Iraq’s economy is so riddled with corruption that minor border post jobs are changing hands for as much as $100,000, Iraq’s deputy prime minister, Ali Allawi, has admitted.
In an extraordinarily frank speech about his government’s efforts to introduce reforms, he said there were no quick wins, adding the economy would probably remain in “existential crisis so long as oil does not reach $70 a barrel for a sustained period” and called for cuts in public spending as its revenues fall short.
Allawi said only a tenth of the $8bn due annually to the Iraqi treasury arrived from border customs, in contrast to Jordan, where 97% was received. He said border customs “are riddled with corruption to the point where minor clerks’ jobs in some outposts change there for $50,000 to $100,000 and sometimes it goes up to multiples of that.”
He likened Iraq’s situation to the coming of the dry season at a lake in Africa “where the fish become more frenzied as the oxygen levels reduce […] many of these people did not know how to extract rent from this dwindling pool.”
The new government of Mustafa al-Kadhimi, in which Allawi is also finance minister, came to power in May following extended and sometimes violent street protests. It has introduced a massive economic reform white paper ahead of elections due next year.
Allawi said: “On the assumption that oil prices don’t move up something somewhere has to give – either we follow a sort of Venezuela course and become an oil economy that goes belly up, or we tighten our belts.”
He said “nobody’s going to be for belt-tightening”, but claimed there was a subliminal recognition that things had to change. Current levels of public spending were unsustainable, he said.
“It requires, I must say, that somebody has to say ‘no’ at some point and now, I suppose this has fallen to me to say ‘no’ but you can only say ‘no’, up to a point, or then they will say no to you”.
Allawi said “a lot of the country’s problems are interlocking and whenever there is an issue that requires resolution, there’s bound to be some vested interest, sometimes extremely powerful, that stop this from happening”.
“People say ‘why not go after low hanging fruit’. There really is no such thing as low hanging fruit if the entire environment around you is to a large extent devastated.
Iraq, Opec’s second largest producer, has been struggling to pay public salaries due to dwindling oil revenues as the coronavirus pandemic hits crude prices. In October, the federal government earned only $3.45bn (£2.58bn) in oil export revenues, which is not enough to cover salaries, benefits and other essential expenses.
Iraq has also failed for most of this year to adhere to its OPEC+ quota due to its financial and political struggles.
If Iraq’s Kurdistan region is included, Iraq pumped out 3.842m barrels a day in October, up from September’s 3.6m and exceeding its OPEC+ quota of 3.804m.
Allawi said Iraq’s acceptance of the OPEC model of “one size fits all” – allocating output cuts without taking into account member countries’ economic and political conditions – was close to breaking point, suggesting Iraq may leave the network.
Discussing the role of US troops in Iraq, he said: “In terms of the significance of US presence, it’s moved from being sort of essential to stability to being somewhat ornamental.” The US has 3,000 troops in the country, but the numbers are set to fall to 2,500 in January, before Joe Biden’s inauguration in January.
Iraq’s national security adviser, Qasim Al-Araji, said US policies had pushed armed groups in Iraq to escalate. The killings of the Iraqi militia leader Abu Mahdi al-Muhandis and the leader of the Iranian Quds force, Qassem Suleimani, has “undoubtedly made the situation worse. Iraq has been a victim of these regional conflicts and disputes.”