Hot Spots: Iraq.(oil reserves)

Four and a half months since Iraqis bravely went to the polls, the country finally has made some meaningful moves toward forming a new government. Parliament confirmed President Jalal Talabani for a second term in office, who then asked the Shi'ite United Iraqi Alliance's (UIA's) Prime Minister-designate Jawad al-Maliki to form a government, after Ibrahim al-Jafaari gave up his bid to hang on to the position he had held since April 2005. Parliament also picked a new Speaker, Mahmoud al-Mashhadani, who is a Sunni and former Army major.

Almost everything now hinges on whether Dr. al-Maliki can forge the national-unity coalition Iraq urgently needs and whether he can make a credible beginning at offering Iraqis security by breaking the power of the militias operating both inside and outside the official security forces. These militias have taken on a life of their own and some have developed a strong interest in preventing the government from restoring its authority. They've mushroomed not only on the Shia side of the sectarian divide, where the largest is the black-shirted "Mahdi army" of the prominent cleric Moqtada al-Sadr, but also on the Sunni side, with militant Islamic Takfiris; the old Ba'athists who want to restore their regime. Unless their grievances are addressed and their confidence in the impartiality of the national police and Army is restored, the slide into internecine violence will continue.

The persistent violence, coupled with the long delay in forming a government with clout, has already had a highly damaging impact on the economy. A number of key sectors have fallen below where they used to operate before the war, such as the pivotal petroleum industry, where rifts have opened up among several political factions seeking to control the Ministry of Oil. Through most of 2004/2005, Iraq managed to keep liftings between 1.8 million and 2.0 million bpd; but late in 2005, production slackened to only 1.66 million bpd, compared to a preinvasion level of 2.5 million bpd. Indications are that output has suffered further since then due to mismanagement, corruption and sabotage; and poor oversight and security concerns have kept electricity, water and sewer services below pre-war levels.

The U.S. and its allies are falling short of their funding pledges: the USD 18.4 billion promised by the U.S. for the rebuilding program was established with a three-year term expiring this Fall. U.S. allies have fulfilled only about USD 3.1-billion worth of the USD 13.6 billion they pledged to provide, and it is unclear if the remainder will materialize. While most contractors have been trying to do their best to perform under trying circumstances, others have been held back by violence that has killed hundreds of them; by sabotage targeting Iraq's oil, electrical, and water infrastructure; by growing numbers of Iraqis and Americans implicated in ...