EU and UN initiative far from enough to tackle Iraq’s entrenched corruption

EU and UN initiative far from enough to tackle Iraq’s entrenched corruption

Iraqi President Barham Salih made international headlines when he introduced a new anti-corruption law to Iraq’s parliament this week, not so much for the legislation itself as for Salih’s revelation that an estimated $150 billion in oil revenues have been stolen since the fall of Saddam Hussein in 2003. Salih used the occasion to reiterate a plea for the “formation of an international coalition to fight corruption,” and just one day later, the UN and the European Union’s Iraqi Mission announced a €15 million programme aimed at curbing embezzlement and bolstering transparency in the country’s public sector.

While the timing might have been fortuitous, the sheer scale and pervasiveness of corruption within both the Iraqi central government in Baghdad and the autonomous Kurdistan regional government in Irbil mean this EU/UN programme amounts to little more than a demonstrative gesture. The very governments Europe and the UN are partnering with are responsible for leaving hospitals starved for funding during a pandemic, crushing peaceful anticorruption protests with lethal violence, expropriating European companies attempting to invest in the Iraqi market, and jailing journalists who have met with European diplomats on charges of “spying” for foreign powers.

Amidst a new round of protests in response to the murder of Iraqi anticorruption activists, the message from Iraq’s grassroots, at least, is clear: rooting out endemic corruption will take far more than €15 million, and no serious anticorruption effort can be entrusted to the corrupt government officials themselves.

Iraq’s corruption epidemic

Corruption has fatally undermined the Iraqi state’s ability to function ever since the current cohort of Iraqi elites rose to power nearly 20 years ago. Iraq’s corruption problem is so all-encompassing – with complicity from the uppermost echelons of government and ramifications for everything from oil to healthcare to telecoms – that the country ranked 20th from the bottom on Transparency International’s Corruption Perceptions Index in 2020. Given the experience of ordinary Iraqis forced to pay bribes to find work or deal with a healthcare system driven to near-collapse by corruption, this ranking is hardly surprising.

President Salih’s recent revelation of the billions in lost oil revenues is nonetheless one of the most blatant illustrations of corruption thus far. Iraq’s dependence on its oil industry, which constitutes 60% of its GDP, mean this theft has impacted every other sector of the economy; when oil prices collapsed during the pandemic last year, the Iraqi economy contracted 10.4%. This downturn has encouraged additional corruption: a Deloitte audit conducted in Iraq’s autonomous Kurdistan region revealed that only 29% of oil revenues made it into the public coffers during the first half of 2020.

Other egregious examples of graft have directly led to the loss of innocent life. In April, a devastating fire at Baghdad’s Ibn al-Khatib Hospital killed at least 80 and injured 110 others, with President Salih himself blaming corruption and mismanagement in the healthcare space for the disaster. Iraq’s Health Minister subsequently resigned and a number of other officials were dismissed, but the government’s failure to stop the repeated killings of anticorruption activists in the weeks since has dispelled any hopes of broader accountability. After campaigner Ihab Al Wazni was shot dead in Karbala in early May, another activist, Hisham Al Mashhadani, was recently murdered after declaring he would run in the upcoming elections, becoming the latest of 35 activists killed since the government’s first crackdown on peaceful protests in 2019.

Hundreds have now taken to the streets only to be met with live ammunition from the security forces, leaving one demonstrator dead and over a dozen injured in Baghdad earlier this week.

European interests impacted

Corruption in Iraq does not only have an impact on its own population but has also become a serious concern for any European company or investor still brave enough to test the waters of its market. Two of the most prominent international victims of Iraqi graft are Kuwait logistics firm Agility and French telecoms operator Orange, who together purchased a joint 44% stake in Iraq’s Korek Telecom in 2011 for $810 million. Though the deal at first looked like a promising example of foreign investors buoying the Iraqi economy, Iraq’s telecoms regulator CMC unexpectedly revoked the agreement after just two years – citing failures to meet obligations such as investment targets and network rollout – and confiscated the companies’ investments in what Orange calls out-and-out expropriation.

Leading the legal response, Agility filed a case against the Iraqi government at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in 2017, alleging that Korek’s majority stakeholder Sirwan Barzani – a millionaire military commander in Iraqi Kurdistan and a member of the ruling Barzani family – had orchestrated the expropriation. Despite the evidence put forward by the company in support of its allegations, an ICSID panel composed of attorneys Cavinder Bull, John Beechey, and Sean Murphy failed to consider evidence suggesting the payment of bribes to senior CMC commissioners, before ruling in favour of Iraq and ordering Agility to pay $5.2 million in court damages this past February. The ICSID ruling sets a worrying precedent for France’s Orange, which is now bringing its own case before the global arbitration body, as well as for any other foreign investor who might run afoul of powerful Iraqi politicians in future.

The Orange expropriation is hardly the EU’s only challenge in dealing with Iraqi Kurdistan’s ruling elite. As the Financial Times recently reported, journalists in Kurdistan have been jailed on charges of espionage after speaking with European diplomats, in trials described by Human Rights Watch as “marred by serious violations of fair trial standards as well as high-level political interference”.  While the joint UN and EU programme to curb embezzlement and bolster transparency in the Iraqi public sector seems like a positive step, the disregard shown by Iraqi officials towards Europe suggests the initiative is little more than window dressing.

At least some recent developments in Baghdad suggest scope for improvement. Last month, the country’s Commission on Public Integrity (CPI) issued 58 arrest warrants for officials connected to graft, including cabinet members. This week, Salih’s presentation of a wide-reaching anti-corruption law came alongside a supreme court decision to strip lawmakers of parliamentary immunity.

All the same, the EU should now be able to recognise that its most important partners for challenging corruption in Iraq will not be found in the Iraqi parliament. They are instead protesting in the streets.

Update June 8, 2021:

A spokesperson for Korek has disputed some of the claims made in the article, stating that Korek has had to navigate a difficult business environment caused by ISIS, civil unrest and legal disputes with Orange and Agility.

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