Questions and Answers - Provisional Transcript
Dr John Chipman
Thank you for your statement. There are a number of people in the audience with business interests in the region, and I would encourage you to ask questions of both our speakers on the economy, and specifically on the situation in Iraq.
Douglas Hurd
I would like to thank Dr Barham Saleh for an open and interesting exposition of the government’s achievements and prospects. He repeatedly spoke of the need to cooperate and integrate, to some extent, with Iraq’s neighbours. Could he describe to us how his government now assesses their day-by-day relationships and dealings with the government of Iran?
Dr Barham Saleh
Our relationship with Iran is very important and requires daily attention and management. We and Iran share a border of 1,400 kilometres, and Iran has had long-standing relationships with many political parties that were in opposition to the Saddam Hussein regime. There is no denying that Iran has influence and ways and means by which it can deal with the situation in Iraq. We emphasise to our neighbours Iran that their long-term investment should be in the stability of Iraq, in supporting Iraqi sovereignty, and in respecting the free will of the Iraqi people. This is the best thing that has happened to this region, including Iran, because Saddam Hussein was not only a threat to the people of Iraq, but also to Iraq’s neighbours, particularly Iran. We have a complex relationship and would like to emphasise the need for cooperation on security and the economy, but based on the notion of non-interference in domestic affairs.
Dr Toby Dodge, Consulting Senior Fellow for the Middle East, IISS
Thank you for a very precise speech. I noticed from the front cover of Al Hayat this morning that oil has closed at $44 per barrel. What are the ramifications of that for the next two Iraqi government budgets? As US troops draw back into their barracks over the next year, you are facing an extremely important electoral cycle, with the provincial elections in January and the nationals in December. How do you see that unfolding over the next 12 months, given the interaction between those, and your call for a political surge?
Dr Barham Saleh
The declining oil price has serious implications for Iraq’s economy because 95% of our revenues are driven by oil. Obviously this is impacting our budget projections and our ability to spend money on vitally needed infrastructure, education and healthcare projects, and in creating employment opportunities. We are somewhat safe for 2009 because we have a surplus from previous years’ budgets, which we have accumulated; this will, I hope, be put to good use in 2009. But, as I said, 2010 will be a problem for us. In the meantime, we need to look seriously at ways of restructuring the oil sector and enhancing oil production because it is not only the declining oil price that is a problem for us; it is also stagnant production rates. This crisis probably offers us an opportunity to focus in a meaningful and serious way to reform the oil sector and open up this sector so that investment can come in and production levels can be enhanced way beyond where we are now. Again, this has serious implications for Iraq, but my hope is that this will give urgency to the need for reform, particularly in the oil sector. There is currently an ongoing debate in cabinet and in the political leadership of the country on this very topic.
Dr John Chipman
Over the last year and a half, there have been a number of oil companies which have concluded agreements directly with the Kurdistan Regional Government (KRG), even in the absence of a national oil law, and there are now other oil companies that are interested in speaking to entities in southern Iraq about direct investments there. Perhaps giving the impression to avoid direct negotiation with authorities in Baghdad, these are companies that are making potentially very serious investment that would ultimately benefit the Iraqi economy. What can you say in the ambiguous legal environment in which these were concluded about the protection that could be proffered to those investors and to those oil companies that have engaged in sometimes this imaginative way with the relevant entities in Iraq?
Dr Barham Saleh
The political leadership of the country is now focused on the issue of the oil law. This has taken too long and Iraq needs clarity on the legal environment and investment environment for oil. This is hurting our industry, which we recognise, and at the moment we have a senior committee led by Vice President Tariq Al-Hashimi and involving key ministers and political players, both from the KRG and the federal government in Baghdad to hopefully bring this oil law to a close. Unfortunately, the debate about these contracts has taken away from the fundamentals of the issue. This has turned into a political issue between the Kurdistan region and other political constituents in the federal government.
The real issue is about how to improve management of the oil sector and how to enhance revenue-earning capacity for Iraq. The bottom line is that five years on from the liberation of Iraq, our oil production rates are still stagnant at approximately 2.5 million barrels. That is definitely not a good statement about how we have pursued the management of the oil sector, whether it is because of politics or the legal environment. Now, with this financial crisis, my hope is that we will be focused on bringing this to a close and provide international investors with clearly defined legal structures and processes by which such contracts could be pursued. The contracts with the KRG are the subject of an intense debate between Baghdad and Erbil, and we hope that these will be resolved before long because they have gone on for far too long, and the country is hurting. We need the money and we need the increased capacity, but on a positive note, there are two oil fields in the north – one in Zakho and one near Kuysanjaq[?] – that are ready. The oil minister Mr Shahristani visited Erbil, and the KRG have agreed to connect these fields to the Iraqi export pipeline to Turkey. Hopefully we can build on this because, at the end of the day, oil is owned by all the people of Iraq; the revenues will have to be shared at the federal level and redistributed to the whole of the Iraqi population without any discrimination. We have some legal and accounting issues that need to be resolved, but I think we have no choice but to resolve them.
Mark Fitzpatrick, Senior Fellow for Non-Proliferation, IISS
If I may shift the focus of the question and ask a question to Mr Hayashi, there were many interesting points in your presentation, but I would like to focus on nuclear energy. You said that Japan supports the development of nuclear energy, as long as countries follow the ‘three Ss’ of safety, security and safeguards, a very reasonable approach. In the United States, there is an issue today about the nuclear cooperation agreement with the United Arab Emirates. There are some members of congress who say that the agreement should be held up until UAE imposes stricter controls on the use of front companies to evade sanctions on Iran. The issue thus is whether nuclear cooperation be used as leverage to pressure countries to put more pressure on Iran. More generally, can countries like Japan do more to encourage Iran to desist in the pursuit of uranium enrichment and plutonium production technologies that have a potential use in nuclear weapons?
Yoshimasa Hayashi
Thank you for your question. What I said about the three Ss are standard, but it is compatible with the International Energy Agency (IEA) and International Atomic Energy Agency (IAEA), so that is really based on the international organisations’ rules. On top of that, if they clear all those standing rules, we are ready to cooperate on the basis of the three Ss, especially in shifting the oil to make new energy, which is very good for the environment, as well. I did not mention this in my speech, but that is consistent with the processes of the IEA and IAEA.
Dr Dana Allin, Senior Fellow for Transatlantic Affairs, IISS
Dr Saleh, for most of the past five years, there has been a passionate debate in the United States about what the effect would be of setting a deadline for the withdrawal of American troops. Just to summarise that very roughly, on the one hand there has been an argument that a foreseeable end to the occupation would help take the wind out of the sails of the insurgency, and also encourage the Iraqi government to take more responsibility. On the other side it has been argued that such a deadline would simply encourage opponents of a peaceful Iraq to wait for the Americans to leave. Now, there is an agreed deadline. Could you say something about what you see as the effect so far, and what you expect the effect to be in the next months?
Dr Barham Saleh
This agreement took place in the context of a change in security dynamics in Iraq, so this was not a timeline to basically take the argument away from ‘the insurgents’. This is done in the context of an increasingly confident Iraqi government, and confident Iraqi security forces that are increasingly assuming the lead in the security inside the country. It was the collective mutual recognition by both the United States and Iraq that within those three years, we Iraqis will be able to assume responsibility for domestic security and to discharge those responsibilities on our own.
That does not mean that we would not need the continuing support of the United States and allies in the years beyond that, but, fundamentally, Iraq will assume the lead. I think that could be heralded as a success for Iraq, a success for the United States, and a success for that mission. This was a mission to liberate Iraq from tyranny and restoring Iraq’s sovereignty; to that effect, I think we can claim success. The next two or three years will be crucial that this will not be seen as a date for terrorists and others to think of regrouping and coming back and attacking Iraq’s security and stability. The challenge will not be easy, but I am confident that we will do it.
Barbara Slavin, Assistant Managing Editor for World and National Security, The Washington Times
How are you managing, with this focus of the United States and others in the international community, on isolating Iran, particularly through the economic sanctions, the Office of Foreign Assets Control (OFAC) regulations, and so on? How is that impacting your own efforts to cooperate in economic terms with Iran? Does it affect banking or the oil industry? Do you get a special dispensation from the United States in order to continue this?
I have another particular question that keeps coming up: what is going to happen with the 3,500 mujahedeen in Camp Ashraf? They have been saying in the United States that they are afraid that they are going to be arrested, that the Americans who are protecting them now will withdraw. What is going to be the status of these people?
Dr Barham Saleh
The short answer to your question is ‘with difficulty’. The management of this relationship with Iran and our neighbours is not easy; it is always complex. Iraq is a member of the United Nations and is bound by the Security Council resolutions, and in conversations with our Iranian neighbours, we have been very clear that we cannot do anything that is not sanctioned by the UN. We are very clear about that. However, we and Iran, we and Turkey, we and our other neighbours have common economic interests, and increasing areas of cooperation in the economic area will be good for Iraqi stability and for the region as a whole. Obviously this has to be pursued within the context of the present UN Security Council resolutions towards Iran, and we have been very clear about that, both in our debates in cabinet, in the decisions that we have taken, and in our own discussions with our Iranian neighbours.
Vis-à-vis Camp Ashraf, obviously this is a difficult situation. Iraq in the last 30-40 years of Saddam’s rule was a source of problems in the region, and many groups found inside of Iraq a refuge and were used by the former regime as tools to destabilise our neighbours. The new Iraq wants to be at peace with itself and its neighbours, so obviously we are very clear and very strict about not allowing our territory to be used by any opposition group against the security of our neighbours. While we emphasise to our neighbours not to interfere in our domestic affairs, we also have to live by that rule, and we have no desire to use any of these groups for any means.
We have international obligations towards those people at Camp Ashraf. The International Committee of the Red Cross (ICRC) is involved, and we are working with them to ensure that the government of Iraq is fully within its obligations to these matters, but by the same token we have been very clear to the residents of Camp Ashraf that no activity is incompatible with their status inside the country, and we do not want them to be yet another complicating factor for our relations with our Iranian neighbours.
Major General (Retd) Mahmoud Irdaisat Director, National Centre for Strategic Studies, King Abdullah Academy for Defence Studies, Royal Jordanian National Defence College
Dr Saleh, you have talked to and asked rightly of your neighbours to cooperate with their Iraqi government economically and with regards to security. You rightly said that you have the right to ask such questions, but looking from the perspective of your neighbours into Iraq, do you think Iraqis themselves need to do more in regard to political parties and factions to cooperate and have more reconciliation within Iraq? We are seeing factions in Iraq fighting over oil revenues, if not oil fields, and everyone is running to strike deals with others over the oil fields. How are your neighbours going to cooperate with a country which looks as divided as it does? Do you think you have to do more within Iraq to convince others to cooperate economically and on security?
Dr Barham Saleh
I acknowledge that we, as Iraqis, have political problems and we have underlying issues that need to be resolved. We are not shy about it. We have an open political process in Iraq. If you look at our parliamentary debates, which are televised live, you will see what I am talking about. For some of our neighbours to use this as a pretext to be judgmental about Iraq, I do not want to get into a debate with some of those voices who are being judgmental about our political process. This could be used another way. I do not have a desire for it. Our priority is with Iraq. Our priority is to stabilise our country. It is in the interests of our country to see Iraq integrated into the region. It is also in the interests of the region to have Iraq integrated. For those who want to view Iraq in the way that you have just mentioned, I remind them of the last 35 years under Saddam Hussein’s rule. Was that a stable order in Iraq? Was that a united country? Was that a source of stability and prosperity for the region?
Saddam’s Iraq was the cause of so many problems, not just for Iraqis but for the entire region. The region has no option but to embrace the new Iraq. The new Iraq is not perfect, however. If there is another country in this region that is perfect, please let us know so that we can emulate it. We are acknowledging our imperfections, but we have a process that can deal with these problems. This new Iraq is a reality. It is a fact. It has to be dealt with. This new Iraq and the rest of the region have a binding common interest to defeat al-Qaeda and terrorism, to harness the economic potential of Iraq and the entire region, and to make sure that the people of this region benefit from our resources as opposed to squandering the resources on conflict and rivalry as we have done under Saddam Hussein’s regime. This should be the framework through which you view Iraq. I think there is much to be celebrated about the new Iraq compared to what we were, not just in Iraq but the region as a whole, under Saddam Hussein. Let us not forget that historical context. It is very important.
Nadia Bilbassy Charters, MBC Television
Mr Barham, you just said that Iraq should be viewed as an opportunity and not as a problem. There is a perception – or perhaps a criticism – that there are no national projects in Iraq and that all of the projects are implemented on sectarian ground. Can you correct this or comment on it? Secondly, how do you assure the investors from the region and the world that Iraq is safe enough for their investments in the long term?
Dr Barham Saleh
The Iraqi ‘National Project’ is a work in progress. The era where the supreme leader of Iraq will define the national project of Iraq is over. This brings with it a healthy and lively debate about national identity and what type of Iraq we want. There is sectarianism in Iraq. There is ethnic nationalism in Iraq. This is true. Much of this is a legacy of the past. Parts of it are reflections of the political polarisation that has been part of the transition in Iraq over the last five years.
As I said earlier, when the debate on the security pact and the Strategic Framework Agreement with the US was debated in Parliament, it was quite remarkable. The Parliamentary majority that voted for this transcended ethnic and sectarian lines. There were Shias who opposed the deal; there were Sunnis who opposed the deal; there were some Kurds who were not happy with the deal either. The political majority that emerged spoke of ‘Iraqi national interests’ and they voted for this in an open and democratic process.
I can tell you that there are many, many situations in which this notion of national unity emerges in very clear forms. The fight against al-Qaeda was not a sectarian fight. It was Sunni tribes in Al Anbar who took on al-Qaeda, supported by a Shia-led government, and supported by the coalition forces. There was a bombing in Kirkuk two days ago in which Kurds were killed, Turkomans were killed, and Arabs were killed. The community leaders have come together and are trying to find the common ground against these terrorists.
I come from Baghdad. We have problems and we are not shy about talking about our problems. There is polarisation in our society. There are sectarian parties that are pushing sectarian agenda. There are ethnic parties that are pushing an ethnic agenda. However, out of the difficulties of the last five years, out of the ashes of 35 years of tyranny, there is something that is emerging: Kurds, Arabs, Shias and Sunnis are working together. Regrettably, it is not often reflected in the media as much as we would like it to be.
As I was coming to Manama yesterday, I was in the lounge at Baghdad Airport watching television images of Zawra Park. People were celebrating Eid. It was a normal Eid in Baghdad. Thousands upon thousands of families were celebrating Eid. That image should be on every television screen so that people can see the changing realities of Iraq. Iraq is not only defined by the car bombs and the terrorist onslaught.
I am not saying that the road ahead is easy. We still have many challenges, political and security challenges. However, the contrast between where we are today and where we were two years ago – and definitely where we were under Saddam’s rule – is huge. It is sometimes uncomfortable because some people predicted that this change would mean chaos, a division of Iraq, even the end of Iraq. I do not believe it. We have difficulties, but a new Iraq is emerging that is confident of itself. People are searching for the definition of their national identity and this is a very healthy debate.
On the issue of investment, I believe investors will have to make the choice. Obviously the security environment in Baghdad is not what you have in Manama. I am not saying that. Investors will have to assess the risks and the opportunities. Iraq is a virgin market. Iraq will be the largest market in the whole of the Middle East, possibly the largest ever emerging market, because there is nothing that is not needed in Iraq, whether it is in infrastructure, services, or anything. As I explained, the situation in Kurdistan, which has been secure, has attracted many investors. It has created amazing economic activity. Areas in southern Iraq, such as in Basra, are attracting investors. Areas in Al Anbar, which is now secure, are attracting many investors. I believe Iraq is ready for business. There are security risks, but these are mitigated by the huge opportunities and rewards that are available.
Tadashi Maeda
I would like to thank both speakers for excellent remarks. I have one question for Dr Saleh, in terms of the oil policies. You underscored the importance of inviting foreign direct investment to the upstream investment in oil fields. This is truly important. However, more concerted action is necessary for the development of the entire oil sectors, for example, in transportation logistics downstream.
Iran is exporting crude oil, but importing gas due to lack of the capacity of refineries. They are harmonising the investment to the upstream, midstream and downstream. In this regard, what is your government planning in terms of a more harmonised approach?
I have a supplementary comment to the question of Mark Fitzpatrick on nuclear issues. Japan has been more proactively engaged in the potential of the countries who have introduced nuclear power generation. For example, in the case of Vietnam, the Japanese Government and private sectors have been engaged in terms of providing technical assistance to the country for the secure and safe operations of the nuclear power generations. These are my supplementary comments.
Dr Barham Saleh
I acknowledge that we need a more comprehensive harmonised policy on oil, both upstream and downstream. I am also willing to acknowledge that, certainly last year and the year before, we added revenues because of the higher oil prices, but also our ability to spend money was limited. General Petraeus is here. He remembers the many debates about it. It was because of the security, but also because of bureaucratic inertia and outdated regulations. The ability of the government to spend money has now increased significantly from 26% of our investment budget in 2006 to what we expect this year to be 85% of our investment budget allocation. This is a huge difference. As I said, we had a windfall of new revenues because of the higher prices. Therefore, the incentive for the harmonisation and the reforms that you are talking about were not as great.
Some of us have lost the battle in Cabinet about the need for a more open and aggressive investment strategy in the oil sector. Because of this financial crisis and because of the implications for 2009 and 2010, we may be obliged to review this situation again. We now have a committee that has been tasked to look at the management of the oil sector. It is a committee that has been set up with experts to look at the data and the reality of the ground, and to come up with strategies. Personally – and I want to underline that this is my view and not government policy – I believe that we need a much more open investment environment. We need the technology, the know-how, and we need the investment that will come with major companies to harness Iraq’s huge oil potential.
Investment downstream is also definitely needed. Our concern is that many of these companies are mostly interested in the upstream investment, although some Japanese companies have an integrated plan of investment upstream and downstream. In this context, I want to commend our allies and our partners in Japan for having economic assistance and help to Iraq very much in the forefront, by providing concessionary loans and technical assistance. We are now in the process of organising a major Iraq/Japan business forum inside Iraq. We intend to do this with a number of our partners, in Europe, the US and in Japan.
Baria Alamuddin, Al Hayat
Dr Saleh, I would like to share with you your optimism on Iraq. I am sure everyone in the room wishes Iraq well and welcomes the country back to the Arab fold. However, as Secretary Gates has said, you do agree that there is an obvious meddling by Iran in the affairs of Iraq in many ways. I wonder if you could share with us your thoughts on that. What is the Iraqi Government doing in this area?
Dr Barham Saleh
On the issue of optimism and pessimism, often my colleagues in government accuse me of being a pessimist in Baghdad. I hope that I have provided you with a realistic assessment of Iraq today in terms of the challenges, but also we need to recognise the achievements. Remarkable achievements have taken place. The prospects for Iraq are good. If you look at the larger context, in terms of where we were five years, the prospects, opportunities and the potential that we can all envisage now are all because of the change in Iraq. It has been messy, difficult, and problematic. This is true. Still, we are moving along and we are making it. I am sure there will be setbacks. Putting together a democratic process in the heart of the Islamic Middle East – in all places in Iraq, where Islamism, democracy, Shia, Kurds, Iran, the US, Arabs, Turks collide together – is not easy. However, considering that context and the journey we have come through, it has been remarkable. It is a testament to the resilience of the people of Iraq who rejected terrorism, who rejected extremism, and who rejected civil war.
Al-Qaeda and Zarkawi pushed this country to the limit with the strategy of instigating a sectarian war. There is no civil war in Kirkuk, which was deemed to be the flashpoint for a Kurd-Arab civil war on the eve of the war five years ago. The communities still talk among themselves about ways forward. Nobody is satisfied, but nobody is resorting to armed conflict to settle the issues. These need to be understood in context.
Coming back to the Iran issue, I am a neighbour to Iran and I have a vital stake in making sure that our relation with Iran are stable, good neighbourly, and based on a non-interference in domestic affairs. We have been very clear to our neighbours in Iran that they were beneficiaries of the removal of Saddam Hussein. They are beneficiaries of the new political order of Iraq because the new political order wants to be at peace with itself and at peace with its neighbours. We do not want to go back to a state of conflict of state and war with Iran. Enough. We do not want to pay for others for the conflicts and rivalries. We want to be at peace in Iraq.
Our neighbours in Iran also need to understand that respecting Iraqi sovereignty and not interfering in our affairs are in their strategic interest. We do have issues with our Iranian neighbours. I have to remember that I am an official of the Iraqi Government. I have to pursue these debates in private meetings and in official meetings, as opposed to in a live plenary session.
Ambassador Khaled Al Duwaisan, Kuwait
I think my question was asked by the lady from MBC Television, but I will put forward a different perspective to the Deputy Prime Minister of Iraq. Dr Barham Saleh, as you said, the security risk is very high. We see now that it is quiet in the north. In the middle, after the surge, it is getting better. In the south, the British have handed over the security situation to the Iraqi Government. Now that you are encouraging investments in Iraq, do you have a plan or a policy, as a government, to protect all of those investors, whether they are private investors or the government? Can you elaborate on this situation, especially in terms of the south region or the middle region?
Dr Barham Saleh
I would not consider, at this moment, that the security risk is that high. There are security risks to any investment, whether it is in Iraq or Bahrain or one of these countries here. We have issues of security. The Government is taking serious action in this regard in terms of protecting investors. As an example, we recently turned the Rashid Garrison in Baghdad – that was the largest military garrison – over to investors. We have had public bidding rounds where major investors from the Gulf participated. We hope that this will be decided soon and that the contracts will be awarded to develop one of the largest areas of Baghdad for residential and commercial projects. The Government will be providing the security needed for the investor winning that contract. The same applies to Al Anbar, Basra, Kurdistan, and so on. Investors who are serious about their investments and who want to work in Iraq can be assured that the Government will do what it can to provide the security that is needed.
Dr Frederick Kagan
Dr Barham Saleh, thank you for your comments. I would like to congratulate the Iraqi people on their remarkable accomplishments, and also express my gratitude – and the gratitude of many Americans – to the Iraqi people for their sacrifices in our common cause. As Iraq enters a year of extremely important elections, I would be interested to know if you were satisfied with the preparations and provisions that have been made to ensure that these elections, especially the provincial elections, will be secure and will be seen to be legitimate, transparent, free and fair for all political parties and not just whichever political party happens to predominate in any given area.
Dr Barham Saleh
It is a major concern. Many of the political parties are already making noises and demanding assurances that the elections will be free and fair. We have an independent election commission. The UN is also involved. The fact of the matter is that these elections will be taking place in full view of the world. The world media, NGOs and the coalition that is still there will be watching. I do not think that any party will be able to basically rig the election as happens in other cases around this part of the world. However, will it be 100% free and fair? I hope it will be, but I am sure that, in certain locales and in certain situations, there will be manipulations. We in the Government, the Judiciary, the Election Committee, and the UN will all be tasked to making sure that this is free and fair.
Interestingly, the local elections have already started in earnest. Although other countries would view this as secondary, these are turning into major and intense political battles between various entities in Southern Iraq and the Sunni areas of Iraq that could not take part in the previous elections. This time, many Sunnis will participate in the elections. I hope that this will mean greater buy-in to the new emergent reality and political order of Iraq.
Dr John Chipman
As there are no further questions, I would like to thank the Deputy Prime Minister, Barham Saleh, and Councillor Yoshimasa Hayashi for their presentations and their engagements with the audience. Thank you very much.