December 22, 2020: Iraq was hoping the IMF (International Monetary Fund) would help bail the government out of its growing budget deficit crises. An IMF audit team completed a ten-day examination of the economic situation on December 10^th and reported that Iraq has the same problems it had for several years, only worse and that the solution was not more multi-billion-dollar loans but internal reforms that address the widespread corruption. Earlier audits had found that corrupt officials were responsible for $400 billion of government funds stolen or misappropriated since 2003.

After 2014 low oil prices and persistent corruption have forced the government to seek foreign loans to maintain essential services (like water, power, sanitation and paying the security forces). That need was made worse because ISIL (Islamic State in Iraq and the Levant) took control of a third of the country in 2014 and it took three years of expensive fighting to regain control of that territory. The only foreign lenders available are international organizations like the World Bank and IMF. The government does not like working with these groups because their loans come with strict conditions that you cannot bribe your way out of. In 2016 the IMF agreed to loan Iraq $5.4 billion over the next three years, and much more in addition to that if the government could meet IMF terms. This included a lot of long-overdue reforms in taxation, cuts in spending and improved transparency, like allowing the IMF and the public see details of government spending. Normally oil-rich states, especially in the Middle East, become corrupt and stay that way because they rarely have to call on the IMF and expose themselves to close scrutiny. In a perverse way there’s a benefit to the low oil prices and the Iraqi financial crises because the IMF can be more effective at enforcing anti-corruption measures than internal pressure. The anti-corruption did not proceed as hoped.

As the IMF reforms were implemented, a growing number of corrupt officials resisted. This usually took the form of indignant politicians accusing the foreign lender of interfering with Iraqi sovereignty and acting no better than an invading army. Most Iraqis won’t go along with this because they realize that even when the Islamic terrorism has been eliminated, there will still be the corruption. That has led to a growing anti-corruption movement. Since late July 2015 thousands of pro-reform Iraqis have been demonstrating in Baghdad and other cities every Friday to encourage the government to take more action against corruption. Those demonstrations continue although their intensity varies over time.

Among the more obvious changes demanded was eliminating thousands of senior level positions in the government that exist mainly to enable politicians to steal. That met a lot of resistance as did efforts to enforce existing laws against corruption. The government initially responded by making some minor changes. The people demanded more, and less corruption in general. Government resistance to actual change is what keeps the demonstrators coming. The people demand more action and these demonstrations were the start of a sustained anti-corruption movement. What makes these demonstrations so effective is that they have the support of the two top Shia clerics; Grand Ayatollah Sistani and the younger, more radical and pro-Iran Ayatollah Sadr. This clerical support makes the demonstrations impossible to ignore but so many top officials are corrupt that it is difficult to get enough of them removed or persuaded to act with more integrity to make a difference. Yet the persistence of the demonstrators has had an impact and each year more officials are prosecuted for corruption. There is still a lot of corruption but there is more risk involved for those to continue stealing.

Corruption has been endemic to this region for thousands of years, but now there is democracy and widespread realization that economic progress is impossible with the current levels of corruption. The problem with corruption is that it is a difficult addiction to quit, especially for those benefitting from it for the first time. Post Saddam democracy meant more corruption because democracy means more people must be involved. The government payroll, long monopolized by the Sunni minority (less than 20 percent of the population), is now monopolized by the Shia majority (60 percent of the population) with as little as possible passed along to the Kurds. The famously inept and obstructive Iraqi civil service has grown from a million under Saddam to over six million now. While eliminating corruption, or just curbing it substantially, would do wonders for economic growth and the quality of government services, it would deprive thousands of politicians of a fortune-making opportunities and seriously cut the income of many affluent Iraqi families.

To put this into perspective, Iraq is one of the 20 most corrupt nations in the world according to recent international surveys that rated 180 nations. Iraq is the 16^th worst and back in 2012 it was in 18^th place. The worst aspect of this is that most Iraqis now know more about how the corruption works and many of the financial details.

Economic Warfare Against Iran

There are several trends in Iraq that are annoying Iran and perhaps the worst of these are growing commercial relationships between Saudi Arabia and Iraq. Such relationships are not unknown but in the past they existed only because Iraq was ruled by its Sunni minority. When the era of Sunni minority rule ended in, 2003 the new Shia government of Iraq initially saw the Saudis as an enemy and the Saudis considered this new Iraqi government a tool of the Iranians. Since 2003 attitudes have changed. The Saudis came to understand the Shia Arab majority in Iraq is more Arab than Shia and the Saudis were willing to live with that. Iran has never been able to win over the Arab Shia, in large part because inside Iran their own Arab minority is despised and mistreated. Always has been and as far as most Araba are concerned, that centuries old attitude is not going to change. Despite that Iran and Iraq have a lot of commercial relationships but even these are being threatened as Iraq does more business with the Gulf Arab states. Even the religious connection has been lost as the most senior Iraqi Shia clerics renounce any loyalty to Iran.

Saudi Arabia and Iran are competing to win the most popular support possible in Iraq. The Saudis are offering billions of dollars’ worth of economic investments, much of it aimed at improving the Shia south and the Shia majority city of Basra. This is the heartland of the Iraqi Shia. Iraqi Shia live throughout the country but most are down south where they are very much the majority. Most Iraqi Shia are dissatisfied with Iraq’s Shia-dominated parliament and government. Lots of government investment has gone to the south and much of it got stolen or pays for sub-standard work. Corrupt Shia politicians were responsible for this and since 2018 there have been anti-corruption demonstrations in the Shia south and Shia neighborhoods in Baghdad.

The Saudis point out that they also have a corruption problem but have learned how to control it and have been reducing the corrosive impact of corruption on their economy. They are obviously successful. In the latest global corruption survey those at the top of the list are all more successful because they have the least corruption. Down at the bottom are the more and most corrupt. The Saudis are at 52 out of 180 while Iraq is 162. The UAE is at 21, ahead of the U.S. at 23 and Israel at 35. Iran is at 146. The Iraqis have been getting more advice and economic assistance (trade and investment) from the Sunni Arab oil states while all they get from Iran is offers of alliance, more Iranian military advisors and threats of violent retaliation if Iraqi politicians do not comply.

Economically, Iran has not got much to offer. Their latest proposal is a military/defense treaty with no Iranian cash attached. These Iranian treaties and aid packages once included generous bribes for key politicians. Since the Americans revived their economic sanctions in 2017 and became the global leader in oil production, Iran had a lot less cash for their foreign subversion efforts. With oil prices down and their exports subject to seizure, there is a lot less cash for terrorism.

Iran still has many thousands of loyal and fanatic Iraqi Shia on their side but three years ago they had a lot more. Iran has not been able to improve the lives of Iraqi Shia and those Iraqis have noticed. It has also been noticed that Iran has been trying to enrich Iranian manufacturers by driving Iraqi competitors out of business. No such threat from the Sunni oil states.

With the pro-Saddam terrorist threat much diminished the Iranians feel they have lost a valuable asset in Iraq. Trying to demonize the Americans never worked very well because U.S. troops took the lead in fighting the Sunni Arab terrorists and still do. Since 2014 most of the American military aid has been from the air, with over 13,000 airstrikes and many more surveillance missions. There are only 3,000 U.S. troops in Iraq right now and the American goal is to get them all out. Despite that Iran continues to insist that the Americans are the Great Satan and a dangerous enemy of Islam. Four decades of preaching that has not reflected well on Iran. This assessment is shared by most Iranians as well.

The September Threat

The U.S. and Iraq are deadlocked over how to move against Iran-backed Iraqi militias. In late September the U.S. threatened to bomb pro-Iran Iraqi militias unless Iraq eliminated the threat first. The American position was that Iran was at war with Americans in Iraq and said so frequently and publicly. All the major Iraqi Shia religious leaders have called for the disbanding of all PMF (Popular Mobilization Forces) militias, in part because Iran was rapidly turning the entire PMF into an Iraqi version of the Lebanese Hezbollah organization called Kataib Hezbollah. Founded in the 1980s with Iranian help, the original Hezbollah still takes orders from Iran and has dominated Lebanese politics for over three decades. Most Lebanese want Hezbollah gone but a heavily armed militia with enormous economic power in Lebanon is difficult to disband. Iraqis want Kataib Hezbollah gone now and cannot understand why their prime minister does not act. Fear probably has a lot to do with the delay. In Lebanon Iran had several senior Lebanese politicians assassinated for being too openly hostile to Hezbollah. The personal danger for the Iraqi prime minister is based on fact, not just speculation.

In response to the American threat against them the Iran-backed militias, especially Kataib Hezbollah, agreed to a temporary halt to attacks against Americans. Not all the pro-Iran factions agreed, but most did and there have been far fewer attacks lately.

The new Iraqi prime minister (Mustafa al Kadhimi) is decidedly hostile to Iran, and calls for easing the Iranians out and not giving them any justification to get more violent. Kadhimi had already ordered the removal of many pro-Iran commanders in the security services and disbanded some units that were dangerously pro-Iran. Kadhimi went to the U.S. in late August to meet with the American leader and discuss improving U.S.-Iraq relations. Such a meeting was important because Kadhimi is the first post-Saddam (2003) prime minister that is not heavily influenced/controlled by Iran.

Iran still has enough loyal (to Iran) Iraqi militias to be a threat to the Iraqi government. Most Iraqi politicians and voters want less Iranian influence. Iran wants fewer foreign troops in Iraq. That is a point of contention because Iraqis realize the foreign troops offer some assurance that Western and Arab states would actively assist Iraq if Iran sought to take control via a civil war or invasion. Civil war is the more likely option, but only in an emergency, such as Iraq appearing to succeed in disbanding all the pro-Iran militias. At the moment Iran is willing to halt all violence by Kataib Hezbollah if the government agrees to have all foreign troops leave Iraq, except for Iranian advisors. This sort of thing is seen by Iraqis as an expression of Iranian contempt for Iraq and confidence that Iran will turn Iraq into another Lebanon.

December 20, 2020: In Baghdad eight rockets were fired into the Green Zone and apparently aimed at the American embassy complex. There was some damage to the embassy and one civilian near the embassy was wounded. One of the rockets was intercepted by the C-RAM anti-missile system and most of the unguided rockets missed the large embassy complex. Iran and pro-Iran Iraqi militias denied responsibility and blamed a rogue faction. It is suspected that this attack was not a rogue faction but an effort by Iran to deceive the Americans. That sort of thing is standard procedure for the Iranians.

At the same time anti-corruption efforts led to arrest of dozens of senior officials belonging to Iran-backed PMF militias. These militias had become and more involved in illegal activities and assumed they were immune from prosecution. It was that way for a while but apparently no longer. Iran is not pleased with this development.

December 18, 2020: In the northwest (Kurdish run Dohuk province) Turkish artillery fired at least fifty 155mm shells across the border into Iraq and said they were aiming for suspected PKK (Turkish Kurdish separatist) forces hiding in several villages near the border. There were also some airstrikes deeper into Iraq, beyond the range of the 155mm shells. In the last week the artillery fire and airstrikes have left at least three civilians dead, along with dozens of PKK members. The civilians have learned to flee their villages when the PKK move in, but not all civilians leave, or get out in time.

December 16, 2020: In the north (Kirkuk province) ISIL set fires at two oil wells. The fires were quickly extinguished and no damage was done.

December 15, 2020: In the northwest (Kurdish run Dohuk province) a Kurdish border post on the Syrian border was attacked by over fifty Syrian YPG Kurdish militiamen. The Syrian Kurds were repulsed and came back the next day and tried again at another part of the border and failed there also

December 14, 2020: In the northwest (Kurdish run Dohuk province) a Kurdish checkpoint on the Syrian border was attacked by Syrian YPG Kurdish militiamen who killed one Iraqi Kurd fighter and then retreated back into Syria.

December 13, 2020: In Baghdad there were five explosions during the night. Four of them were outside closed liquor store and another was at a civilian residence. Another liquor store bomb was discovered and disabled by police before it could go off. In response pro-Iran policemen closed many other liquor stores for bogus “violations. Turkey protested because Turkish manufacturers and wholesalers provided most of the alcoholic beverages for the Iraqi market. Since the campaign against liquor stores began liquor imports from Turkey have fallen 50 percent. This comes at time when there is peak demand because of New Year and Christmas, which is celebrated by many non-Christians in Iraq.

All this was seen as an effort to increase demand for Iranian made methamphetamine pills. Also known as crystal meth or speed this synthetic narcotic is manufactured in Iran and smuggled into Iraq with the help of bribes to Iranian and Iraqi border police and coast guards. Unlike opium and heroin from Afghanistan, meth can be made locally and since 2014 it has become a popular business opportunity for many unemployed but technically adept Iranians. The government initially cracked down, destroying dozens of meth labs each month and executing a growing number of those caught making or distributing the drug. That has not slowed down meth production because meth is cheaper and faster acting than opium and as a stimulant has legitimate uses for people who have to stay alert for long periods at work. The Iranian attitude towards meth changed dramatically in 2017 when the Americans revived economic sanctions because Iran was caught working on nuclear weapons. Soon Iran had a major economic recession and the government has less cash for paying its thousands of pro-Iran Iraqi militiamen. Up to that point not a lot of Iraqis were setting up meth labs and now Iran wanted to keep it that way. Distributing Iranian meth pills in Iraq became a major source of income for Iran-backed militias. Currently about three percent of Iranians are addicted to meth, opium or heroin and Iraq is catching up with that despite, or because of, the growing poverty.

December 10, 2020: In the west (Anbar province) on the Syrian border (Deir Ezzor province) Russian troops and their local 5^th Corps Syrian militia set up a headquarters on the Syrian side near the Al Bukamal crossing into Iraq. This is part of an agreement with Iran to reduce the Iranian presence here and give Israel reason to halt its air attacks. The 5^th Corps Syrian mercenaries began replacing Iraqi, Lebanese, Syrian and Afghan mercenaries working for Iran.

December 9, 2020: In the north (Kirkuk province) ISIL planted two bombs near two different oil wells. The explosions caused some damage and started fires, which were soon extinguished.

December 8, 2020: In the west (Anbar province) ISIL gunmen attacked an army outpost, killing three soldiers and wounding four. The army had recently launched some major search operations seeking to eliminate ISIL camps and safe houses.

December 7, 2020: Another little publicized but important defeat for Iran is the defection of four PMF militias from the pro-Iran coalition to a new coalition that will concentrate on guarding Shia shrines in Iraq. They do this under the guidance of Grand Ayatollah Ali Sistani, the most senior Iraqi Shia cleric. Back in 2019 Sistani announced his support of the demonstrators and their goals of eliminating corruption, especially in the government. In effect Sistani was also supporting the very anti-Iran attitudes of the protestors.

There is another senior Shia cleric, Muqtada al Sadr who is almost as influential as Sistani but it more actively a politician. This puts him at odds with Sistani followers but not with Sistani himself. At least not in public. The two clerics realize that they have tremendous influence in what happens in Iraq and that influence would be greatly diminished if they feuded openly.

December 6, 2020: In the north (Sulaimani Province), anti-government protests turned deadly as one group of unpaid government workers set fires. These protests have been going on since December 2^nd and escalating. These protestors have not been paid since October and that is the status of many government employees. Security forces responded to the arson with gunfire and six protestors died and at least twelve were wounded before the crowd dispersed. One policeman died as well. This payroll crisis is three months old now. It began when the government was not to pay September salaries for most of the eight million recipients of monthly government payments and while some payments were made on the overdue September payments the October payroll is still overdue. This crisis was not a surprise. In June the Finance Ministry warned that the lower oil prices and quarantine restrictions caused by covid19 have made it impossible to meet the monthly payments to 4.5 million government employees, 2.5 million retirees and a million welfare recipients. Because of lower oil prices and lower oil demand the Iraqi GDP has shrunk about eleven percent in 2020 and that meant less of the expected government income was available.

The money was not there and borrowing would not cover the shortfall for long. Pay rates would have to be cut and long-delayed reforms undertaken. This would include eliminating those who were being paid several times, usually fraudulently. For example, a retiree might still have one or more government jobs. The eight million payments were not going to eight million individuals. Many paychecks, no one is sure how many, go to one person, usually a senior official who controls multiple jobs and secretly collects the monthly payments for himself. The armed forces were long considered the worst offender in this area but the Americans introduced biometric IDs when American aid was paying for most of the defense budget. That made it much more difficult to create phantom soldiers. But not impossible and the government is wasting billions of dollars a year paying people who do not exist. Reducing the phantom payroll would be a major political and legal undertaking and it is not a sure thing that the newly elected and selected government could get it done. Another lucrative cost-cutting target is the size of payments for senior officials, including retired ones. These people often get several hundred thousand dollars a year each and over a hundred thousand dollars a month when they retire.

Further north, in the autonomous Kurdish provinces the federal government is also criticized for not paying its bills. In the case of the Kurds, they made a deal with the federal government that they would sell the oil they produce via the Oil Ministry rather than smuggling it out. Selling the oil via the government fetches a higher price but the government has not been paying for the oil because of the overall cash shortage and inability to fulfill the government budget. Iran frustrated at their growing problems with the Americans in Iraq, have sought to strike back by ordering pro-Iran Iraqi politicians to oppose any moves to provide the Kurds with any cash.

November 29, 2020: On the Syria/Iraq border an unidentified UAV used a missile to kill an unnamed senior IRGC (Islamic Revolution Guard Corps) officer whose car was crossing the border after midnight. Three other IRGC men in the vehicle also died. Iran believed Israel was responsible. This “assassination” comes a day after a key Iranian nuclear weapons scientist was ambushed and killed outside the Iranian capital. Iranian officials are openly calling for retaliation but so far have not been able to deliver. This makes the Iranian leadership look weak and that just makes those leaders more determined to make the Israelis and Americans pay for the growing list of successful operations to thwart Iranian efforts in Syria and back in Iran where efforts to build a nuclear weapon plod on.

November 26, 2020: In the west (Anbar province) on the Syrian border (Deir Ezzor province) there was another airstrike against Iranian mercenaries guarding weapons stored near the Al Bukamal crossing into Iraq. This time there were about twenty Iranians and Iranian mercenaries killed. There were also secondary explosions as missiles of ammunition stored there was hit.

November 21, 2020: In eastern Syria (Deir Ezzor province) there was another airstrike against Iranian mercenaries guarding weapons stored near the Al Bukamal crossing into Iraq. There were fifteen deaths of Afghan and Iraqi gunmen working for Iran. The Afghan mercs are more expensive but they are also more effective. Despite the reduction in cash available to support Syria operations, some of the more expensive Afghan mercs are retained while more of the less effective ones were removed from the payroll. Many Afghan Shia have served as Iranian mercenaries in Syria and returned to Afghanistan.

November 17, 2020: An Iran-backed militia fired seven rockets into the Baghdad Green Zone, apparently at the American embassy compound. Three rockets landed in or near the compound but caused no injuries or damage. Another rocket landed in an empty part of the Green Zone while three rockets landed outside the zone, killing a child and wounding five other civilians.