The Iraqi economy faces two key challenges. The first involves identifying the country's oil output by 2020. Will it reach the 12 million barrels per day mark, as the statements of government officials repeatedly claim, based on contracts signed with international oil companies? Or will Iraq's output not exceed 6 million barrels per day, as the recent report of the International Energy Agency (IEA) stresses, relying on sources including senior Iraqi oil officials? Regardless of the potential for increasing Iraqi oil output, so that the country may take its natural place in the global oil industry as the owner of the world's second largest oil reserves, high oil revenues will bring massive damage to Iraq, in light of the continuing lack of transparency in the country and the chronic culture of corruption. The second economic challenge for Iraq comes to light following the decisions made by Prime Minister Nuri al-Maliki, who sacked the central bank governor Sinan al-Shabibi, ordered his detention without trial, and then appointed another in his place. Ali al-Dabbagh, a government spokesman, issued a long statement justifying Maliki's move. He said, “The approval [by the cabinet] of the recommendations of the Commission studying the fluctuation of the exchange rate of the Iraqi dinar came out of the government's keenness on addressing this issue. The fluctuations are the result of the lack of regulation over currency imports, poor utilization of currency purchasing, and loose regulation by the Iraqi central bank over currency auctions, sale of dollars to the private sector and cash flow out of Iraq. [Fluctuations are also the result of] international sanctions on Syria and Iran, particularly as a result of measures related to the boycott of the Syrian and Iranian central banks, which led to a major devaluation of their currencies." This accusation by the head of the executive branch raised concerns among economists, who fear that the prime minister may attempt to meddle in the policies of the central bank and seize control of the state's monetary reserves, as though they are at the disposal of the executive branch or part of the funds that the latter controls. This is contrary to norms in place in all countries, where the central bank is an independent body that the executive branch may not intervene in its affairs. Indeed, the governor of the central bank reports to the board of directors of the bank, and not to the prime minister. When it comes to the oil challenge, the danger lies in the fact that the information on Iraqi productive capacity is coming from official Iraqi sources, with a difference existing between what is being disclosed officially and what is being said to specialized international agencies. This difference mainly involves the level of optimism – or pessimism – over the future performance of the sector, and the prospects for completing agreed projects on schedule. Will it be possible, for example, to complete projects for exports, pipelines, water pumping stations (especially in the south) and pump installation on time? There are also differences over the definition of what constitutes the Iraqi productive capacity. Is it only measured from the fields being developed by international companies in agreement with the Iraqi oil ministry, or does it also include the fields developed by national oil companies? Furthermore, does it include the oil output of Iraqi Kurdistan? Indeed, there is a big debate about whether Kurdistan will remain part of Iraq, in light of the escalating disputes with Baghdad. If we assume that the Kurdistan region will remain part of Iraq by the end of this decade, then what guarantees are there that its oil production will be part of Iraq's output? Will Kurdistan's production be marketed internationally by the Iraqi government (through the State Oil Marketing Organization (SOMO)), or will the Kurdistan region, as its oil minister said, export its oil directly to Turkey, “whether Baghdad agrees or not"? The second and more important danger concerns the benefit of oil revenues should rampant corruption continue to plague the country, from the most senior elements of the state to the most junior, as statements made by MPs reveal on a near daily basis. Will the future of Iraq resemble Nigeria's future, Africa's top oil producer, where poverty and underdevelopment is endemic, despite its current oil output of 2.5 million barrels per day? To be sure, corruption in Nigeria, especially in the oil sector, according to the Minister of Finance Ngozi Okonjo - Oyuela, costs about $ 40 million per day, or about $ 15 billion annually. So can a modern democratic state be built where corruption reaches such levels? Maliki's accusation of Shabibi and sacking him in the manner that followed clearly indicates that Iraqi financial institutions have lost their independence. For one thing, the accusation was made by the executive branch rather than the judiciary, despite the fact that the accused is the governor of the central bank, whose function, among other things, is to maintain the country's financial reserves, and determine the exchange value of the Iraqi dinar. It is clear that the prime minister considers the funds kept by the central bank a part of the state's funds that must be under his control (on par with the state budget). Since he is the prime minister, the commander of the armed forces and the person responsible for the country's security, he believes that he has the right to control these funds because they belong to Iraq, and because he is the first and final person responsible for the citizens and the country's wealth. Concerning the charges of corruption made against the governor of the central bank, I hope that the prime minister will excuse us if we do not believe them, because they were not issued by any particular court. A decision of this kind issued in this manner is in truth an insult to Iraq, and not only to the governor of the central bank. Indeed, this is not the way modern states deal with central bank officials. For these reasons, there is no escaping being pessimistic about the fate of the additional billions of dollars in oil revenues Iraq is expected to receive in the coming years. Here, the widespread fear among the Arab public is ever more relevant, as embodied in the following question: Is oil a blessing or a curse? * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
