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Economy of Iraq

Historically, Iraq's economy was characterized by heavy dependence on oil exports and emphasis on development through central planning. Prior to the outbreak of the war with Iran in September 1980, Iraq's economic prospects were bright. Oil production had reached a level of 3.5 million barrels per day, and oil revenues were $21 billion in 1979 and $27 billion in 1980. At the outbreak of the war, Iraq had amassed an estimated $35 billion in foreign exchange reserves. The Iran-Iraq war depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with foreign debt of more than $40 billion. However, after hostilities ceased in August 1988, oil exports gradually began to increase, with the construction of new pipelines and the restoration of damaged facilities. But Iraq's invasion of Kuwait in August 1990, subsequent international sanctions, damage from military action by an international coalition in January and February of 1991, and neglect of infrastructure devastated Iraq’s economy again. Government policies that diverted government income to key supporters of the regime and sustained a large military and internal-security force further impaired the economy and left the typical Iraqi facing desperate hardships. The UN created the Oil-for-Food (OFF) program in April 1995 (UN Security Council Resolution 986) as a temporary measure to provide for the humanitarian needs of the Iraqi people because of the effect of the continued sanctions regime. The OFF authorized nations to allow the importation of petroleum and petroleum products from Iraq worth $1 billion dollars (U.S.) every 90 days. The Security Council directed the Secretary General to create an escrow account that would hold the proceeds from the sales of oil, and allow Iraq to purchase food, medical supplies, and other goods for essential civilian needs. Although GDP fell in 2001 and 2002, largely as a result of the global economic slowdown and lower oil prices, per capita food imports increased and medical supplies and health care services improved. However, the military action of the U.S.-led coalition from March to April 2003 disrupted the central economic administrative structure. Since then, the rebuilding and enhancement of oil and utilities infrastructure and other production capacities has proceeded steadily, despite attacks on key economic facilities and internal security incidents. Iraq is now making progress toward establishing the laws and institutions needed to make and implement economic policy. Iraq's economy remains dominated by the oil sector, which currently provides about 90% of foreign exchange earnings. Oil production currently averages about 2.5 million barrels per day, of which about 2.0 million barrels per day are exported. Following two successful oil bid rounds in 2009, the Iraqi Government has plans to dramatically increase production and export capacity over the next decade. The government must overcome some significant financial, technical, and infrastructure constraints to achieve stated goals, however. Iraq is seeking to pass and implement laws to strengthen the economy, including a hydrocarbon law that encourages development of the oil and gas sector and a revenue sharing law that equitably divides oil and gas revenues among the central government, the provinces, and the Kurdistan Regional Government (KRG). Implementing structural reforms, such as bank restructuring and private sector development, while simultaneously reducing corruption, will be key to Iraq's economic growth. Foreign assistance has been an integral component of Iraq's reconstruction efforts since 2003. At a donors’ conference in Madrid in October 2003, more than $33 billion was pledged to assist in the reconstruction of Iraq. Following that conference, the UN and the World Bank launched the International Reconstruction Fund Facility for Iraq (IRFFI) to administer and disburse about $1.7 billion of those funds. The rest of the assistance is being disbursed bilaterally. Since 2003, international donors have pledged about $18 billion in financial and technical assistance, soft loans or potential loan facilities, and trade finance. International donors have exceeded their combined pledges for grants and technical assistance, totaling about $6.5 billion, by more than $1.3 billion. Total soft loan pledges amount to about $12.8 billion, of which $6.5 billion has been committed. Japan is the leading soft loan contributor, having committed nearly $3.3 billion to projects around Iraq. New programs approved by the International Monetary Fund (IMF) and World Bank will substantially close the gap between soft-loan pledges and commitments. In February 2010, the IMF and World Bank approved $3.6 billion and $250 million of support to Iraq, respectively. Both programs are focused on helping the Iraqi Government maintain macroeconomic stability and mitigate Iraq’s vulnerability to external shocks due to volatility in global oil markets. The Iraqi Government has worked closely with both institutions since 2003, including the December 2008 completion of an IMF Stand-By Arrangement (SBA), after which Iraq received the balance of the Paris Club’s 80% debt reduction. U.S. foreign assistance to Iraq since 2003 has totaled $58 billion. The bulk of this assistance has gone toward reconstruction and security. The focus of U.S. foreign assistance in recent years has shifted from bricks-and-mortar reconstruction to technical assistance and capacity building. The U.S. Government is working with the Iraqi Government to build political, economic, rule of law, and civil society institutions throughout Iraq. Agriculture Agriculture is Iraq’s second-largest economic sector (after the oil sector), producing about 12% of GDP, and the second-largest source of jobs (after the public sector), employing at least 15% of the labor force. However, despite its abundant land and water resources, Iraq is a net food importer. Obstacles to agricultural development, most of which existed prior to the removal of the Ba'ath regime in 2003, include government policies and subsidies that distort the market and undermine productivity and competition; outdated technology in plant and animal genetics, fertilizers, irrigation and drainage systems, and farm equipment; inadequate and unstable electricity; degradation of irrigation-management systems; insufficient credit and private capital; and inadequate market information and networks. In addition, the policy of the Ba'ath regime to destroy the "Marsh Arab" culture by draining the southern marshes and introducing irrigated farming to the region destroyed a natural food-producing area, while concentration of salts and minerals in the soil due to the draining left the land unsuitable for agriculture. Assistance from the U.S. Agency for International Development (USAID), the U.S. Department of Agriculture (USDA), and other international partners since 2003 has helped Iraq begin the necessary improvements. Current U.S. efforts are focused primarily on helping Iraq transition to a private sector-driven agricultural system. Trade The United Nations imposed economic sanctions on Iraq after it invaded Kuwait in 1990. Under the Oil-for-Food program, Iraq was allowed to export oil and use the proceeds to purchase goods for essential civilian needs, including food, medicine, and infrastructure-repair parts. With the lifting of UN sanctions after the Ba'ath regime was removed in 2003, Iraq is gradually resuming trade relations with the international community, including the United States. The United States designated Iraq as a beneficiary developing country under the Generalized System of Preferences (GSP) program in September 2004. Iraq was granted observer status at the World Trade Organization (WTO) in February 2004, and began its WTO accession process in December 2004. Iraq has participated in two Working Party meetings as part of the accession process, one on May 25, 2007, and the other on April 2, 2008. During this long-term process, Iraq must align its trade regime with the rules-based, multilateral international trade system. Through USAID technical assistance, the United States is continuing to support Iraq’s accession to the WTO. Completion of the requirements for WTO membership will help Iraq establish a proven framework for fostering a more stable and transparent economy that will encourage both domestic and foreign investment.
Nominal GDP (2010 est.): $82.2 billion. Nominal GDP per capita (2010 est., PPP): $2,564. GDP real growth rate (2010 est.): 0.8%. Rate of inflation (2010 est.): 3.3%. Unemployment rate (2009 est.): 15.3%. Budget (2011 est.): Revenues --$69.2 billion; expenditures --$82.6 billion. Public debt (Dec. 2010 est.): $52 billion to $79 billion. Natural resources: Oil, natural gas, phosphates, sulfur. Agriculture: Products --wheat, barley, rice, corn, chickpeas, beans, dates, cotton, sunflowers, cattle, sheep, and chickens. Industry: Types --petroleum, chemicals, textiles, construction materials, food processing, fertilizer, metal fabrication/processing. Trade: Exports (2010 est.)--$50.8 billion; export commodities --crude oil, crude materials excluding fuels, food and live animals. Export partners (2009)--U.S., India, Italy, South Korea, Taiwan, China, Netherlands, and Japan. Imports (2010 est.)--$45.2 billion; import commodities --food, medicine, manufactured goods. Import partners (2009)--Turkey, Syria, U.S., China, Jordan, Italy, and Germany.

Geography of Iraq

Iraq is bordered by Kuwait, Iran, Turkey, Syria, Jordan, and Saudi Arabia. The country slopes from mountains over 3,000 meters (10,000 ft.) above sea level along the border with Iran and Turkey to the remnants of sea-level, reedy marshes in the southeast. Much of the land is desert or wasteland. The mountains in the northeast are an extension of the alpine system that runs eastward from the Balkans into southern Turkey, northern Iraq, Iran, and Afghanistan, terminating in the Himalayas. Average temperatures range from higher than 48 degrees C (120 degrees F) in July and August to below freezing in January. Most of the rainfall occurs from December through April and averages between 10 and 18 centimeters (4-7 in.) annually. The mountainous region of northern Iraq receives appreciably more precipitation than the central or southern desert region. Area: 437,072 sq. km.; about the size of California. Cities: Capital--Baghdad (pop. 3.8 million 1986 est.). Other cities--Basrah, Mosul, Karkuk, As Sulaymaniyah, Irbil. Terrain: Alluvial plains, mountains, and desert. Climate: Mostly hot and dry.

Government of Iraq

Iraq is a parliamentary democracy with a federal system of government. The 2005 Iraqi constitution guarantees basic rights. The executive branch consists of the Presidency Council (one president and up to three vice presidents) and a Council of Ministers (one prime minister, three deputy prime ministers, and 43 cabinet ministers). The president is the head of state, protecting the constitution and representing the sovereignty and unity of the state, while the prime minister is the direct executive authority and commander in chief. The president and vice presidents are elected by the Council of Representatives. The prime minister is nominated by the president and must be approved by a majority of members of the Council of Representatives. Upon nomination, the prime minister-designate names the members of his cabinet, the Council of Ministers, which is then approved by the Council of Representatives. Subsequently, the prime minister and the new ministers are sworn in. The executive branch serves a 4-year term concurrent with that of the Council of Representatives. Iraq's legislative branch consists of an elected Council of Representatives (COR). After the 2005 elections, the Council of Representatives consisted of 275 members, each of whom was elected to a 4-year term of service. Following the March 7, 2010 elections, the COR consists of 325 members to reflect an increase in the population of Iraq. At least one-quarter of the members of the Council of Representatives must be female. The responsibilities of the Council of Representatives include enacting federal laws, monitoring the executive branch, and electing the president of the republic. Iraq's judicial branch is independent, and is under no authority but that of the law. The federal judicial authority comprises the Higher Judicial Council, Federal Supreme Court, Court of Cassation, Public Prosecution Department, Judiciary Oversight Commission, and other federal courts. The Higher Judicial Council supervises the affairs of the federal judiciary. The Federal Supreme Court has limited jurisdiction related to intra-governmental disputes and constitutional issues. The appellate courts appeal up to the Court of Cassation, the highest court of appeal. The establishment of the federal courts, their types, and methods for judicial appointments are set forth by laws enacted by the Council of Representatives. Principal Officials of the Iraqi National Unity Government President--Jalal Talabani Vice Presidents--pending Prime Minister--Nuri al-Maliki Deputy Prime Minister--Husayn al-Shahristani Deputy Prime Minister--Rowsch Nuri Shaways Deputy Prime Minister--Salih al-Mutlaq Minister of Defense--pending Minister of Finance--Rafi al-Issawi Minister of Foreign Affairs--Hoshyar Mahmud Zebari Minister of Interior--pending Minister of Oil--Abd al-Karim al-Luaybi POLITICAL CONDITIONS Recent Elections On January 31, 2009, Iraq held elections for provincial councils in all provinces except for the three provinces comprising the Kurdistan Regional Government, and Kirkuk province. On March 7, 2010, Iraq held national parliamentary elections based on an open list system that elected the members of the Council of Representatives, who elect the president and approve the executive branch appointments. The Iraqi National Movement coalition led by former Prime Minister Ayad Allawi won the most seats (91), followed by Prime Minister Nuri al-Maliki’s State of Law coalition (89 seats), the Kurdish bloc (headed by Kurdistan Democratic Party President Masud Barzani and Patriotic Union of Kurdistan President Jalal Talabani, with a total of 57 seats), the Iraqi National Alliance led by Muqtada al-Sadr (70 seats), and other smaller political and minority parties (18 seats). On November 11, 2010, the Council of Representatives convened to elect Jalal Talabani to another term as President of Iraq. Osama al-Nujayfi of the Iraqi National Movement coalition was elected as Parliament Speaker. On December 21, 2010, the Council of Representatives approved President Talabani’s nomination of Nuri al-Maliki for a second term as Prime Minister, as well as a majority of Prime Minister Maliki’s Council of Ministers. Major Political Parties and Organizations and Leaders Badr Organization [Hadi al-Amiri]; Da'wa al-Islamiya Party [Nuri Kamil al-Maliki]; Goran List [Nowshirwan Mustafa]; Independents Bloc [Husayn al-Shahristani]; Iraqi Front for National Dialogue [Salih al-Mutlaq]; Accord/Withaq [Ayad Allawi]; Islamic Supreme Council of Iraq or ISCI [Ammar Adb al-Aziz al-Hakim]; Kurdistan Democratic Party or KDP [Mas’oud Barzani]; National Movement of Reform and Development/Al-Hal (Kamil Karem al-Dulaimi]; Patriotic Union of Kurdistan or PUK [Jalal Talabani]; Renewal/Tajdeed List [Tariq al-Hashimi]; Sadrist Trend [Muqtada al-Sadr]. Smaller Parties and Organizations and Leaders Future Gathering [Rafi’ al-Issawi]; Iraqi Islamic Party [Osama al-Tikriti]; Iraqi Justice and Reform Movement [Ajeel al-Yawer]; Iraqi National Congress/INC [Ahmad Chalabi]; Iraqi Turkoman Front [Saad al-Din Mohammed Amen]; Iraqiyoon [Osama al-Nujaifi]; Iraq Unity Alliance [Jawad al-Bulani and Sa’doun al-Dulaimi]; Islamic Virtue Party/Al-Fadilah [Hashim al-Hashimi]; Kurdistan Islamic Union [Salah ad-Din Muhammad Baha al-Din]; Kurdistan Islamic Group [Ali Bapir]; Life Current [Eskandar Witwit]; National Reform Current [Ibrahim al-Ja’afari]; Sons of Rafidain [Salam al-Zowba’e]. Minority Parties and Organizations and Leaders Rafidan List/Assyrian Democratic Movement [Younadam Kanna]; Assyrian Chaldean Syriac People’s Council [Khalis Estepho]; Shabak [Jamshed al-Shabaki]; Yezedi [Ameen Jejjo]; Sabi’/Manda’i [Khalid al-Roomi]. Government Type: Parliamentary democracy. Constitution: October 15, 2005. Independence: On October 3, 1932, Iraq gained independence from the League of Nations Mandate under British Administration. Several coups after 1958 resulted in dictatorship, with the Ba’ath Party seizing power in 1963 and again in 1968. From July 1979 to March 2003, Iraq was ruled by Saddam Hussein and the Ba’ath Party. Following the overthrow of the regime by a U.S.-led coalition in March-April 2003, the Coalition Provisional Authority (CPA) assumed administrative and security responsibility for Iraq while Iraqi political leaders and the Iraqi people established a transitional government. On June 28, 2004, the CPA transferred sovereignty to the Iraqi Interim Government. A new four-year, constitutionally based government took office in March 2006, and a new cabinet was installed in May 2006. On June 31, 2009, U.S. troops withdrew from urban areas, a step that reinforced Iraqi sovereignty. On March 7, 2010, Iraq held a second round of national elections to choose the members of the Council of Representatives and, in turn, the executive branch of government. Branches: Executive--Presidency Council (one president and two vice presidents; this configuration may change following the March 2010 national elections; Council of Ministers (one prime minister, two deputy prime ministers, and 37 cabinet ministers). Judicial--Supreme Court appointed by the prime minister and confirmed by the Council of Representatives. Legislative--Council of Representatives (COR) consisting of 325 members. Divisions: 18 governorates (muhafazat, singular - muhafazah)--Al Anbar, Al Basrah, Al Muthanna, Al Qadisiyah, An Najaf, Erbil, As Sulaymaniyah, Kirkuk, Babil, Baghdad, Dahuk, Dhi Qar, Diyala, Karbala', Maysan, Ninawa, Salah ad Din, Wasit. One region--the Kurdistan Regional Government.

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History of Iraq

Once known as Mesopotamia, Iraq was the site of flourishing ancient civilizations, including the Sumerian, Babylonian, and Parthian cultures. Muslims conquered Iraq in the seventh century A.D. In the eighth century, the Abassid caliphate established its capital at Baghdad. At the end of World War I, Iraq became a British-mandated territory. When it was declared independent in 1932, the Hashemite family, which also ruled Jordan, ruled as a constitutional monarchy. In 1945, Iraq joined the United Nations and became a founding member of the Arab League. In 1956, the Baghdad Pact allied Iraq, Turkey, Iran, Pakistan, and the United Kingdom, and established its headquarters in Baghdad. Gen. Abdul Karim Qasim took power in July 1958 coup, during which King Faysal II and Prime Minister Nuri as-Said were killed. Qasim ended Iraq's membership in the Baghdad Pact in 1959. Qasim was assassinated in February 1963, when the Arab Socialist Renaissance Party (Ba'ath Party) took power under the leadership of Gen. Ahmad Hasan al-Bakr as prime minister and Col. Abdul Salam Arif as president. Nine months later, Arif led a coup ousting the Ba'ath government. In April 1966, Arif was killed in a plane crash and was succeeded by his brother, Gen. Abdul Rahman Mohammad Arif. On July 17, 1968, a group of Ba'athists and military elements overthrew the Arif regime. Ahmad Hasan al-Bakr reemerged as the President of Iraq and Chairman of the Revolutionary Command Council (RCC). In July 1979, Bakr resigned, and Saddam Hussein assumed both offices. The Iran-Iraq war (1980-88) devastated the economy of Iraq. Iraq declared victory in 1988 but actually achieved a weary return to the status quo antebellum. The war left Iraq with the largest military establishment in the Gulf region but with huge debts and an ongoing rebellion by Kurdish elements in the northern mountains. The government suppressed the rebellion by using weapons of mass destruction on civilian targets, including a mass chemical weapons attack on the city of Halabja that killed several thousand civilians. Iraq invaded Kuwait in August 1990, but a U.S.-led coalition acting under United Nations (UN) resolutions expelled Iraq from Kuwait in February 1991. After the war, Kurds in the north and Shi'a Muslims in the south rebelled against the government of Saddam Hussein. The government responded quickly and with crushing force, killing thousands. It also pursued damaging environmental and agricultural policy meant to drain the marshes of the south. As a result, the United States, United Kingdom, and France established protective no-fly zones in northern and southern Iraq. In addition, the UN Security Council required the regime to surrender its weapons of mass destruction (WMD) and submit to UN inspections. When the Ba'ath regime refused to fully cooperate with the UN inspections, the Security Council employed sanctions to prevent further WMD development and compel Iraqi adherence to international obligations. Coalition forces enforced no-fly zones in southern and northern Iraq to protect Iraqi citizens from attack by the regime and a no-drive zone in southern Iraq to prevent the regime from massing forces to threaten or again invade Kuwait. A U.S.-led coalition removed the Ba'th regime in March-April 2003, bringing an end to more than 12 years of Iraqi defiance of UN Security Council resolutions. The coalition formed the Coalition Provisional Authority (CPA) to provide for the administration of Iraq during the period of transitional administration, to restore conditions of security and stability, and to create conditions in which the Iraqi people could freely determine their own political future. The UN Security Council acknowledged the authorities of the coalition and provided for a role for the UN and other parties to assist in fulfilling these objectives. The CPA disbanded on June 28, 2004, transferring sovereign authority for governing Iraq to the Iraqi Interim Government (IIG). Based on the timetable laid out in the Transitional Administrative Law (TAL), the IIG governed Iraq until elections were held on January 30, 2005; thereafter the Iraqi Transitional Government assumed authority. In May 2005, the Iraqi Transitional Government appointed a multi-ethnic committee to draft a new Iraqi Constitution. The new constitution was finalized in September 2005, and was ratified in a nationwide referendum on October 15, 2005. On December 15, 2005, Iraqis again went to the polls to participate in the first legislative elections as laid out by the new constitution. The new four-year, constitutionally based government took office in March 2006, and the new cabinet was approved and installed in May 2006.

People of Iraq

Almost 75% of Iraq's population lives in the flat, alluvial plain stretching southeast from Baghdad and Basrah to the Persian Gulf. The Tigris and Euphrates Rivers carry about 70 million cubic meters of silt annually to the delta. Known in ancient times as Mesopotamia, the region is the legendary locale of the Garden of Eden. The ruins of Ur, Babylon, and other ancient cities are located in Iraq. Iraq's two largest ethnic groups are Arabs and Kurds. Other distinct groups include Turkomen, Chaldeans, Assyrians, and Armenians. Arabic is the most commonly spoken language. Kurdish is spoken in the north, and English is the most commonly spoken Western language. The majority (60%-65%) of Iraqi Muslims are members of the Shi'a sect, but there is a large (32%-37%) Sunni population as well, made up of both Arabs and Kurds. Most Kurds are Sunni Muslim but differ from their Arab neighbors in language and customs. Communities of Christians, Mandaeans, and Yezidis also exist. Iraq’s once-substantial Jewish community has almost completely disappeared from the country. In recent years, a large number of Iraqis have been displaced, and there are currently 199,179 Iraqi refugees registered with the UN High Commissioner for Refugees (UNHCR) in Jordan, Syria, Lebanon, Egypt, Turkey, and Iran. UNHCR estimates that approximately 1.5 million Iraqis displaced by sectarian violence following the Samarra Mosque bombing of February 2006 remain internally displaced inside Iraq. For more information on Iraqi refugees, internally displaced persons, and conflict victims, please visit: http://www.state.gov/g/prm/108717.htm . Nationality: Noun and adjective --Iraqi(s). Population (July 2011 est.): 30,399,572. Population growth rate (2011 est.): 2.399%. Ethnic groups: Arab 75%-80%, Kurd 15%-20%, Turkoman, Chaldean, Assyrian, or others approximately 5%. Religions: Muslim 97% (Shi’a 60%-65%; Sunni 32%-37%), Christian and others approximately 3%. Languages: Arabic (official), Kurdish (official), Turkoman (a Turkish dialect), Assyrian, Armenian. Education: Years compulsory --primary school (age 6 through grade 6). Literacy (2006 UNESCO est.)--74.1%. Health: Infant mortality rate --41.68 deaths/1,000 live births. Life expectancy --70.55 yrs.