Why Baghdad’s Attempts to Mollify Protests Are Falling on Deaf Ears

Editor’s Note: Protesters again flooded the streets of Baghdad and other Iraqi cities on Oct. 25, the one-year anniversary of Prime Minister Adel Abdul-Mahdi taking office. As this analysis originally published Oct. 11 assessed, government offers to tackle corruption and joblessness continue to be unlikely to address the fundamental grievances that are driving the unrest.

Deadly anti-government protests in Iraq have shed fresh light on the fragility of Iraq’s post-2003 government and economy. Like episodes of significant unrest in 2011, 2015, 2016 and 2018, these protests include calls for improvements in social services, an increase in economic opportunities and an end to government corruption. But in terms of scale and scope, this spate of protests is unprecedented, perhaps portending the beginning of a moment of transition for Iraq’s government — not only for Prime Minister Adel Abdul-Mahdi’s current administration, but also the broader system of governance as a whole.

In the long run, the promises of increased subsidies and jobs that the Iraqi government has used to calm previous economically fueled grievances are unsustainable. To preserve the current system in the face of repeatedly resurfacing political and economic gripes, the political class has two stark choices. It must either permit massive structural changes that will transform the economy into a stronger, more diverse and sustainable system, or it must stage the harshest crackdown since the U.S. intervention in 2003 to preserve the system as it is. Both options, naturally, will lead to profound business disruptions in the near term.

The Cycle of Economic Weakness Endures

One issue repeatedly drawing Iraqis onto the street is the country’s structural economic weaknesses. Iraq’s economy leans heavily on oil and natural gas extraction (energy exports constitute 99 percent of Iraqi exports and provide 84 percent of government revenue). But to keep producing at capacity, the energy sector sorely needs reform. Half of the government’s budget goes to state pensions and public sector wages, plus handouts and subsidies that maintain social support. This has stifled diversification in the Iraqi economy, leading to an anemic private sector and a population overly dependent on public sector jobs that counts on the government to provide cheap and often unreliable services. A few reforms have taken place, but not enough to solve these structural problems. Donations from countries concerned about Iraqi stability, plus help from the International Monetary Fund and the World Bank, have helped paper over the fundamental issues but failed to bring about the needed changes.

The government’s familiar tactic of offering piecemeal solutions ultimately worsens the problems at the heart of Iraq’s structural economic inefficiency. Overspending on public wages and subsidies that the government deems necessary to ensure stability has inflated public debt and created a massive budget deficit. In part to appease demands for jobs, public sector employment tripled from 900,000 in 2004 to roughly 3 million today; the subsequent wage inflation took jobs spending from 7 percent of the overall budget in 2004 to more than 40 percent today. Even with public-sector hiring freezes, such as one implemented in 2016, that’s an unsustainable growth rate that could lead to breakdowns in government spending. Nevertheless, the government is relying on those familiar promises to quell the current unrest, including offers to add even more public sector jobs, plus hand out cash transfers and housing support that would deepen the hole it has found itself in.

The familiar government promises do not satisfy Iraqis like they once did. With previous pledges to create jobs and improve services going unfulfilled, this round of promises, unsurprisingly, hasn’t convinced all protesting Iraqis to get off the streets. This also means that its familiar pattern won’t work in the future. In fact, broken promises of reform have become such a familiar refrain that they have provided a platform that nationalist leaders like Muqtada al-Sadr have used to win popular support.

Broken Trust Transcends Sectarian Lines

Also feeding the protests is Iraqis’ perception of a broken political system that doesn’t answer their demands for representation and solutions. Iraqis have gone to the polls for at least eight local and national elections since Saddam Hussein’s ouster in 2003. But none of the leaders they have chosen have managed to turn the broken economy around or satisfy their needs. In fact, poverty levels and security woes have increased during that time. Mistrust in parts of the government system isn’t new; previous instances of unrest also stemmed from Iraqis’ demands for an end to corruption and the introduction of fresh faces into the government. What’s new this time is the breadth of the frustration, which transcends Iraq’s traditional sectarian politics. Public anger is not directed at any single sect, party or external patron. For example, the influence of powerful cleric Ali al-Sistani, whose voice once commanded considerable respect among all Iraqis, is reportedly weakening among a younger generation that has heard the same unfulfilled promises, year after year, from traditional sources of authority. This points to the likelihood that demands will emerge from Iraq’s citizens that will become harder for the government to solve.

Although the protests transcend sectarian lines, their predominant participants — and many of the targets of their ire in government — are Shiite Muslims. This reflects the fact that Shiites constitute the largest share of the Iraqi population, a reality reflected in the structure of the post-2003 government system. One factor influencing the current protest movement is the deepening influence of Iran, a Shiite power, in Iraq. Anti-Iranian slogans that have become part of the ongoing protests point to a popular rejection of the growth of Iranian sway. This stems not so much from a specific rejection of Iranian influence as much as a desire to preserve Iraqi sovereignty, ultimately translating into a rejection of how the Iraqi government conducts its affairs and foreign policy.

The Risks to Iraqi Stability

Iraqis are pushing their government to tackle tough political issues, like solving pervasive corruption, instead of just offering the same old solutions. But a sincere and effective effort to diminish corruption in Iraq would require the state to engage in massive structural reform while unraveling some of the patronage networks that have formed within the political class around the energy sector. Not surprisingly, there is little enthusiasm among the political class to take this challenging and controversial route, which would create widespread disruptions and necessitate a reorganization of the energy sector over the long term. Nevertheless, the government has taken small steps in that direction. On Oct. 8, the Iraqi government froze the activities of provincial councils, followed by a government reshuffle announced two days later. The question in the near term remains whether that will be enough to assuage protests; it certainly won’t be enough to overhaul the entire system.

Original: https://www.stratfor.com/article/why-baghdads-attempts-mollify-protests-are-falling-deaf-ears-corruption-unemployment-iraq