Although Iraq’s revenue is rapidly increasing, official consideration of humanitarian issues is taking a back seat, external funding for development is diminishing, and corruption appears to be thriving amidst undemocratic practices. These issues are most clearly manifested in the nation’s 2013 budget proposal, the largest budget in the country’s history. Out of the colossal 138 trillion Iraqi Dinars (USD 118.6 billion), most notable are the allocations to oil production in the form of foreign and domestic projects, the security and defense sectors, and the Prime Minister’s office. To be sure, the primary reason for the exceptionally large budget is oil revenue and production, as Iraq boasts the fourth largest oil reserves in the world[1] and may quickly become the world’s second largest oil producer. It is, therefore, worth exploring how Iraq’s 2013 budget reflects the ways in which oil production affects state power, humanitarian funding, and social programs.

 

Oil Production and State Power

Proposed by the Ministry of Finance, the 2013 budget displays an 18% increase from the 2012 budget of ID117 trillion. According to Ali al-Dabbagh, an official government spokesperson, the figures are partially based on expected average oil prices of $90 per barrel, and exports of 2.9 million barrels of oil per day (bpd) (of which 250 thousand bpd are planned from the Kurdistan region). Revenues based on these calculations are expected to contribute to 95% of the 2013 budget. These figures are compared to Iraq's 2012 draft budget, which forecasted oil exports of 2.6 million bpd, a significant increase from Iraq's average of 2.2 million bbl/day in 2011. In fact, predictions are being made all the way up to the year 2035 of a yearly average of $200bn in oil revenue (The Guardian).

Although it is clear that Iraq’s oil exports and revenues are increasing, the strong influence of oil production on Iraq’s budget works both politically and socially. To be sure, many of the world’s developed and developing economies depend heavily on oil. However, there appear to be inconsistencies between the domestic politics of oil producers and oil consumers. The production and consumption of oil often seem to have a connection to undemocratic practices, albeit in different ways. This is not to say that oil production leads directly to corruption or repression, but rather corruption and repression may be facilitated by complex relationships that have developed with the evolution of the oil industry. Although this correlation may be due to economic pressures or a desire to repress populations and buy political support, Timothy Mitchell argues that this trend may also be related to the properties of oil, the means of production, cash flow, and the dependent relationship between oil producers and oil consumers.

In fact, the budget can be viewed as a medium through which state power and undemocratic practices are reinforced by oil. One need only refer to the recent pressures on Kurdistan by Baghdad to halt their unilateral oil deals with ExxonMobil and Chevron, condemning the deals as “illegal,” then allocating 250 thousand bpd to the KRG to control energy flow and curb potential conflict. This conflict revolves largely around the oil and gas law, or lack thereof, and drilling territory. Due to the fact that claims to the disputed territories are not resolved, and would have to be in order for there to be a comprehensive oil and gas law, Baghdad and the KRG have clashed over contracts, jurisdiction, production, and other issues. The hydrocarbons draft law has been in negotiations since 2007 and there does not seem to be a consensus in the near future. Additionally, Kurdistan refused to vote in favor of the proposed budget because the salary of the Peshmarga was not included, while other allocations for security in Iraq make up 14% of the budget.

These events illustrate how power and security are tightly bound to oil via the budget. In other words, oil is used to bolster internal security, while restricting and controlling resources and defense. When one examines the budget’s content this becomes more pronounced. ID19.86 trillion is marked for security and defense sectors, ID13.6 trillion is reserved for foreign oil companies' projects, and ID405.88 million alone is reserved for the Prime Minister’s office, compared to ID12.71 trillion for education and ID17.7 trillion for social services. (It should be noted that the funds allocated to the Prime Minister’s office are officially for social benefits, such as the Women’s Care Department, which are facilitated by his office.) These numbers indicate not only that power and security in Iraq flow through oil, but also that power lies with the Prime Minister and the government’s priorities revolve around security and defense.

The central government has tried to curb the autonomy not only of the KRG, but also of oil laborers through law, intelligence, and security measures. As a result, the government more effectively controls the means of oil production, which is also strengthened through the budget, and uses it as a tool against demands for workers rights. In February, 2011, Baghdad implemented crackdowns (not for the first time) on illegal strikes and unions at Kirkuk’s North Oil Company, as well as strikes in Basra during the past several years. Although workers still form unions despite their illegality, legislation has not yet changed and strikes continue to be suppressed. Furthermore, because of an abundance of human resources in the country, a relatively low level of specialization required for menial oil labor, and the government’s effective enforcement of power, strikes and unions are not as effective as they need to be. Thus, in Iraq’s case, oil production actually works to oppose democratic practices.

On the other hand, the stifling of pluralism and representation in Iraq also comes in the form of corruption, which is just as prominently linked to money, power, and oil. Baghdad and Moscow’s recently botched arms deal, allegedly due to corruption and bribery of the Iraqi officials who were negotiating, demonstrates the inability of the central government to fulfill its goals. Thus, corruption not only takes the form of repression on the street and in public spaces, but also in private among public officials. LUKOIL, Russia’s second largest crude producer, concurrently has plans to accept an offer from Exxon to take over West Qurna-1 oilfield (Reuters) and it is already in the process of developing West Qurna-2. So although there is a chance that Baghdad and Moscow may not benefit from a weapons deal and exchange tools of hard power, they are already cooperating in their production of soft power in southern Iraq.

 

Humanitarian and Social Programs

Although exorbitant spending on defense and energy is a common trait between oil producers and oil consumers, the way by which it affects humanitarian and social affairs regarding external funding, domestic programs, and civil society, is particularly stark in oil producing nations. High revenue, as a result of oil, make it easy and convenient to ignore or mask numerous inequalities in income and services. According to a previous NCCI op-ed, “In 2008, far fewer donors contributed about $473.6 million to humanitarian assistance in Iraq. In perspective, there was an 86% decrease in funding since the peak of funding in 2003.” Most recently, ECHO decreased funding from EUR 8 million (2012) to EUR 7 million (2013) for their humanitarian action plan (HIP) in Iraq, despite the fact that the country belongs to “category 3 (most severe) of the European Commission’s Directorate-General for Humanitarian Aid and Civil Protection (DG ECHO) crisis index and to category 2 of DG ECHO’s vulnerability index for 2012”(ECHO/WWD/BUD/2013/0100; emphasis added). The report cites Iraq’s economic growth and need to focus on capacity building, as opposed to rebuilding, for its reasons to decrease funding, yet the report strangely acknowledges that 23% of the population (7 million people) lives below the poverty line. With a clear reference to inequality and growth, the report does not address that the government actually does have the capacity to generate revenue or that corruption and repression are the problems regarding inequality. Instead of identifying the sources, destinations, and ways by which national profits are generated and contribute to the long-term problem, programs focus on short-term goals, which, while important, cannot function alone as a remedy.

Moreover, responsible domestic budgeting and administration is just as important as high revenue and funding. Hollowing out institutions in the name of security, intelligence, and reform does not foster valuable growth. In mid-November, the Iraqi Cabinet announced plans to eliminate food ration cards, which the government had been distributing since the 1990s when Iraq was struggling with international sanctions under Saddam Hussein’s regime. The decision to eliminate the rations was quickly reversed after public outcry, despite the sentiment that the system has been quite ineffective. According to The Iraqi Knowledge Network, for example, 80 percent of Iraqi families who had ration cards had only ever received one of the items on the ration card list between 2010 and 2011. This reveals the government’s inability to adequately deliver social services, as well as a portion of the public’s dependency (real or psychological) on services that seldom deliver. When supplemented with the ECHO report it becomes apparent that there is a discrepancy between international donations/donors, capacity building, and government services. A recent BBC report also noted a recent survey, estimating that between 800,000 to a million Iraqi children have lost one or both of their parents. However, Iraq's Deputy Minister for Social Affairs, Dara Yara, said that "We are working day and night to improve the services we provide to orphans. But the money I'm allocated for this is very limited. And the whole social security system in this country needs reform.” A recent UNICEF survey also highlighted further inequalities among children, noting that one in three (5.6 million) children in Iraq suffer from at least one of the following: inadequate access to and promotion of health services; lack of access to quality education; violence against children in schools and families; psychological trauma from years of extreme violence; discrimination; prolonged detention in juvenile facilities; insufficient attention to the special needs of children with disabilities and who are not in their family environment; and lack of access to information and participation in cultural life.

On the surface, Iraq’s budget provides only a few ways by which revenue, state power, and corruption are linked, but when reviewed more carefully in the context of Iraq’s politics and society, the relationship between money, power, oil, and humanitarian concerns are revealed. Each of these elements and institutions produces and reproduces power in different ways. Incidentally, yet on a macro scale, this also illuminates the irony of America’s policy of bringing democracy to Iraq, from which the U.S. received massive benefits as an oil consumer, while facilitating and influencing oil production. Despite projections of mass economic growth in Iraq’s future, this in no way guarantees structural or social change. If there is to be a more vibrant civil society, more effective social services programs, democratic capacity, and reform of structural inequality, workers and other disenfranchised groups must be allowed to voice their demands, international organizations must work with local groups to produce effective and necessary programs, and the means of oil production — including the depletion of fossil fuels — must be reassessed.

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