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Monitoring Report: Iraq

Iraq is looking at a home run against the self-declared Islamic State this year. However, zero sum political maneuvering risks many of these gains in the short to medium term, and brings the prospect of a difficult 2017. The US-led Coalition faces the ongoing challenge of managing alliances.

The political ‘Reform Movement’

Since the spring, a loose coalition of MPs,“the Reform Movement”,  has shaken Iraqi politics, riding a wave of popular anger at the political class and managing to topple two ministers since July; following an unsuccessful attempt to oust Parliamentary speaker Dr Saleem al-Jubouri.  Of course, the seeds of this movement were very much sown at the beginning of 2016, when Prime Minister Haider al-Abadi attempted to introduce a ‘technocratic’ cabinet (in effect to reduce the power of his political allies), and Moqtada al-Sadr took advantage of this to increase his own political standing by taking over the popular demonstration movement and storm the Green Zone.

However, the movement itself is backed and largely controlled by stalwarts of the post-2003 political order, seeking to manage an information campaign that its aim is to end corruption and free Iraq of malign foreign influence. The danger now is that many Iraqis understand that the movement comprises many MPs seen as corrupt, and if the Reform Movement succeeds in further weakening Abadi, the beneficiary may be the highly erratic Sadrist Trend.

So far, the Movement has been making gains, although the two ministers who have been removed could be seen as relatively easy targets in the current climate. Defense Minister Khaled al-Obeidi is a Sunni sometimes seen by Iraqi conspiracy theorists as close to the United States, an incorrect observation, but something that has not been helped by a popular theory that the U.S. either tolerates or directly supports the Islamic State (IS.) The latter accusation is a popular narrative in Iranian media and Iraqi media linked to Iraq’s Popular Mobilization Units, or Al Hashd al-Shaabi.

Many of these conspiracy theorists correctly point out Obeidi’s closeness to the Nujaifi brothers, the exiled Mosul politicians often accused by nationalists of links to Turkey, Baathism and even I.S.

While these accusations are exaggerated, the Nujaifis have positioned themselves close to the dominant Kurdish political bloc, the Kurdish Democratic Party (KDP) and Turkey, fueling more fears of a takeover of northern Iraq after Turkish forces refused to withdraw. These same forces were training Nujaifi’s militia, the Hashd al-Watani, yet another force poised for the Mosul offensive.

Underscoring this tension, in early October, a spokesman from the Tehran-founded Badr Organization compared the Turkish presence in northern Iraq to an I.S. occupation, while multiple hard line Hashd leaders close to Iran, as well as the freewheeling and erratic Sadr, have threatened to attack U.S. forces.

The second target of the Reform Movement has been Hoshyar Zebari, the KDP politburo member and relative of Kurdish President Barzani. Zebari has been targeted more because of his affiliation to the widely disliked KDP than due to credible accusations of misusing funds.

The purpose of the Reform Movement is to undermine Abadi through instigating votes of no confidence against cabinet ministers, with rumors that veteran Shia politician, (until recently head of the Shia National Alliance) Ibrahim al-Jafaari is soon to be targeted for removal from the Ministry of Foreign Affairs.

Longing for a strongman

The effort to destabilize the Abadi government began over the spring when Maliki capitalized on fears among some MPs that Abadi’s reform efforts, which had morphed into the much touted “technocratic cabinet” plan, would undermine access to politicized hiring in the ministries.

A source of Iraq’s economic dysfunction is heavy public sector over-employment, which gives parties that run ministries significant political influence. On August 23rd, Abadi caused more concern for politicians eyeing the massive hiring power of ministries when he announced that the budget forecast for oil prices for 2017 would be $35, a first for successive Iraqi administrations that have optimistically forecast high prices and exports. In fact, even at the time of the oil price collapse Iraq’s budgets were aimed at $80 plus oil prices, forecasting $45 average prices for 2016, with prices for Basra Crude reaching a low of $23 in February.

The reformists political insurgency has also capitalized on the views of the Iraqi street that Abadi had been weak on security, to include the view that he is being pressured by the United States to block Al Hashd al-Shabi involvement in the forthcoming Mosul offensive. This political wrangling has created a situation where Iraq’s conventional armed forces will bear the brunt of the Mosul offensive, because of political sensitivities of the PMU and the Kurdish Peshmerga going into the city. If Iraq’s Counter Terrorism Forces and the army stumble in the coming urban combat, Maliki and the reformists will likely use any military setback against Abadi.

As noted, Abadi is widely seen by many as being weak, failing to defend parliament against its storming by Sadrists in May and having failed to arrest any high profile targets of anti-corruption probes. This view is championed by State of Law MP Hanan al-Fatlawi, who paints Abadi’s conciliatory approach to Kurdish oil revenue and territory issues as feeble and not supporting Iraq’s interests. Even his allies view Abadi as being weak for other reasons, namely being unable to confront the wishes of hardline pro-Iran factions of the Popular Mobilization Units, who have demanded more salaries and weapons despite allegations of corruption and payroll fraud.

The reality is somewhat complicated, however, with Abadi at times appearing weak, and at other times appearing both strident against his foes and conciliatory towards his enemies, earning him the grudging (and probably temporary) support of heavyweights such as Badr Organization leader Hadi al-Amiri.

Ministerial reshuffles

Abadi has also had mixed fortunes, with the six ministers he appointed for the technocratic cabinet either being rejected by the Supreme Court after they invalidated the parliamentary sessions where they were sworn in, or eventually stepping aside, following technically illegal cabinet sessions with acting ministers. Even as this chaos was unfolding, the Iraqi Army were advancing, affording the PM to at least affect the air of a military strongman.

Meanwhile, cabinet posts that witnessed resignations included less politically important positions such as the ministers of Water Resources and Housing and Construction; while important ministerial positions at the Ministry of Oil and Interior had been left vacant.

As these setbacks unfolded, those attacking Abadi’s appointment of ministers had a point in the sense that the PM had circumvented constitutionally required procedures for parliamentary approval, and that although he had gone to parliament to formally swear in the ministers, they should not have held sessions. Technically, some of those they replaced were still in their positions, adding to a sense of political chaos that characterized the summer.

But some equilibrium seemed to be returning to the political scene in August, when a court rejected corruption allegations against erstwhile Abadi ally and Parliament Speaker Salem al-Jubouri (now supported by Maliki), while a week later six of Abadi’s nominated ministers were sworn into their positions.

Crucially, on August 15th Jabar al-Luaibi was sworn in as Minister of Oil, assuaging fears that the Ministry was going to see several more months of talks with international oil companies (IOC) regarding revised contracts and investment schedules with nobody at the helm. At the same time, progress on IMF loans had spurred IOCs to announce new investment plans, albeit at much lower levels than originally planned.

According to Reuters, in early August IOCs announced revised expenditure plans with Shell reigning in investment from $1.5 billion in 2015 to $742 million, BP revised spending plans down to $1.8 billion for Rumaila, down from planned $3.5 billion planned in 2015 while Lukoil announced expenditure of $1.08 billion, down from $2.5 billion.

This came on the back of news that Iraq’s oil output continued to soar, defying predictions that long delays to the Common Seawater Supply Facility would have critically lessened pressure in the giant southern fields. By the end of August, Iraq was aggressively battling for market share, averaging 4.7 million bpd (including Kurdistan) as Luaibi touted plans to double storage in the south and revitalize refinery investment terms.

In a second minor victory for Abadi, Luaibi quickly announced to the press that there would be an immediate effort to resolve the long running revenue and exports dispute with Kurdish Ministry of Natural Resources (MNR). On the energy front therefore, August and September seemed to hold great promise for the beleaguered sector, but many industry professionals remained unconvinced. A sticking point appears to have been the Iraqi Ministry of Oil’s (MoO) guidance for IOCs in 2016: do more with less, while IOCs contend things are already approaching breaking point. Luaibi expressed his logic to IOCs in a letter to operators, arguing that with more oil exported and debts cleared, Iraq would have the billions required to meet infrastructure requirements:

"In light of the current environment of the oil price and its forecast in the next year[s], we [the Ministry of Oil and contractors] should be prepared to live with the prevailing circumstances. The minister wants them to "modify and adjust, accordingly, the field enhanced redevelopment plans/final development plans."

This reportedly prompted one IOC official to complain, “we’re not a bank.”

Throwing stones in glass houses

Abadi’s victories, with Iraqi army advances to Qayyara and Shirqat, dominating the Tigris River Valley, and successful cabinet appointments, still seemed hollow through the month of September. A bitter intra-Sunni battle is likely to continue between Jubouri and Obeidi (dismissed on the 25th of August.).  Indeed, Abadi may have made a serious mistake in immediately standing by Obeidi, and issuing a temporary travel ban against five MPs accused of corruption alongside Jubouri.

This has had the effect of Jubouri allegedly being involved in the dismissal of Finance Minister Hoshyar Zebari on corruption charges; charges that some analysts noted were hardly significant in the Iraqi context. Zebari, from Barzani’s Kurdish Democratic Party, is a bitter enemy of Maliki, who he accused of allowing the rise of the Islamic State. For his part, Zebari railed against both Maliki and Jubouri following his dismissal, accusing the two of conspiring together, although it is notable that one of Jubouri’s aides told The Financial Times that the dismissals sent a negative signal to the international community. Either way, Jubouri is now positioned as another prong in a growing array of threats to the PM.

The combined effect of these ongoing episodes of political mudslinging will likely be a further weakening of public trust in the political system, and the erosion of Sunni faith in their political leadership. This is already fragmented in every Sunni majority province, something that could delay reconstruction across swathes of damaged and mine laden urban areas.

Following Obeidi’s dismissal, the head of the Sunni Mutahiddun bloc and former Vice President and Speaker Osama al-Nujaifi defended Obedi, claiming that the Minister actually wanted to fight corruption; simultaneously Jubouri reportedly accused Nujaifi of being behind the accusations against him. Apparently the main Sunni instigator of the effort against Zebari was the Maliki ally, Salahaddin MP Haitham al-Jubouri.

In the wake of these political battles, Hoshyar Zebari’s aides were in Jordan discussing terms for the first $5.4 billion the IMF is lending Iraq, while Zebari’s rivals collected signatures for his questioning in parliament. Zebari’s reaction, chiming with the climate of political slander, was to immediately plan counter accusations. In an echo of Mishan al-Jubouri’s remarks on corruption in February, one MP told The Financial Times, “It used to be, you cover me, I cover you, now it’s you expose me, I expose you.” Zebari also insisted that his removal would jeopardize up to $17 billion in credit for Iraq that could be released by the IMF agreement (around as much as the deficit) and planned Eurobond issuance, leaving Iraq in “chaos.” As it happened, Zebari was battling the plan to unseat him at the same time as a scheduled meeting to approve a tranche of over $600 million. After Zebari’s dismissal, the IMF’s Christian Josz noted that the organization was committed to working with Iraqis on the monitoring program despite Zebari’s ousting.

Going forward, continuing the IMF program may prove challenging, since Iraq has committed to a monitoring program once again aimed at the long stalled State Owned Enterprise sector reform (which economists such as Frank Gunter often characterize as a black hole of subsidies – and therefore, opaque bottom lines –, over-employment and unattractive joint venture terms for foreign investors).

Likewise, the IMF requires the appointment of independent auditors for multiple financial institutions in Iraq such as the state owned Al Rafidain and Al Rasheed banks.

Iraq’s new (post-sectarian…ish) political dynamic

The political wrangling has underscored a new dynamic in Iraqi politics, increasing intra-sectarian rivalry as new alliances are formed, ostensibly to oust the stalwarts of the post-2003 political scene, but often with Maliki somewhere behind the intrigue.

While most seem to agree that a major effort against Abadi can wait until after Mosul-- perhaps some time in early 2017--Maliki attempted a political masterstroke in his meetings with the Patriotic Union of Kurdistan (PUK) which began with his Sulaymaniyah trip in mid-July. The PUK has long been closer to Tehran and Iraq’s pro-Iranian Shiite political parties than the relatively pro-Erdogan KDP, so it wass natural that Maliki should cement ties with the PUK.

Furthermore, some members of the PUK also have a history of having doubts about Kurdish independence, including senior member Adel Murad and Kirkuk governor Najmaldin Karim who favor various forms of decentralization. PUK discontent has likely been heightened by the Kurdish region’s ongoing financial crisis: on August 22nd, a PUK delegation to Baghdad led by Mullah Bakhtyar reportedly aimed (in Bakhtyar’s words) “to resolve the budget and salaries of the Kurdistan Region, as well as other problems.”

Whatever the motivations, Maliki’s Sulaymaniyah gambit effectively supported the move against Zebari, which also picked up support from Kurdistan Islamic Union members. But, in a development typical of the complexity of Iraqi politics, some PUK members, including veteran leaders Barham Saleh and Kosrat Rasul, attempted to rally pan-Kurdish support for Zebari ahead of the vote, a sign of the lingering bitter sentiment against Maliki in the region and behind the scenes American lobbying.

Therefore, since many Kurds hold Maliki responsible for their financial woes, as well as having a role in the fall of Mosul, his ploy to rally Kurds around the prospect of renewed financial union with Iraq looks shaky. At the same time, Abadi is taking a significant gamble by publicly showcasing rapprochement with the KDP.

Political stalemate ahead?

On the 29th August Abadi met with KRG PM Nechirvan Barzani in Baghdad, which was followed by a statement from the Iraqi government that a preliminary deal had been reached on exports from Kurdistan and Kirkuk. Such talk has been a lightning rod of controversy to Maliki supporters and State of Law MPs such as Hanan al-Fatlawi, who threatened in June to bring supporters onto the streets if another deal was made.

Nonetheless, by the start of October a deal had been finalized, following months of diplomatic negotiation and gentle pushing from U.S. officials, with Special Presidential Envoy Brett McGurk and U.K. Ambassador Frank Baker at the helm.  On the Iraqi side, KRG President Masoud Barzani and Iraqi National Security Advisor Falah Fayed were the primary negotiators.

By most accounts, the reason for the U.S. and U.K. eagerness to arrange a new oil exports deal was coordination over the expected Mosul liberation; Barzani had apparently hinted that, due to financial problems the Mosul offensive would be problematic for the Kurds.

The Kurdish President was not lying on that front, as in August the Kurdish MNR announced revenues had fallen to $461 million for July, down from a peak of $800 million in the summer of 2015, hundreds of millions of dollars short of the funds required to fully finance their war effort and large public sector salary payroll. In this respect, the KRI is significantly worse off than Arab Iraq (which is of course under financial strain) with revenues from the southern terminals bringing in over $4 billion in revenues for August, down $1 billion from the $5 billion per month required in the 2016 budget.

September brought even worse news for the Kurds, with August revenues coming in at $349.9 million, with a steep $10 per barrel discount, which one Kurdish official said was due to quality issues (the lingering threat of legal action against buyers and shippers is more usually cited as a reason.) Amid this crisis, Baghdad was able to apply leverage successfully used in the past, the threat of legal action (as it had done in late 2014 over a violation of the 1976 Iraq-Turkey Pipeline treaty, updated 2010).

On August 30th, MoO notified market participants that three tankers would be blacklisted and forbidden from entering Iraqi ports. At the same time, Baghdad said that in the absence of an agreement over Kirkuk oil, NOC would truck the oil into Iran, despite high transport costs, a move rejected by Kirkuk governor and PUK member Najmaldin Karim, who complained that Baghdad owed Kirkuk oil revenues.

Faced with these worsening options, on 1 September, Iraq’s State Oil Marketing Organization (SOMO) and the MNR announced joint exports from the supergiant Kirkuk field. Previously, Kurdish military control of Kirkuk’s infrastructure allowed them to unilaterally export up to 150,000 bpd before the federal North Oil Company decided to re-inject the oil, risking damaging reservoirs rather than accept what MoO viewed as illegal exports. At the time of the initial announcement on the jointly exported Kirkuk oil, it was said that revenues would be split 50-50.

At the same time, debt of up to $20 billion and a lack of access to debt markets as a non-sovereign entity have added up to ongoing financial gloom in the region. Payments to IOCs have also mounted, with the struggling Genel receiving its export payments for Taq Taq from July on September 28th, as Gulf Keystone said there could be no new investment as long as payments were in arrears, having missed July and August payments. The following day, bondholders in Gulf Keystone won 85.5% control over the company following a London court order on the debt restructuring of the firm.

All of this puts more pressure on the KDP, and could encourage greater PUK-Gorran support for Maliki. This in turn could add ammunition to those who wish to end to oil exports deal. In early September for example, MoO announced that, “The oil ministry will also try to retake full control of all Kirkuk oilfields that were administered by the NOC before the terrorist gangs of ISIS entered Iraqi territories and before the Peshmerga forces seized some oil wells during the previous government.” For many in Baghdad and Erbil therefore, this is not just a question of oil, it is a question of long disputed territory and how long alliances can hold out after IS are expelled from Mosul.

Mosul offensive

The sheer size of Mosul and the likely suicidal resistance of dug in I.S. fighters mean the coming offensive on the city itself will need an overwhelmingly large force to ensure victory. For example, in the first battle of Grozny in 1994, as many as 38,000 Russian soldiers with heavy weapons and armor struggled to defeat a force as small as 5000. Luckily for Baghdad, anti-IS forces now have over two years’ combat experience, adapting to IS changes of tactics at every turn. Nonetheless, battles such as Grozny and now Aleppo show what can go wrong.

Considering this, the Peshmerga and PMU will be vital for the offensive, especially considering that a brigade sized force of Iraqi Army has been given the mission of cutting off IS forces that may attempt to flee to Syria or Turkey.

This leaves Iraqi Army units such as the 9th Division and 16th Division, in addition to Iraqi Counter Terrorism Forces (ICTF, which includes police special units such as the Emergency Response Brigades) to seize the vast urban area with US-led coalition support in the air and on the ground.  American and Australian special forces appear to be operating as forward air controllers with Iraqi units in the field. Iraqi security forces have spent a long summer battling their way up the Tigris river valley, and must be concerned at the prospect of a nightmarish urban fight.

Refugee flows, potentially comprising as many 1 million desperate civilians, could clog roads, potentially paralyzing military advances, while IS will not hesitate to disguise themselves as refugees. This will tie down huge numbers of security forces.  Yet it is worth noting that high level Iraqi and coalition interlocutors have suggested to us that the UN has exaggerated potential refugee flows and also exaggerated the lack of preparedness for handling refugees.  In the first week of October, NAMEA visited Salahaddin province and saw accommodation being prepared for tens of thousands of internally displaced persons.  The efforts to support displaced civilians appear to be well organized and extensive.

Another risk is that recent ISF success has led to a false sense of security: for instance: Shirqat, a small town 100 km south of Mosul (the surrounding area was re-taken over the summer) fell in less than 24 hours, and the liberation of Fallujah was much quicker than anticipated. Furthermore, Iraqi army coordination with Coalition air strikes has been improving, with one Iraqi Colonel comparing them to scalpels removing tumors. In the same interview, the Colonel expected that Sunnis inside Mosul would rise up, causing IS to suddenly collapse. This could of course happen, and would likely bring a historic victory by Christmas, boosting Abadi’s popularity. But it is dangerous to expect it.

What is concerning is the number of “moving parts” the operation will have, and the fact that no army in history has ever had an easy battle in a dense built up area.

Furthermore, if certain units are restricted from the fight, if they clash with each other, or if they participate in a piecemeal fashion due to lack of political or operational coordination, I.S. have a chance of holding out for a long time, risking an Aleppo style quagmire that could drag on until the spring. Such a scenario could happen if, for example, there are rumors of Turkish Special Forces in the city, in which case it would be hard for the Iraqi government to reign in deeply anti-Turkish PMU units.

Turkish Special Forces have covertly entered Iraq in the past, and could do so again with Atheel al-Nujaifi’s unofficial Hashd al-Watani. Even if they do not, there is real risk of a firefight between the latter group and hardline Hashd elements.

Similar problems have occurred in the past, with gun battles erupting in November 2015 and April 2016 in Tuz Khurmatu, pitting Kurdish Peshmerga against pro-Iranian Hashd. In those cases, politicians and commanders were able to rapidly coordinate and remove units from the battlefield to de-escalate. In a chaotic campaign for Mosul, this may not be possible.

More worrying for Coalition commanders would be major friendly fire incidents against the PMU. This could even come from the Iraqi Air Force but would likely be blamed on the U.S. The most radical elements of PMU forces would then have to be persuaded not to attack U.S. bases at Qayyara West and Makhmour, and some PMU are well equipped with rocket artillery. Any of the above incidents, if severe enough, could halt the entire Mosul operation.

A stalled Mosul offensive could in turn increase the pressure on Abadi to send in the PMU, moving units directly into the city itself. While the PMU has a large number of Sunni fighters from neighboring Salahaddin, Mosul is dominated by the Shammar tribal confederation, parts of which have joined Kurds to fight I.S., while other Shammar tribesmen have long had a difficult relationship with the government. This could in turn cause an explosive situation if hardline PMU factions enter the city, turning the ethnically mixed town into a patchwork of competing groups.

In the past, I.S. predecessors the Islamic State of Iraq proved themselves capable of holding up larger American forces until airpower arrived, fighting with a suicidal ferocity that at times shocked the Americans. A repeat of this kind of resistance on a city-wide scale will test even the most battle hardened units.

Allies preparing for the battle will be hoping that the swift Iraqi government advances to Qayyara and Shirqat are a sign of how the coming battle will play out. If not, I.S. are saving themselves for an apocalyptic confrontation in the town where Baghdadi made his infamous July 2014 call for a global Islamic uprising.

So far, signs of I.S. tunnel complexes, rumors of warrens of IS tunnels and moats full of oil are not a good sign. In all likelihood however, I.S. simply cannot hold out against the forces arrayed against them in Iraq. Knowing this, Abadi would do well to plan his Mosul victory speech ahead of the event, because in the current political climate, the aftermath of Mosul could be more important than the battle itself.

So far (as of 26 October), it appears that the town of Bartella, to the immediate east of Mosul, has been recaptured from I.S.  But there appears to have been little other notable progress since the initiation of the operation two weeks ago.  This is despite lots of positive press coverage, good cooperation between the various units involved (regular Iraqi Army, Special Forces, Peshmerga and Shiite militias as well as Coalition forces).

The Order of Battle for the Mosul Operation

According to the Salahuddin Operations Command (which briefed NAMEA three weeks ago), the forces that are participating in the battles for the liberation of Mosul are the following (translation from Arabic):

·      16 regiments from Special Operations and Counterterrorism Division

 ·      32 regiments from the army (15th and 16th divisions) with the entire divisions headquarters and 16 tank battalions (9th division)

 ·      4 armored regiments (37th brigade) Iraqi army

 ·      12 regiments from Ninewa’s police reserve

 ·      12 regiments from QRF (3 brigades)

 ·      Ninewa PMF battalions

 ·      8 commando regiments (1st and 2nd brigades)

 ·      8 mechanical regiments - federal police (2 brigades)

 ·      Iraqi Forces and Coalition Forces heavy artillery, for support

 ·      6 regiments of Kurdish Peshmerga forces

 ·      PMF divisions for support, 4 military divisions will to encircle the city of Mosul, just like Fallujah previously, to cut supply and escape routes

 ·      Coalition Air force, 10 squadrons

 ·      Iraqi Air Force, 3

 ·      Attack helicopters from the coalition and from the Iraqi Army Aviation, 10 formations.

Overall command and control seems to be alternating between a headquarters in Erbil (Kurdistan) and a headquarters in Qayyara (southern Ninewa).

To the east and south of Mosul, the CTS, the 37th Armored Division and the 9th Division are primarily responsible.  The Shiite militias (Al Hashd Al Shaabi / PMF) will hold the area from Beiji to Qayyara, basically securing the line of Showra (NE of Qayyara) and Hamman al Ali (N of Showra and S of Mosul).

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