Kurds and US win big in post-war Iraqi contracts

Published March 17th, 2013 - 11:30 GMT
Iraq’s Gross Domestic Product reached 10.5 percent in 2012, the highest percentage in the Middle East, and higher than previous expectations
Iraq’s Gross Domestic Product reached 10.5 percent in 2012, the highest percentage in the Middle East, and higher than previous expectations

Iraq has recorded the highest percentage of economic growth of all Arab economies in the last few years. It has the fourth-largest oil reserves globally, and is attempting to be one of the biggest oil producers worldwide.

Iraq’s Gross Domestic Product reached 10.5 percent in 2012, the highest percentage in the Middle East, and higher than previous expectations. GDP will grow at an average of at least 9.4 percent annually between 2012 and 2016, says the central bank.

Iraq produced 3.2 million barrels of oil per day in 2012, and output is expected to grow. Iraq’s oil minister last year said he expects production to reach 8 million to 8.5 million barrels per day by 2017.

“Iraq will be the fastest-growing country in the world during 2012 and 2013,” Merrill Lynch said in a report last year. The U.S. bank foresees “a steady 9% growth rate in the Iraqi economy between 2013 and 2017,” and “this growth is ascribed in the first place to the increase in the country’s oil production.”

Over the past decade, Iraq has succeeded in moving ahead with development and reconstruction after the war. While it is slated to be one of the most important economies in the world, there are many abnormalities in its growth due to rampant poverty, corruption, and unfair wealth distribution among its people.

American companies

These abnormalities have led more people to sink deeper into poverty, especially in Baghdad. This situation was allowed to develop in an environment of corruption, analyst and writer Salama al-Derawee told Al Arabiya.

“The state is disconnected. There are a lot of military groups still in Iraq to protect corruption,” Derawee said.

Over the past decade, during the occupation, American companies seemed to gain the most. They struck big deals throughout the country with huge profits, and were supported by a corrupt system.

“About a sixth of the $60.5 billion America spent on rebuilding war-torn Iraq over the past ten years has been lost to waste and fraud,” said a recent official U.S. report, adding that most of this money went to American companies.

The report highlights specific cases, such as the subcontractor supplier who overcharged Iraqi projects by thousands of dollars for supplies, including $900 for a control switch valued at $7.05, and $80 for a pipe that should cost $1.41.

In addition, most of the rebuilding projects in Iraq have been carried out by U.S. companies, including multi-billion-dollar contracts, while many foreign and local companies were banned against even bidding on projects.

Looking at these figures confirms that American companies (including Halliburton, Bechtel, ExxonMobil and others) were among the biggest gainers in the post-war rebuilding phase.

Kurds, the second-biggest gainers

Ten years after the invasion of Iraq, the Kurds have the best economic situation, and their capital Erbil has become one of the most famous, important and prosperous cities in the Middle East.

“The Kurds’ area seems to be an independent country. They deal with other countries and multinational companies without approval from Baghdad,” said Derawee. “Kurdistan has built early business relations with international sides directly, and they made a lot of deals with others independently, including oil exports.”

He believes that “stability is the secret of success,” adding that Kurds had a good opportunity to build a strong economy, while other areas were busy dealing with the chaos that occurred after the invasion.

Kurdistan has an estimated 45 billion barrels of oil as reserves, and it hosts some of the largest oil and gas companies in the world. Observers say Erbil may become one of the richest cities in the region because it attracts huge investments.

Deep poverty

There is deep poverty and an unfair division of wealth in Baghdad and many other cities.

Poverty in Iraq is still over 30 percent overall, but it rises to more than 50 percent in some areas such as al-Muthana, al-Qadesia and Mesan. These figures are unbelievable for a country that produces more than 3 million barrels of oil per day, which is valued at more than $300 million.

“Iraq needs more reforms,” Derawee said. “Sectarianism and militias are the big problems. Some people dominate resources and wealth based on sectarianism. That’s why we see extreme poverty in some areas and extreme wealth in others, even in the same city.”

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