Iraq: July 2024 Update


July 7, 2024: Years of peace and rising oil income and produced a residential construction boom in Iraq. Current GDP is $224 billion and is expected to total $277 billion for all of 2024. Oil sales could be higher but are restricted because of production quotas set by OPEC (Organization of the Petroleum Exporting Countries). Unemployment is high and that causes unrest. The reason for the high unemployment is employer preference for Arab workers imported from other countries. There are currently over a million foreign workers and they are more efficient, reliable, and work harder than Iraqis. Iraqi workers cannot be compelled to work as efficiently as foreign Arabs and many employers prefer the foreigners. Iraq tried to outlaw the importation of more effective foreign workers if there are complaints from qualified unemployed Iraqis available.

This importation of foreign workers is common in Middle Eastern Arab oil states. Many of these foreigners are Palestinians, who avoid politics and concentrate on their work to maintain their high standard of living in a foreign country.

Meanwhile, relations with neighboring Iran continue to be troublesome. Iran is losing influence inside Iraq. This is mainly because Iran is ruled by a religious dictatorship that condones aggressive interference in neighboring countries. Iraq has long been the main recipient of this meddling as Iran has long sought more economic and political influence there. This is made easier by Iraq’s internal problems from corruption. Historically what is now known as Iraq was seen as the most corrupt region in the Middle East, if not the world. Despite that, a growing number of formerly pro-Iran Iraqis have changed their minds. The current Iranian government has been an economic, diplomatic and military disaster for Iran.

Few Iraqis want to emulate Iran and this now includes Iraqi members of pro-Iran militias. To encourage and maintain these pro-Iran attitudes, the Iranians supplied militiamen with weapons and regular cash payments. Growing economic problems inside Iran has reduced the money needed to keep those Iraqi militiamen loyal so they aren’t. Iraqis were also put off by the brutality Iran used to suppress the hijab protests that began nearly a year ago and only began to diminish earlier this year.

Iranians are angry about continued economic problems and increased economic sanctions imposed on Iran because of its support for Russia in the Ukraine War and continued heavy spending to support Iranian violence in Syria and Iraq. Most Iranian troublemaking has been in Syria though that has shifted to Yemen where its Houthi proxies are blockading the Suez Canal.

The situation in Iraq is more difficult for Iran because the obvious targets are the American troops still in Iraq and foreigners in general. Iraqis appreciate the American presence because it is mainly about going after Islamic terrorists and Iran-sponsored violence. Another important difference is that Iraq is undergoing reconstruction. There are no economic sanctions om Iraq and the oil revenue is being spent on projects inside the country. This provides jobs and other benefits for Iraqis. Iranian-sponsored violence is not appreciated.

In the Persian Gulf, the United States sent more F-16 and F-35 fighters to join the F-22s and A-10s already there. These aircraft are needed to deal with Iranian attempts to seize commercial ships in the Gulf and outside the Gulf’s entrance. Iran considers these seizures as compensation for the economic sanctions imposed on Iran. Earlier in 2023 Iran succeeded in seizing two ships. Since then, the United States has reinforced its naval and air forces in the Persian Gulf and adjacent Gulf of Oman. This has prevented any more seizures but has not stopped Iranian attempts using their ships or helicopters to hand armed men on the tanker deck.

Smuggling ships are still liable to seizure by the Iranians because these ships cannot make a distress call without risking seizure by their rescuers. The smuggling ships tend to be private operations by criminal organizations. Iranian forces have been going after commercial ships more since 2021 but that slowed to nearly nothing in 2024 given increased American air force prescence. In 2023 the seizure attempts often involved violence or a realistic threat of violence. The Iranians have escalated like this before and Western nations have learned to respond quickly and shoot back. Jet warplanes are the quickest way to respond and the Iranian air force has nothing to deal with this. Russia was supposed to send 30 or more Su-35 fighters to Iran in payment for weapons and munitions Iran has sent to Russian forces in Ukraine. As of 2024 none of these Su-35s has arrived. It is unclear why Russia has not delivered the Su-35s yet. Iran is one of Russia’s few allies and they would use the Su-35s in the Gulf.

Iran has supplied Russia with more and more military equipment, weapons and munitions for use in Ukraine. These sales have included Iranian-made Mohajer-6 UAVs (Unmanned Aerial Vehicles). Since 2021 Iran has been offering Mohajer-6 to potential export customers seeking a reasonably priced armed UAV. Mohajer-6 is similar to older Israeli Heron UAVs but equipped to carry four small laser-guided missiles or smart (GPS guided) bombs. The Mohajer line of UAVs first appeared in the 1990s and were crude by comparison with Western, especially Israeli and American, UAVs. Iran could not initially find foreign customers willing to buy these early models but they were eventually accepted and used by a few foreigners, mostly Iranian proxies, for use against Israel and other enemies of Iran. Mohajer-6 was different and Iran sought to present this UAV as a cheaper alternative to Chinese armed-UAVS. Russia bought thousands of Mohajer-6s for use against Ukraine.

Iran also continues to deplete its artillery ammunition inventory in order to supply Russia. The latest deal involves 14,000 152mm shells for D20 towed howitzers, 10,000 high-explosive shells for T-72 tank guns as well as two replacement barrels for the T-72 tank and two replacement barrels for the 122mm D30 towed howitzers. These guns and ammo are sold to Russia, and not at a discount. Russia needs more artillery and shells for its big guns. Iran is one of the few foreign suppliers available to Russia.

The corruption by the clerics who run, or just support, the government has grown as the economic problems most Iranians must endure have increased. The clergy have become more blatant with their corrupt practices. This is made possible by putting clergy in charge of many economic activities and charitable organizations. Clergy now often do their stealing openly and without apology. The religious dictatorship still has the support of its IRGC (Islamic Revolutionary Guard Corps). Ayatollah Khamenei is the senior cleric on the Guardians Council that is the final authority in the government. Twelve senior clerics on the council have ruled Iran since the 1980s. Tenure on the council is for life. Iran is also a democracy, but the Guardians Council decides who can, or cannot, run for office. The elected officials run the government and pass laws that regulate the government and economy. The IRGC was created to protect the Guardians Council from internal and external threats. Earlier in 2023 the council met with IRGC commanders to discuss accusations of mismanagement in the government, the poor state of the economy and growing shortages of cash for the IRGC to operate and support foreign operations. The IRGC saw corruption as the main reason for the poor state of the economy and growing discontent among Iranians.

Weeks after this meeting there were calls for a national referendum on whether to maintain the Islamic Republic and the Guardians Council dictatorship. An alternative solution would be the Guardians Council agreeing to adopt a new constitution that would satisfy enough Iranians to avoid a civil war. Many Iranian leaders believe that an uprising is possible if the religious dictatorship does nothing or tries to suppress this movement with violence. That kind of suppression is not as convincing as in the past and members of the religious establishment and some IRGC leaders openly express concern that an uprising is possible and whoever wins, Iran loses. So far, a majority of the Guardians Council opposes any concessions. IRGC leaders are also less eager to oppose any concessions. Many IRGC leaders are closer to the protests and have a better sense of how angry Iranians are and how far most Iranians are willing to go. The IRGC is not large enough to take on most Iranians and many individual IRGC men are not willing to slaughter a lot of fellow Iranians to keep corrupt religious and IRGC leaders in power. The senior IRGC commanders are more belligerent in their support of whatever the Guardians Council wants and threaten those who openly oppose the Guardians Council with violent retribution.

In the north (Gilan province) the lifestyle police tried to enforce a new, stricter hijab law by arresting three women who were out in public without the mandatory hijab hair covering. A crowd promptly formed and prevented the arrests. Most Iranians are not intimidated by the brutality their government used to suppress the hijab protests that began in September 2022 and only began to diminish in early 2023, largely because the government had jailed thousands of protestors and executed a few. Iranians are angry about continued economic problems and increased economic sanctions imposed on Iran because of its support for Russia in the Ukraine War and continued heavy spending to support Iranian violence in Syria and Iraq. Most of the Iranian troublemaking is in Syria while some of it is at home where the government, a religious dictatorship, puts a priority on forcing women to cover their hair in public. The government revived the use of the lifestyle or morality police and that did not provide the reaction the government hoped for. Iranians are increasingly hostile towards and resistant to government intimidation efforts.

The economic situation keeps getting worse. While the government admits to an inflation rate of about 50 percent, most Iranians consider that unrealistic because many Iranians keep track of prices and know that many food items have doubled in price over the last year. The real inflation rate is closer to 60 percent and rising. Most Iranians no longer trust the government when it comes to improving the economy. That means many Iranians seek to obtain dollars for their savings and major purposes. The dollar is far more stable than the Iranian rial. The declining value of the rial and increase in prices is a major factor in the growing poverty rate. At the start of 2022 more than half the population was visibly living below the poverty line, even though the official poverty rate was about 40 percent. A year later the poverty rate is over 50 percent.

Inflation recently destroyed the Iranian currency. For example, in 2019 it cost 120,000 rials to buy a dollar. That led to a new currency, the toman, whose initial exchange rate was 12 toman to the dollar. The toman was the name for a prior Iranian currency which was replaced in 1925 with the rial. The revival of the toman was necessary because people needed too many rials to purchase basic goods. The rial exchange rate immediately declined too. In 2020 you need over 26 tomans to buy a dollar. By 2023 it costs 55 toman and despite strenuous efforts the government cannot reduce that rate and keep it low. The government spent a lot of dollars trying to reduce the exchange and seemed to succeed in November but the Americans increased restrictions on dollars headed for Iran and the Iranian efforts could not handle that.

The current foreign exchange crisis is largely due to exporters of non-oil goods keeping about half the money they receive in banks outside the country. That was in response to government efforts to enforce a fixed exchange rate that made life worse for businesses and consumers. Avoiding that is a good business decision because that money is safer from government corruption if it is kept in foreign banks. Many Iranians with jobs prefer to keep their savings in dollars, even if that is illegal and local banks cannot be used. Because of their corruption and economic incompetence, the religious dictatorship feels more threatened by their subjects than by any external threat.

Iran has agreed to create electricity transmission networks built through Azerbaijan to Russia. This link enables Russia and Iran to export surplus electricity to each other. Peak consumption for Russia occurs in the winter, while peak consumption for Iran occurs in the summer.

In 2023 Israel accused Iran of attempting to carry out an attack on the Israeli embassy in Baku, the Azerbaijan capital. For years Iran has been attempting to arrange attacks on Israeli embassies worldwide, but particularly in the Middle East. It wasn’t until 2022 that Iranian neighbor Azerbaijan finally decided to open an embassy in Israel. This came after three decades of increasing economic and military cooperation. Azerbaijan is an oil-rich Moslem majority nation that was, until 1991, part of the Soviet Union. Azerbaijan has purchased several billion dollars’ worth of weapons from Israel since independence, and recently successfully used them in a territorial dispute with its Armenian neighbor.

During 2023 Russia agreed with its Arab Gulf State allies that the UAE is justified in disputing ownership of three islands in the Persian Gulf that are currently occupied by Iran. Russia has sought to maintain good relations with Iran and the Arab Gulf states, so openly choosing sides in the three islands dispute proved to be a mistake. For over fifty years Iran has defended its possession of three disputed islands in the Persian Gulf. The United Arab Emirates (UAE) persists in disputing possession of three islands (Greater Tunb, Lesser Tunb and Abu Musa), which Iran seized by force in 1971, and refuses to give back. Iran ignores the fact that Arabs live on the islands and would rather be ruled by Arabs.

A few percent of Iranians are Arabs and they are not treated well. This annoys Arabs in general, but also makes it clear that Iran does not fear Arabs and continues to strive for domination of the Moslem world. Most Arabs see this as blasphemous because Iran is run by Shia clerics, a Moslem sect considered heretical by many Sunnis. Some 80 percent of Moslems are Sunni, and the Arabs running Saudi Arabia are extremely Sunni. By making some provocative statements about the disputed islands, a media storm was generated in the Arab world, blocking out discussion of anything else Iran is doing, for a while anyway. Basing more patrol boats on the disputed islands provides more targets in the event of a war over the islands. The Arab states on the west coast of the Gulf have been able to build up a much stronger air force that Iran possesses, but Arabs still fear Iran because the Iranians have been beating Arabs in battle for thousands of years. Reputation and track record does count for something.

The Ukraine War has caused most NATO nations, including the United States, to concentrate on what is going on in Ukraine, often at the expense of commitments elsewhere. This is particularly important in the Persian Gulf, which contains nearly half the world's known oil reserves and produces 30 percent of its oil exports. The importance of this oil to the world led in 2019 to the formation of the IMSC (International Maritime Security Construct), a military coalition of nations currently taking part in, or planning to take part in, patrolling the Gulf and its approaches with warships and maritime patrol aircraft to discourage Iranian attacks on ships. The commanders of IMSC have so far been British. Before the UAE (United Arab Emirates) left the IMSC in early 2023, the members were Albania, Bahrain, Britain, Estonia, Lithuania, Romania, Saudi Arabia, United Arab Emirates, United States and Seychelles. Australia was a member but left in late 2020.

The UAE has long been the most active Gulf nation when it came to dealing with Iranian aggression. This extended to Yemen, where an Iran-backed civil war between the Shia and Sunni Yemenis has raged since 2014. The UAE intervention played a major role in forcing Iran to admit it was behind the Shia uprising and smuggling weapons to them. Forces now part of IMSC have long been looking for smugglers and armed outlaws in the Persian Gulf. While there have been a few Islamic terrorist attacks, the major troublemaker has been Iran. The Shia religious dictatorship that has ruled Iran since the 1980s believes Iran should control what it goes on in the Gulf, especially when it comes to oil and natural gas exports.




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