How Iraq Continues To Trick Washington

Back in 2020, a senior Washington-based lawyer who has long worked closely with the U.S. Treasury Department exclusively told OilPrice.com that: “Just like Pakistan was with Al Qaeda and us, we know the Iraqis are lying about Iran, but we still have to give them cookies when they visit”. Cookies were presumably in abundance as Iraq’s latest prime minister, Mohammed Al Sudani, rocked up to the White House last week, along with the ministers of oil, finance, trade, and electricity, the president of the central bank, and five assorted businessmen. Officially, they came to discuss bilateral security, trade, economic, and energy issues, and broader security concerns connected to the region. Unofficially, as a senior source who works closely with Iraq’s Oil Ministry exclusively put it to OilPrice.com: “It was to promise a reduction in imports of gas and electricity from Iran, and gas flaring, in exchange for sanctions waivers and money from the U.S. – no change.”

Given that Iraq had just signed the longest-ever deal (five years) to keep importing huge quantities of gas and electricity from Iran, it must have been difficult for Al Sudani to keep a straight face – perhaps the moustache helped cover up any smirking. Nonetheless, he did his job of offering up the usual promises, with the usual additional one of including more U.S. companies in Iraq’s oil and gas sector developments. These are generally confined to engineering, procurement and construction contracts awarded to a predictable array of U.S. heavyweight companies that never work out, given the massive corruption at the heart of these Iraqi sectors, with which Western firms cannot and will not comply, as analysed in full in my new book on the new global oil market order.  Related: White House Aims to Keep Gasoline Prices in Check

In one way or another, all the major recent withdrawals of Western firms from Iraqi oil and gas sector contracts have come down to this. These include ExxonMobil’s exit from West Qurna 1 and the Common Seawater Supply Project, Shell’s from West Qurna 1, Majnoon and the Nebras Petrochemical Project, and BP’s intended disposal of its interest in Rumaila, among many others. As highlighted by the independent non-governmental organisation, Transparency International, in its ‘Corruption Perceptions Index’ Iraq has been described as: “Among the worst countries on corruption and governance indicators, with corruption risks exacerbated by lack of experience in the public administration, weak capacity to absorb the influx of aid money, sectarian issues and lack of political will for anti-corruption efforts.” It added: “Massive embezzlement, procurement scams, money laundering, oil smuggling and widespread bureaucratic bribery that have led the country to the bottom of international corruption rankings, fuelled political violence and hampered effective state-building and service delivery.” It concluded: “Political interference in anti-corruption bodies and politicization of corruption issues, weak civil society, insecurity, lack of resources and incomplete legal provisions severely limit the government’s capacity to efficiently curb soaring corruption.”

Aside from this unappealing element of doing business with Iraq for Western firms, the U.S. government has multiple first-hand knowledge of Baghdad’s various governments promising one thing and doing quite the opposite before. The same things are promised (to reduce gas and electricity imports from Iran, and gas flaring), and the same things are given by the U.S. (money to do both, and waivers to keep importing resources from Iran in the interim). Invariably, Iraq then renegues on everything after the money has been banked safely. Up until the signing of the five-year gas and electricity import deal with Iran, the most shocking betrayal of the U.S.’s trust in Iraq in this context had come from the fast-talking former Iraqi Prime Minister, Mustafa al-Kadhimi. He had danced the usual dance with the U.S. so well that in May 2020 Washington gave him even more money than before and the longest waiver ever given – 120 days – to keep importing gas from Iran, on the standard condition that Iraq stopped doing it soon. However, once the money had been banked and al-Kadhimi was safely back on home territory, Iraq signed a two-year contract – the longest period ever at that point – with Iran to keep importing gas from it. Washington responded by giving Iraq the shortest-ever waiver – 30 days – to keep this arrangement going with Iran before it needed to be renewed. It also hit 20 Iran- and Iraq-based entities with swingeing new sanctions, citing them as instruments in the funnelling of money to Iran’s Islamic Revolutionary Guards Corps’ (IRGC) elite Quds Force, which was entirely true. It…