting will take place in the first part of 2023. The EU should take that opportunity to start discussing thorny issues with the Sudani government, including the ramifications of the failed effort to revive the Iran nuclear deal for regional security, and the Hashd’s future as a fixture of the Iraqi political and security landscape. 

One entry point for the EU and member states would be Iraq’s economic and financial management, which needs external support. In November 2022, the U.S. Federal Reserve began requiring greater transparency about international dollar transactions. In response, the Iraqi central bank reportedly blacklisted four banks and barred them from carrying out dollar transactions. The new U.S. requirements thus had the effect of limiting dollar transactions and weakening the Iraqi dinar against the dollar. An outcry ensued, with pro-Iran factions in Iraq denouncing the blacklisting as deliberate U.S. pressure on the Sudani government (without suggesting to what end). The move came at a time when Iran, in response to tougher U.S. and EU sanctions following its arms sales to Russia and its crackdown on countrywide anti-establishment protests, was looking to bolster its trade with Iraq in particular.

The EU should engage in frank dialogue with the Sudani government on how to reform Iraq’s financial and governance system.

Perceived as a more neutral actor than the U.S., the EU should engage in frank dialogue with the Sudani government on how to reform Iraq’s financial and governance system in a way that would meet global standards and strengthen Iraq’s independence, irrespective of the government’s policy orientation vis-à-vis either Iran or the U.S. The EU is already supporting security sector reform, public financial management oversight through the World Bank, and Iraqi accession to the World Trade Organization. It could offer similar assistance in further areas, including by encouraging international financial institutions to invest in Iraq, on the condition that the government meets agreed-upon reform metrics. 

The EU should not shy away from discussing reform of the Hashd institution, both when offering support for security sector reform in the context of the EU Advisory Mission in Iraq (EUAM Iraq) and in high-level political engagements, such as the forthcoming EU-Iraq ministerial meeting and a planned high-level visit by Iraq’s prime minister to Brussels. The Hashd institution formally falls under the prime minister’s supervision in his capacity as commander-in-chief, but he exercises minimal oversight of its operational and financial management. The groups constituting the Hashd, which has a budget almost as large as those of the interior and defence ministries, have repeatedly rejected any notion of strengthening the premier’s prerogatives as a threat to their existence. Yet with U.S.-Iran tensions in Iraq on the wane and no Hashd attack on U.S. or coalition forces since the Sudani government was sworn in – several Hashd groups are looking to improve their international standing and back a government that also is seeking broad international acceptance – the time to tackle this difficult question may have arrived. 

Other Recommendations

As Brussels works to expand its ties with Baghdad, the EU and member states should encourage the Iraqi government to adopt other policies that can help stave off a new political crisis. 

First, they should urge the government to organise provincial elections as a way to promote political participation and improve local governance and accountability. The country has held no such contest since 2013, and parliament dissolved the existing provincial councils in 2019, on the back of the Tishreen protests. These moves have helped concentrate power in the hands of provincial governors, who no longer face scrutiny by elected provincial council members. Holding provincial elections might also entice the Sadrists, who enjoy considerable popularity in Baghdad and the south, back into formal politics and create an opportunity for a fresh crop of politicians, including Tishreeni activists, to join decision-making at the local level. In turn, such changes could open the national political arena to new actors. The 2021 elections were primarily a venue for elite competition, in part because many Tishreeni activists, having lost faith in Iraqi formal politics, declined to participate. 

Holding provincial elections will also necessitate a discussion about how to improve local representation, as parliament will need to pass a new law regulating how they are conducted. A single non-transferable vote system used in the 2021 parliamentary elections, or a hybrid that partially allows transferable votes under party lists, which was used before that, could diversify the mix of candidates to provincial councils the same way it did in the parliament elected in 2021, which (despite remaining primarily an elite preserve) has more new parties, more independent candidates and a number of female members surpassing the quota for women. (The new law should reflect the language on that quota in the 2008 law on local elections.) 

Secondly, the EU and member states should encourage dialogue across the political spectrum and civil society in order to create momentum for a long overdue constitutional review that could prompt better implementation as well as needed amendments. Holding credible provincial elections is a necessary but insufficient condition for addressing the underlying problems spotlighted by the Tishreeni protests. Governance reform is unlikely to be effective unless the muhasasa system is revamped, which could be most enduringly done by amending the constitution, and paramilitaries are fully brought under the control of the relevant security ministries. Key provisions of the constitution adopted in 2005 remain unfulfilled, some awaiting the requisite legislation. 

Thirdly, with respect to the frictions in Kurdistan, the EU should use its newly established permanent mission in Erbil to offer itself as a mediator between the Kurdish parties, working closely with its U.S. and UK counterparts. The rift between the parties is complicating negotiations over oil revenue sharing with Baghdad and making the north more vulnerable to military intervention by Iran, which is targeting Iranian Kurdish exile groups, and Türkiye, which is in a long fight with the PKK. 

Finally, the EU and its member states could support Iraq in coping with water scarcity. They could give both material aid and technical advice in the agricultural sector, where outdated irrigation techniques are causing extreme water loss. Such aid would strengthen Iraq’s claims vis-à-vis especially Türkiye, which has said it will not release more water from its dams as long as Iraq does not fix its water waste problem. It could also help Iraqi farmers struggling to make do with less water stay on the land, rather than leave for cities, where infrastructure is already strained and they are often stuck in poverty.

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