Note: Last week, I examined each of the eighteen benchmarks which document the effectiveness of The Surge. I then wrote an overview (part I) of the July Benchmark Report.  This post covers Six Benchmarks: numbers 1 and 2; 4 through 6; and 16.  Links for fast access to this Iraq Primer (should open in new window for reference):  Benchmarks 1-6Benchmarks 13-18

What follows is a look at July’s status on Economic Benchmarks, or, more properly, two Political-Economic Benchmarks.  I try to analyze what we should consider ‘significant progress’ in September’s report, based upon close reading and constant attention to the subject.  Quotes by Stanislaw Lec, who lived during World War II, are only meant to provide some humor and perspective.

Optimists and pessimists differ only on the date of the end of the world.                                                           –Stanislaw Jerzy Lec

The Oil Law, Benchmark Number 3:
As noted in the July Benchmark report, the oil law has made ‘unsatisfactory progress’ despite continued focus and considerable effort on the part of Iraq’s Council of Ministers.  Once it leaves this Council, (after the substantial negotiation toward an agreed format) it is submitted to the Council of Representatives.  The intricacy of the negotiations, also as noted by the report, remains somewhat opaque to onlookers, including U.S. advisors and consultants most directly involved. 

Three camps negotiating the law, two camps observing
The received opinion about passing the oil law generally falls into two extreme and irreconcilable camps.   The first, which includes the Iraq Study Group, maintains that the oil law is essential to Iraq’s progress; and a second camp believes that the U.S. should back off of this process. 

The essentialists are correct in that the oil law is  Iraq’s budget-maker; it will fund all government activities.  Oil is expected to make up 93% of Iraq’s state budget, and therefore all programs for reconstruction, social services, education, and so forth hinge upon this keynote bill for the budget.  Until this bill is passed, semi-autonomous regions, provincial governments, and even the state at large cannot plan or fund future government functions.  Furthermore, once it is passed, it sets up the conditions for future interest in the state by development banks, outside investors, and foreign states. 

Yet “the backing off” contingent has some points.  First, Iraq has money to fund programs now (that’s Benchmark 17–see below), and it is better to get this law right than to pass just any law. 

Three strikes, Sunnis out
The way this law is being discussed and framed obviates many of the roads to national unity; in particular, it fails to meet any Sunni faction demands.  1. Western Iraq, without oil, is predominantly Sunni.  2. Abolishing the national oil company removes what once was a primarily Ba’athist/Sunni institution.  3. Abolishing the oil union also removes a formerly Ba’athist/Sunni institution. 

Under the current arguments, there is little offered to the Sunni minority population (who also has the most experience in oil development).  Therefore, the oil law needs to be backed by a completed Benchmark No. 2, reform of de-Ba’athification law, which will specify who will be able to participate in oil economics; and a completed Benchmark No. 1 (constitutional reform) including Benchmark No. 16 (minority rights equal to everyone’s rights) before this can be settled with the (understandably) obstreperous Sunni legislative contingent.

Following a more natural step-progression
I would further suggest that its placement in the benchmark scheme is out of order.  Until provincial and regional governance structures are achieved (Benchmarks 4 and 5), the advocacy for this bill continues to be amorphous and theoretical in design.  Local projects are managed by local governments, and there are, as yet, no governments to administer these theoretical budgets.  That does not contradict the reality of a raging parochialism in negotiations: Kurdistan ripe with new discoveries; Southern Iraq filled with mismanaged and underinvested older fields; and thus far, no resources found in Western Iraq.  But this is again a theoretical parochialism, of a “wish list” variety, uninformed by local assessments.  While a group of provincial governors will certainly add more voices to the law’s discussion, if handled properly this will be a means to greater local representation and therefore, local satisfaction.  Provision of services and oil income around the state of Iraq will add to state unity, and the precedents and procedures for these services are best taken from the shape of Benchmarks 1, 2, 4, 5, and 16.

As far as national oil companies go, I fail to understand why the U.S. is against the formation of an Iraqi national oil company.  Virtually every supplier state on the planet has a NOC, and it does not stop oil extraction or distribution.  It complicates that activity, but it is a standard operating condition in most oil commerce around the world.

Role of U.S. consultation is unclear
Yet the “backing off” contingent fails to realize that third-party consultation or intervention in this bill is to some degree necessary in order to inject some non-sectarian ice into the flaming controversy that appears to be taking place behind closed doors.  If the U.S. was getting all that it wanted, this bill would be done by now.  Some mediation is required, and since this bill has the potential to unleash further sectarian resentment, de-stabilize the national government, and fund the future of the country, it would be irresponsible not to consult.

However, consultation should promote, rather than a U.S. commercial wish list (no national oil companies, no unions, or whatever else the U.S. is advocating) some benchmarks for a. transparency, that oil revenues are audited regularly by outside auditors, and that the funds are publicly managed; and b. that some of those funds are earmarked for future development, in education, for instance, which increases national self-help in the long term.

I would not expect this law to be in effect by September or even January.  Significant progress toward an oil bill (which is the same as a budget bill) would require that local needs be assessed and a pattern of national distribution informed by the relationship of pressing needs of each locality.   To me, progress on this bill hinges upon the completion of the other major legislative benchmarks, and a settled, meaningful policy of de-Ba’athification reform.  Progress on this bill also requires that the U.S. both stay in the process but not to the extent of driving the kinds of institutions enabled–just their transparent and unifying character.

Do not ask God the way to heaven; he will show you the hardest one.
                                                                       –Stanislaw Jerzy Lec

Reconstruction, Benchmark Number 17:
Many of the statements above about the oil law also relate to reconstruction, but with one difference: this needs to be carried out now.  No reconciliation (Benchmark 6) or reduction in violence (Benchmarks 7, etc) can be obtained as long as the state is not carrying out some functions of economic security. 

A main problem with the July Benchmark Report is that it is another large benchmark with no staged implementation set in the benchmark framework.  The main problem for reconstruction is that all of it is undertaken under poor security conditions.  A lot of back-breaking work has been done to achieve utility service, enterprise development, and other features of economic reconstruction.  Most of this work continues to be subverted or destroyed, a dangerous, sometimes corrupt, and always disheartening and expensive result.  To just shout for reconstruction without acknowledging past efforts and current difficulties is unrealistic, and frankly, rude.  It is past time, however, to ask for staged planning within this benchmark goal.

There are clues in the Benchmark Report about what kinds of economic revitalization are working: cellular phone investment, for instance, has taken off and prospered.  And this is the clue for limitations of effectiveness as well: deciding what kinds of reconstruction will have immediate and lasting effect under current conditions.

If one looks at the character of cellular telephony, one can see the reasons that this essential service has prospered: a, it promotes security and access to information; b, it has minimal infrastructure; c, it is portable and moveable;  d, phones are easily replaceable; and e. has immediate personal use.  The task for reconstruction in this security environment then becomes, a matter of tailoring as many other required services as possible to this model.

1. The Iraqi government should create a program that allows it to disburse its long-held funds into a service provision that has an irregular locational and temporal distribution process, including to refugee populations.  2. In the meantime, they should solicit bids for other major work in areas currently less-wracked by violence, and advertise those bids.  3. Reconstruction funds should be disbursed to aid refugees in camps and set up services to non-official refugee camps in order to provide minimal services to the displaced.

However, like the oil law, reconstruction is complicated by a lack of regional and provincial officials to undertake a more nuanced assessment and program of providing social services, advertising for bids, or arranging a regular or irregular demonstration of services.  I predict that the reconstruction benchmark will still show ‘unsatisfactory progress’ in September, as security conditions will not allow the kind of distribution of reconstruction services required, and, 

because institutional methods of providing reconstruction do not answer in the security environment under which Iraq currently exists.

Progress on these two benchmarks is contingent upon the previously-examined political benchmarks, and the security benchmarks.

Next: Security benchmarks and public relations related to security

Further reading:
al-Jazeera, July 30: Half of Iraq in Absolute Poverty
Reuters, July 30: UN asks for education aid for Iraq refugees