Iraq began 2023 with a newly formed government, after the longest government formation concluded on October 27, 2022. In January, all eyes were on Basra as it hosted the 25th Arabian Gulf Cup. The last time the tournament was played in Iraq was in 1979. Iraq tried to hold the competition multiple times in the last decade, only for it to be postponed due to the circumstances facing the country. Football enthusiasts from across the Gulf came in the thousands, and expressed their surprise at Iraq’s hospitality and security, which was in defiance of the image portrayed over the years by the media. The tournament’s success was topped by the fact that the Iraqi National Team won the tournament for the first time since 1988.
The success of the Gulf Cup was the climax of the Sudani government’s honeymoon period, as Iraq’s struggles with a fluctuating Iraqi dinar quickly brought the government back to reality of the challenges facing the country. The instability of the Iraqi dinar is related to the shortage of USD in the market after the U.S. Treasury took strict measures to tackle the smuggling of USD to Iraq’s neighbours. Not helping the matter is the high inflation rate in Turkey, Syria, and Iran. All of this is made possible through Iraq’s cash-based economy. As a desperate measure, Iraq started to limit the availability of USD by the Central Bank of Iraq, and introduced some measures to de-dollarize Iraq’s economy. Despite changing the governor of the Central Bank and revaluing the Iraqi dinar, there continues to be a discrepancy between the official rate and the market rate. This will continue to be a challenge for the Iraqi government going into 2024. The one positive that has come from this is that Iraq is finally taking measures to digitize its economy and prevent the smuggling of USD to neighbouring states.
Another attempt to stabilize the Iraqi economy was to pass a three year budget, an unprecedented move whose benefits will play out at the start of 2024 where the government will have a budget to manage its spending. Iraq’s political economy is strongly impacted by the budget, and passing a budget law always results in a political crisis, as Iraq has failed to pass a budget many times. While the current budget has its shortcomings, the potential for high energy prices at least in the next three years and fatigue from wrestling over the budget law might have been a strong motivator for this move. What has helped Iraq’s oil-reliant economy are the ongoing conflicts between Russia and Ukraine which keep energy prices relatively high. While unsustainable, Iraq’s economic destiny has been for years tied to global energy prices and at least in the foreseeable future, this will remain the case.
A significant development in 2023 was Iraq winning the case against Turkey at the International Chamber of Commerce’s International Court of Arbitration in Paris which prevents Turkey from importing oil from Iraq’s Kurdistan region without the consent of the federal Iraqi government. This move represents a large milestone in the oil dispute between Baghdad and Erbil. Oil sales from Iraqi Kurdistan are still halted, but going forward this may encourage a more stable arrangement and hopefully end this decade long dispute.
The decision by the court in Paris was also in accordance with the Iraqi Federal Supreme Court’s decision before that, which many claimed was a politicized decision. However, the decision was in line with the Iraqi court which was kept busy even after the government was formed. Most significantly was the Federal Supreme Court’s decision to remove Speaker of Parliament Mohammed Al-Halbousi. A year after the new government was formed, Halbousi was the only one from the “three presidencies” who was able to maintain their position for another term, unlike former Prime Minister Mustafa Al-Kadhimi and former President Barham Salih. Halbousi was removed through a court order that banned him for life from holding a government post. The accusation that led to his indictment was related to corruption and forging documents. While this was important to address and ensure no one is above the law, it will be disappointing if other corrupt politicians are not held to the same account.
While unrelated to his court case, amongst the many issues raised against Halbousi was his ambition to play a wider regional role. He is accused of having opened communication channels with Israel with the intention to normalize relations. He is also rumored of being sympathetic towards plans of relocating displaced Palestinians in western Anbar, in exchange for the Sunni provinces forming an autonomous region and installing him as the leader. Regardless of the accuracy of these rumours, they take a different dimension in the current political atmosphere prevailing in the wider region. Israel’s not so covert plan is to relocate Gazans by force out of occupied Palestine, preferably to Egypt and Jordan. With neither of the two states enthusiastic about this idea, the old-new idea of displacing Palestinians into the western provinces of Iraq to build an independent region resurfaced, financed with the money from Iraq’s phosphate reserves estimated to be worth hundreds of billions of dollars in those areas.
Despite the instability of the Middle East from the war in Palestine, the biggest political challenge that Iraq was able to overcome was a deeper political deadlock related to holding provincial elections. On December 18 Iraqis finally chose their local representatives which has not happened for almost a decade. While being consumed with fighting ISIS was a reasonable justification for not holding provincial elections back in 2017, delaying them had serious consequences for democratization and federalism. With this hurdle overcome, there is hope that the relative stability on the macro-level also spills over to the micro-level as the provincial governments reduce the pressure on the federal level to a certain extent.
2023 also marked twenty years since the invasion of Iraq and the collapse of Saddam’s regime. Since then, Iraq has gone through a myriad of challenges and crises. The only process that remained relatively stable in Iraq’s nascent democracy was the peaceful transfer of power, and even that was challenged by the Sadrist occupation of parliament. The events of late 2022 and 2023 should be reminder of the value of elections and government formation, the precondition of successful democratic development. These events also announce a stronger role by the judiciary in the coming years.
Muhammad Al-Waeli
Muhammad Al-Waeli is an analyst. He comments on issues of authority, policy, and institutions in Iraq. You can follow him on Bluesky: @alwaeli.bsky.social
