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Though the Iraq war is certainly not over, it has reached a crossroads. During the course of the war, about 40 countries sent troops to fight in what was called "Multi-National Force-Iraq." As of this summer, only one foreign country's fighting forces remain in Iraq — those of the United States. A name change in January 2010 will reflect the new reality, when the term "Multi-National Force-Iraq" will be changed to "United States Forces-Iraq." If there is an endgame in Iraq, we are now in it.
The plan that U.S. President Barack Obama inherited from former President George W. Bush called for coalition forces to help create a viable Iraqi national military and security force that would maintain the Baghdad government's authority and Iraq's territorial cohesion and integrity. In the meantime, the major factions in Iraq would devise a regime in which all factions would participate and be satisfied that their factional interests were protected. While this was going on, the United States would systematically reduce its presence in Iraq until around the summer of 2010, when the last U.S. forces would leave.
Two provisos qualified this plan. The first was that the plan depended on the reality on the ground for its timeline. The second was the possibility that some residual force would remain in Iraq to guarantee the agreements made between factions, until they matured and solidified into a self-sustaining regime. Aside from minor tinkering with the timeline, the Obama administration — guided by Defense Secretary Robert Gates, whom Bush appointed and Obama retained — has followed the Bush plan faithfully.
The moment of truth for the U.S. plan is now approaching. The United States still has substantial forces in Iraq. There is a coalition government in Baghdad dominated by Shia (a reasonable situation, since the Shia comprise the largest segment of the population of Iraq). Iraqi security forces are far from world-class, and will continue to struggle in asserting themselves in Iraq. As we move into the endgame, internal and external forces are re-examining power-sharing deals, with some trying to disrupt the entire process.
There are two foci for this disruption. The first concerns the Arab-Kurdish struggle over Kirkuk. The second concerns threats to Iran's national security.
Fighting continues in the Kirkuk region, where the Arabs and Kurds have a major issue to battle over: oil. The Kirkuk region is one of two major oil-producing regions in Iraq (the other is in the Shiite-dominated south). Whoever controls Kirkuk is in a position to extract a substantial amount of wealth from the surrounding region's oil development. There are historical ethnic issues in play here, but the real issue is money. Iraqi central government laws on energy development remain unclear, precisely because there is no practical agreement on the degree to which the central government will control — and benefit — from oil development as opposed to the Kurdish Regional Government. Both Kurdish and Arab factions thus continue to jockey for control of the key city of Kirkuk.
Arab, particularly Sunni Arab, retention of control over Kirkuk opens the door for an expansion of Sunni Arab power into Iraqi Kurdistan. By contrast, Kurdish control of Kirkuk shuts down the Sunni threat to Iraqi Kurdish autonomy and cuts Sunni access to oil revenues from any route other than the Shiite-controlled central government. If the Sunnis get shut out of Kirkuk, they are on the road to marginalization by their bitter enemies — the Kurds and the Shia. Thus, from the Sunni point of view, the battle for Kirkuk is the battle for the Sunni place at the Iraqi table.
Turkey further complicates the situation in Iraq. Currently embedded in constitutional and political thinking in Iraq is the idea that the Kurds would not be independent, but could enjoy a high degree of autonomy. Couple autonomy with the financial benefits of heavy oil development and the Kurdish autonomous region of Iraq becomes a powerful entity. Add to that the peshmerga, the Kurdish independent military forces that have had U.S. patronage since the 1990s, and an autonomous Kurdistan becomes a substantial regional force. And this is not something Turkey wants to see.
The broader Kurdish region is divided among four countries, Turkey, Iraq, Iran and Syria. The Kurds have a substantial presence in southeastern Turkey, where Ankara is engaged in a low-intensity war with the Kurdistan Workers' Party (PKK), members of which have taken refuge in northern Iraq. Turkey's current government has adopted a much more nuanced approach in dealing with the Kurdish question. This has involved coupling the traditional military threats with guarantees of political and economic security to the Iraqi Kurds as long as the Iraqi Kurdish leadership abides by Turkish demands not to press the Kirkuk issue.
Still, whatever the constitutional and political arrangements between Iraqi Kurds and Iraq's central government, or between Iraqi Kurds and the Turkish government, the Iraqi Kurds have a nationalist imperative. The Turkish expectation is that over the long haul, a wealthy and powerful Iraqi Kurdish autonomous region could slip out of Baghdad's control and become a center of Kurdish nationalism. Put another way, no matter what the Iraqi Kurds say now about cooperating with Turkey regarding the PKK, over the long run, they still have an interest in underwriting a broader Kurdish nationalism that will strike directly at Turkish national interests.
The degree to which Sunni activity in northern Iraq is coordinated with Turkish intelligence is unknown to us. The Sunnis are quite capable of waging this battle on their own. But the Turks are not disinterested bystanders, and already support local Turkmen in the Kirkuk region to counter the Iraqi Kurds. The Turks want to see Kurdish economic power and military power limited, and as such they are inherently in favor of the Shiite-dominated Baghdad government. The stronger Baghdad is, the weaker the Kurds will be.
Baghdad understands something critical: While the Kurds may be a significant fighting force in Iraq, they can't possibly stand up to the Turkish army. More broadly, Iraq as a whole can't stand up to the Turkish army. We are entering a period in which a significant strategic threat to Turkey from Iraq could potentially mean Turkish countermeasures. Iraqi memories of Turkish domination during the Ottoman Empire are not pleasant. Therefore, Iraq will be very careful not to cross any redline with the Turks.
This places the United States in a difficult position. Washington has supported the Kurds in Iraq ever since Operation Desert Storm. Through the last decade of the Saddam regime, U.S. special operations forces helped create a de facto autonomous region in Kurdistan. Washington and the Kurds have a long and bumpy history, now complicated by substantial private U.S. investment in Iraqi Kurdistan for the development of oil resources. Iraqi Kurdish and U.S. interests are strongly intertwined, and Washington would rather not see Iraqi Kurdistan swallowed up by arrangements in Baghdad that undermine current U.S. interests and past U.S. promises.
On the other hand, the U.S. relationship with Turkey is one of Washington's most important. Whether the question at hand is Iran, the Caucasus, the Balkans, Central Asia, the Arab-Israeli conflict, Afghanistan, Russia or Iraq, the Turks have a role. Given the status of U.S. power in the region, alienating Turkey is not an option. And the United States must remember that for Turkey, Kurdish power in Iraq and Turkey's desired role in developing Iraqi oil are issues of fundamental national importance.
Now left alone to play out this endgame, the United States must figure out a way to finesse the Kurdish issue. In one sense, it doesn't matter. Turkey has the power ultimately to redefine whatever institutional relationships the United States leaves behind in Iraq. But for Turkey, the sooner Washington hands over this responsibility, the better. The longer the Turks wait, the stronger the Kurds might become and the more destabilizing their actions could be to Turkey. Best of all, if Turkey can assert its influence now, which it has already begun to do, it doesn't have to be branded as the villain.
All Turkey needs to do is make sure that the United States doesn't intervene decisively against the Iraqi Sunnis in the battle over Kirkuk in honor of Washington's commitment to the Kurds.
In any case, the United States doesn't want to intervene against Iraq's Sunnis again. In protecting Sunni Arab interests, the Americans have already been sidestepping any measures to organize a census and follow through with a constitutional mandate to hold a referendum in Kirkuk. For the United States, a strong Sunni community is the necessary counterweight to the Iraqi Shia since, over the long haul, it is not clear how a Shiite-dominated government will relate to Iran.
The Shiite-dominated government led by Iraqi Prime Minister Nouri al-Maliki is no puppet of Iran, but at the same time, it is not Iran's enemy. As matters develop in Iraq, Iran remains the ultimate guarantor of Shiite interests. And Iranian support might not flow directly to the current Iraqi government, but to al-Maliki's opponents within the Shiite community who have closer ties to Tehran. It is not clear whether Iranian militant networks in Iraq have been broken, or are simply lying low. But it is clear that Iran still has levers in place with which it could destabilize the Shiite community or rivals of the Iraqi Shia if it so desired.
Therefore, the United States has a vested interest in building up the Iraqi Sunni community before it leaves. And from an economic point of view, that means giving the Sunnis access to oil revenue as well as a guarantee of control over that revenue after the United States leaves.
With the tempo of attacks picking up as U.S. forces draw down, Iraq's Sunni community is evidently not satisfied with the current security and political arrangements in Iraq. Attacks are on the upswing in the northern areas — where remnants of al Qaeda in Iraq continue to operate in Mosul — as well as in central Iraq in and around Baghdad. The foreign jihadists in Iraq hope such attacks will trigger a massive response from the Shiite community, thus plunging Iraq back into civil war. But the foreign jihadists would not be able to operate without some level of support from the local Sunni community. This broader community wants to make sure that the Shia and Americans don't forget what the Sunnis are capable of should their political, economic and security interests fall by the wayside as the Americans withdraw.
Neither the Iraqi Sunnis nor the Kurds really want the Americans to leave. Neither trust that the intentions or guarantees of the Shiite-dominated government. Iraq lacks a tradition of respect for government institutions and agreements; a piece of paper is just that. Instead, the Sunnis and Kurds see the United States as the only force that can guarantee their interests. Ironically, the United States is now seen as the only real honest broker in Iraq.
But the United States is an honest broker with severe conflicts of interest. Satisfying both Sunni and Kurdish interests is possible only under three conditions. The first is that Washington exercise a substantial degree of control over the Shiite administration of the country — and particularly over energy laws — for a long period of time. The second is that the United States give significant guarantees to Turkey that the Kurds will not extend their nationalist campaign to Turkey, even if they are permitted to extend it to Iran in a bid to destabilize the Iranian regime. The third is that success in the first two conditions not force Iran into a position where it sees its own national security at risk, and so responds by destabilizing Baghdad — and with it, the entire foundation of the national settlement in Iraq negotiated by the United States.
The American strategy in this matter has been primarily tactical. Wanting to leave, it has promised everyone everything. That is not a bad strategy in the short run, but at a certain point, everyone adds up the promises and realizes that they can't all be kept, either because they are contradictory or because there is no force to guarantee them. Boiled down, this leaves the United States with two strategic options.
First, the United States can leave a residual force of about 20,000 troops in Iraq to guarantee Sunni and Kurdish interests, to protect Turkish interests, etc. The price of pursuing this option is that it leaves Iran facing a nightmare scenario: e.g., the potential re-emergence of a powerful Iraq and the recurrence down the road of the age-old conflict between Persia and Mesopotamia — with the added possibility of a division of American troops supporting their foes. This would pose an existential threat to Iran, forcing Tehran to use covert means to destabilize Iraq that would take advantage of a minimal, widely dispersed U.S. force vulnerable to local violence.
Second, the United States could withdraw and allow Iraq to become a cockpit for competition among neighboring countries: Turkey, Iran, Saudi Arabia, Syria — and ultimately major regional powers like Russia. While chaos in Iraq is not inherently inconsistent with U.S. interests, it is highly unpredictable, meaning the United States could be pulled back into Iraq at the least opportune time and place.
The first option is attractive, but its major weakness is the uncertainty created by Iran. With Iran in the picture, a residual force is as much a hostage as a guarantor of Sunni and Kurdish interests. With Iran out of the picture, the residual U.S. force could be smaller and would be more secure. Eliminate the Iran problem completely, and the picture for all players becomes safer and more secure. But eliminating Iran from the equation is not an option — Iran most assuredly gets a vote in this endgame.
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The war in Iraq has led to many unforeseen consequences such as High Oil Prices, and a weakening of the US dollar. It has led to massive US budget deficits and a loss of US reputation in the world. The war is obviously a terrible thing in and of itself. This is not the location to discuss the war itself, but we seek to allow users to use KookyPlan space to discuss the (sometimes strange) connections between global events and everyday business challenges (and opportunities). Primarily, this space is set up for investors and entrepreneurs to discuss the impact that major events have on their operating environment. Please feel free to contribute, but keep the comments in line with our overall objectives:
Before the war, White House economic adviser Lawrence Lindsay estimated the cost at $100 to $200 billion. So the White House got rid of him and "re-estimated" the cost at $50 to $60 billion. It's now over $500 billion (see actual cost here). But, this only includes the upfront costs, which are mostly handled by "emergency" appropriations. (Iraq funding is apparently still an emergency five years after the war began.) These costs, according to the Washington Post, are now running at $12 billion a month -- $16 billion if you include Afghanistan. By the time you add in the costs hidden in the defense budget, the money we'll have to spend to help future veterans, and money to refurbish a military whose equipment and materiel have been greatly depleted, the total tab to the federal government will almost surely exceed $1.5 trillion. The Washington Post article then goes on to estimate the true cost of the Iraq War (to the US only) to be over $3.0 trillion dollars. While this number may be hotly debated, the sheer magnitude gives you something to think about (since it even exceeds the maximum total value of all Iraqi oil...see calculations below)
Iraq is not only the second longest war in U.S. history (after Vietnam), it is also the second most costly -- surpassed only by World War II.
President Bush tried to sell the American people on the idea that we could have a war with little or no economic sacrifice. Even after the United States went to war, Bush and Congress cut taxes, especially on the rich -- even though the United States already had a massive deficit. So the war had to be funded by more borrowing. By the end of the Bush administration, the cost of the wars in Iraq and Afghanistan, plus the cumulative interest on the increased borrowing used to fund them, will have added about $1 trillion to the national debt.
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Clearly this myth can now be laid to rest!. Just look at what has happened to the wealth of the US since the Iraq war began (currency diving, economy slow, infrastructure investments ignored), Economists used to think that wars were good for the economy, a notion born out of memories of how the massive spending of World War II helped bring the United States and the world out of the Great Depression. But we now know far better ways to stimulate an economy -- ways that quickly improve citizens' well-being and lay the foundations for future growth. But money spent paying Nepalese workers in Iraq (or even Iraqi ones) doesn't stimulate the U.S. economy the way that money spent at home would -- and it certainly doesn't provide the basis for long-term growth the way investments in research, education or infrastructure would.
Before the war, oil was approximately $30 dollars a barrel. Now, its over $130. One of the main factors for this jump has been the war. The Washington post put it this way: " This war has been particularly hard on the economy because it led to a spike in oil prices. Before the 2003 invasion, oil cost less than $25 a barrel, and futures markets expected it to remain around there. (Yes, China and India were growing by leaps and bounds, but cheap supplies from the Middle East were expected to meet their demands.) The war changed that equation, and oil prices recently topped $100 per barrel." Well said!
Nobody really knows for sure, but estimates are that Iraq has huge reserves, perhaps much more than previously thought.
According to Time magazine: "a Colorado energy consultancy firm, IHS, stunned some of Iraq's politicians and oil engineers by declaring that the country's oil reserves were about 215 billion barrels — about double the estimates that have held for Iraq for years. That would make Iraq a giant oil power, second only to Saudi Arabia. If the estimates prove true, Iraq's potential would outstrip its other neighbor Iran, which sits atop about 136 billion barrels of oil. The IHS engineers examined 438 undrilled fields and used new technology to recalculate old reservoirs.
According to CNN: "Iraq has a vast and untapped oil wealth, perhaps 100 billion barrels worth. That's enough, industry experts say, to boost world oil supplies and trigger a decline in prices."
A new book written by a team of experts provides a field-by-field detailed explication of the thesis that Iraqi oil reserves are substantially greater than previously thought. The proven reserves were officially put at 112 billion barrels in 2007 but the final figure could exceed 300 billion barrels. The proven reserves of the Kurdish region are expected to double within the next two years.
Iraq currently produces just over 2 mb/d, down from 2.5 mb/d prior to the U.S. invasion. The authors believe it could boost production to 3.5 mb/d before the impact of a new oil law is felt. They suggest that a 1980's-vintage plan to produce 6 mb/d could eventually become realized. source
Assuming that they have 200 billion barrels @ todays prices of approx $130 per barrel....the market value is approximately US$ 26,000 billion, ....or $26 trillion dollars worth of oil. This is more or less the upward estimate of the nations oil wealth (unrealized).
There were many reasons.
But, many people argue that the US just attacked Iraq because they wanted the oil supplier to be free from influence from a "mad-man" (Saddam Hussein). Could this be true? If that was the US motivation, then it was done by someone that wasnt very good with numbers. Prior to the war, the best estimate was that Iraq had 100 billion barrels of oil, and the going market rate was around $30 per barrel, so the total maximum value of that oil was 3000 billion (or $3 trillion). But, if you look at the more conservative estimates of the total war cost to the US, and your looking at $1.5 trillion, with the Washington Post estimating the total cost over $3 trillion dollars.
Check out these two articles from the New York TImes on the recent opening of oil fields in Iraq. This article from December discusses the second round of bids that happened a few weeks ago. The second article is from last June, which discusses the impact of opening the fields to foreign investment.
Iraq's economy has historically been supported by massive oil exports, accounting for about 95% of its foreign exchange earnings. Current estimates show that the production average is about 2.1 million bbl/day, totaling to roughly $23 billion and an entire third of global market share for crude oil.
For more information Iraq's economy, check out the trade stats on Iraq's Country Insights page. Additonal information on oil trade can be found in the Industries
source globalEDGE.
The only real source of oil globally that has any potential of suddenly coming onto world oil markets is Iraqi oil. At this point, its still a long shot that this would happen (too much fighting still on the ground, and too much political instablity), but if you look at countries like Nigeria where there is rebel fighting in the Niger river delta, you can clearly see that total peace is not necessarily a requirement for oil extraction, and its likely that oil will flow more seriously out of Iraq well before a full and final peace is achieved.
Yes, probably if the war were to start receding into memory, and if there could be stability (relative) in the region, there could be more oil produced in Iraq. The estimates are that Iraq may have more oil than even Saudi Arabia, and much of it is in shallow fields, near to ports, and technically very easy to extract. Politically, of course, this may not be the case, but if the region were to become relatively stable, then there is a massive potential for huge increases in oil supply globally coming out of Iraq. Some analysts say that would only take months to a year to bring much of this supply into world markets due to the close proximity to the gulf, and how little investment would be needed (relatively speaking, compared to other oil fields such as "Tupi" off of Brazil, for example).
Interesting question: what would be the effect on "green investments" if the war in Iraq were to suddenly be a success? (war ends, peace in region, and oil business ramps up to full capacity)
High oil prices (partially caused by the Iraq War) have led investors to change their valuations of many Clean-tech investments and have raised billions of dollars to fund research and alternative energy business models. As the US sought to reduce dependence on foreign oil sources, government incentives have led to massive investments in ethanol and other technologies. Many green business models that we discuss today were not even considered back when oil was $30 a barrel.
If relative stability could be achieved in Iraq, then many experts believe that the massive oil fields could ramp up production quickly, and that oil prices may come down....which would be a big relief for nearly everyone: except for those daring investors that have made big bets on alternative energy sources. Interestingly, the big losers of stability in Iraq would be the "green energy" guys that have been pouring billions of dollars into investments in solar, wind, ethanol, biofuels, etc. These are long-term bets that they are making in alternative energy, but if there were a sudden drop in oil prices, then many of their bets would suddenly fall flat.
Would success in Iraq necessarily lead to failure of clean tech investments? Add your comments here: