Iraq Report: January 6, 2006

SUNNI FRONT AGREES TO SUPPORT UNITY GOVERNMENT, WHILE OTHERS ON FENCE. Sunni Arab leaders from the Iraqi Accordance Front reached a tentative agreement with Kurdish leaders for the formation of a national unity government on 2 January. Meanwhile, other Sunni Arab parties said they would wait for the results of an election assessment by a group of international monitors before making a decision on their participation in the next government.

In essence, the agreement is little more than a recognition by all sides of the need to form a coalition government that is based on consensus and cooperation rather than sectarian quotas, Accordance Front leader Adnan al-Dulaymi told reporters in Salah Al-Din. Meeting participants said the talks did not focus on leadership positions, saying such issues would be addressed once the election results were finalized.

The Accordance Front -- representing three major Sunni Arab political parties -- appears to have won a majority of the Sunni Arab votes in the 15 December parliamentary elections, and is expected to garner at least 40 of the 275 parliamentary seats when final election results are announced sometime next week.

Breaking Ranks

The talks came as a surprise to other Sunni Arab leaders, who claimed that the Accordance Front violated an agreement with other Sunni Arab parties not to enter talks about the formation of the next government until those parties' claims of election fraud are resolved.

As the talks were taking place, Sunni Arab leader Salih al-Mutlaq told Al-Arabiyah television from Baghdad: "Brothers from the Accordance Front said before traveling to northern Iraq that the dialogue will focus on the issue of elections, not around the details of forming a national unity government.... If [the Accordance Front] has gone to discuss the formation of a national unity government, we would have been invited to attend this meeting."

Al-Sharqiyah television reported on 1 January that the front said it would accept whatever decision was issued by the international observer team that is investigating the allegations of vote fraud in the elections. The front's position appears to be based on a belief that the international observers would have the power to issue a legally binding ruling on the elections.

Contentious Issue Of International Observers

The team, sent by the International Mission for Iraqi Elections (IMIE), includes two Arab League representatives, one executive member of the Canadian Association of Former Parliamentarians, and an unidentified European academic, according to the mission's website (http://www.imie.ca).

Tariq al-Hashimi, secretary-general of the Iraqi Islamic Party, which is part of the Accordance Front, told Al-Jazeera television on 1 January that he believed that the final decision of the international team would be legally binding. "This committee is coming to Iraq based on international authorization. As far as I know, the Iraqi government has also approved it. Therefore, its decisions must be binding. In a statement issued by the Accordance Front, we welcomed this committee and said it must be armed with legal power so that it can examine all the work done by the [Iraqi Independent Electoral Commission] and make a number of recommendations within the powers vested in it," he said.

Al-Hashimi's position, evidenced by other comments to the media this week, signals a growing split within the Accordance Front. Front leader al-Dulaymi has taken a more pragmatic approach to resolving the political crisis and appears to be focusing his efforts on positioning his party for a greater role in the next cabinet.

Al-Hashimi and Khalaf al-Ulayyan, the secretary-general of the National Dialogue Council (also a front member), have both said that unless the vote-fraud question is satisfactorily resolved, armed conflict might erupt. Al-Ulayyan suggested last week that civil war might break out (see "RFE/RL Iraq Report," 29 December 2005). Al-Hashimi contended in his interview with Al-Jazeera that the Accordance Front was committed to political dialogue but cautioned that it participation hinged on a resolution to its liking. Should Sunni Arab parties decide to boycott the political process, he said, "We will have no option other than engaging in armed jihad."

Betting On The Monitors

The arrival of the international team was widely applauded by the other parties contesting the elections under the banner Maram (Mu'tamar Rafadi Al-Intikhabat Al-Muzawra, or the Conference for Rejecting the Forged Election) (see "RFE/RL Iraq Report," 29 December 2005).

Mahdi al-Hafiz, a member of former Prime Minister Allawi's Iraqi National List, told Al-Sharqiyah television in a 3 January interview that the bloc has prepared a file containing "evidence" of election fraud that it will present to the IMIE in Baghdad.

Al-Hafiz welcomed the arrival of the observer group, telling the news channel: "All political parties should understand the importance of the legality of the intervention of international monitors. It is equally important for those parties to present all evidence...even if they were conflicting, of what occurred in the election."

Adnan Pachachi, head of the Independent Democrats Grouping, told Al-Arabiyah in a 2 January interview that his party had not reached a decision as to whether it would boycott the political process should the allegation of election fraud fail to be addressed, but he added that the party still preferred to participate in the political process. "We do not issue threats. The opposition can be inside and outside the government. This is a sound democratic [practice] that exists worldwide," he said. (By Kathleen Ridolfo. Originally published on 5 January)

OIL WOES CONTINUE. The outgoing Iraqi government placed Oil Minister Ibrahim Bahr al-Ulum on mandatory administrative leave last week after Bahr al-Ulum publicly criticized Prime Minister Ibrahim al-Ja'fari's administration for implementing a plan to increase the cost of cooking fuel and gasoline to domestic consumers more than fivefold.

One unnamed government official told "The Washington Post" that al-Ja'fari considered Bahr al-Ulum's criticism "unforgivable." The incident followed mounting tension between the two men after Bahr al-Ulum withdrew from al-Ja'fari's United Iraqi Alliance (UIA) ahead of the 15 December parliamentary elections. He then formed his own party, the Future Iraq Grouping, to compete in those elections (see "RFE/RL Iraq Report," 4 December 2005).

The government's decision to increase fuel prices was part of an agreement reached with the International Monetary Fund (IMF) on 23 December for a $685 million standby loan granted by the IMF after Iraq secured an $11 billion debt-exchange agreement with its commercial creditors for debts incurred by the regime of former leader Saddam Hussein. In return for the loan, Iraq agreed to reduce its oil subsidies, improve the efficiency and transparency of public financial management, and develop a comprehensive restructuring strategy for its state-owned banks.

Sacking The Minister

According to Iraqi media reports, Bahr al-Ulum traveled to London in mid-December for a vacation. Upon returning to Iraq he learned that he had been put on administrative leave; Deputy Prime Minister Ahmad Chalabi was appointed acting oil minister. Chalabi served in the same capacity in early 2005, when the transitional government was being formed (see "RFE/RL Iraq Report," 2 May 2005). Bahr al-Ulum subsequently resigned, telling reporters at a 2 January press briefing in Baghdad that the increase in fuel prices placed a heavy burden on Iraq's citizens, RFE/RL's Radio Free Iraq (RFI) reported on 3 January.

Iraqi media reports said the fuel-price increase represents a roughly 200 percent rise in the price of gas and diesel, while propane gas has more than doubled in price, Al-Sharqiyah television reported on 1 January.

The increase has led to long lines at gas stations and protests in a number of Iraqi cities, a situation that is compounded by even greater fuel shortages after distribution lines were cut as a result of insurgent attacks in recent days.

Problems At The Refineries

Pipelines and tankers connected with the vital Bayji refinery were targeted in mid-December attacks that led to a two-day work stoppage. The facility reopened briefly but reportedly shut down again on 21 December after workers refused to work following insurgent threats. On 26 December, the refinery's pipeline to the Al-Durah refinery was attacked in Samarra, north of Baghdad. Oil officials estimated the closure cost Iraq $20 million per day.

The attacks threatened to debilitate the already struggling power sector, which relies heavily on the Bayji refinery for fuel to power its generators and could spark even more public protests. Iraqi cities are also heavily reliant on oil derivatives produced at the refinery -- a fact that reportedly prompted the government to begin trucking the fuel from Bayji to several cities on 1 January. Al-Arabiyah television reported on 4 January that 19 fuel trucks were ambushed in Baghdad; no further details were available.

Exports came to a halt at the southern Al-Basrah terminal in late December due to bad weather. Reuters quoted sources as saying that exports resumed on 2 January.

Meanwhile, demonstrations have sprung up in several Iraqi cities over the past two weeks. In one recent demonstration, police opened fire on demonstrators in Kirkuk on 1 January, killing at least two and wounding seven others after the demonstrators set fire to two gas stations and several police and civilian vehicles. The demonstrators also reportedly set fire to the North Oil Company office in the city.

Production Still Low

Iraq's oil industry has faced increasing woes as it tries to rebuild following years of neglect by the Hussein regime and nearly three years of insurgent attacks. Former Oil Minister Thamir al-Ghadban told Al-Iraqiyah television on 28 December that production capacity fell by one-third to 64,000 cubic meters a day in 2004 from its 2002 level of 92,000 cubic meters per day.

Likewise, benzene production fell from 15.8 million liters a day in 2002 to about 10 million liters a day in 2004 and 2005. Meanwhile, benzene consumption rose from 15 million liters per day in 2002 to 22 million liters per day in 2005.

Illegal smuggling has also contributed to oil-supply problems. Although no accurate figures on the level of smuggling are available, officials say the problem is widespread (see "RFE/RL Iraq Report," 14 October 2005).

Iraq is estimated to hold 115 billion barrels of proven oil reserves, according to a recent report by the U.S. Department of Energy (http://www.eia.doe.gov). But exploitation of those reserves is expected to take several years and will be largely dependent on the country's stability.

The reform of the oil and other sectors of the economy will prove challenging to the next Iraqi government. Iraqis have come to rely heavily on Iraq's social-welfare system. Given the current level of unemployment and ongoing instability, the Iraqi public is not expected to react favorably to cuts in subsidies, including plans to reduce food rations in 2006.

The Trade Ministry is reportedly planning on reducing food rations some 25 percent this year, after its budget was reduced from $4 billion to $3 billion, "Al-Furat" reported on 25 December. The first items to be cut are salt, some vegetables, and detergents -- items easily found in local markets. Rations for sugar, tea, cooking oil, and rice will continue, the newspaper reported. The food-ration system came under heavy criticism in 2004 and 2005 after deliveries became sporadic due to insurgent and criminal attacks. Proposals were made to replace the ration system with cash payments, but it appears that the transitional government failed to reach a decision on the matter. (By Kathleen Ridolfo. Originally published on 4 January)