Corruption, deep disparity mark Iraq's oil legacy post-2003

Basra province boasts most of Iraq’s oil reserves and is symbolic of the deep disparities that have endured since the 2003 U.S.-led invasion that remade the country's political order

The oil is pumped 24 hours a day several meters from Raghed Jasim’s home in Iraq’s crude-rich southern heartland. Gas flares from the field light the night sky bright orange, spewing acrid smoke; when the wind picks up, the 40-year old’s clothes are coated black.

For Iraq’s poorest, evidence of the country's monumental oil wealth is inescapable. So is the knowledge that very little of it trickles down to them.

Jasim’s savings were depleted when he was diagnosed with cancer last year, a disease he is convinced was caused by the toxic plumes. Twenty years since the U.S.-led invasion toppled Saddam Hussein and remade Iraq’s political order with the promise of democracy and freedom, he has one wish: To find a way to leave.

“There is no future here for my children,” he said.

Basra province, which boasts most of Iraq’s oil reserves, is symbolic of the deep disparities that have endured since the 2003 invasion. Basra continually bewilders experts, envoys and residents: How can a relatively stable province so rich in resources rank among the poorest and most under-developed in the country?

“Of course, I blame the corrupt Iraqi government,” said Jasim, a policeman, echoing a widespread view in the region. “But I blame the Americans too. They replaced our leaders with thieves.”

Local leaders in Basra talk of the oil reserves as both a blessing and a curse. They say resources bring affluence but have also given rise to vicious competition between political elites and armed groups at the expense of the Iraqi people.

The power-sharing system in place since 2003, which divides the state and its institutions along ethnic and sectarian lines, sucks oil wealth into a pool of corruption and patronage. The higher the oil price, the more entrenched this system becomes as sectarian-based parties claim lucrative ministry portfolios, appoint loyalists in key positions and dole out public jobs to ensure support. According to the International Monetary Fund, public sector employment tripled from 2004 to 2013, but service delivery in health, education and power sectors remained inadequate.

The result is that elections keep establishment parties in power. Voter turnout has dropped to record lows.

Apart from institutional failures, air pollution is extensive in Basra, and salinity levels arising from a severe fresh water crisis are leading causes of illness, according to local researchers. Unemployment is rampant, with more than half the population below the age of 25.

Public anger gave rise to violent protests in 2018, the precursor to mass anti-government protests in the capital a year later. But a swift crackdown by security forces and assassinations by armed groups have created a climate of fear.

“The killings silenced many activists,” said Basra activist Ammar Sarhan. “Business continues as usual.”

The 2003 toppling of Saddam propelled the oil-rich country into the global economy, opening the doors to foreign investment. In pre-invasion planning, U.S. advisors and their Iraqi opposition allies in exile had envisioned a shock system of reforms that would revamp Iraq’s oil industry and fund post-war reconstruction.

Instead, violence hobbled oil production for years. A charm offensive by then-Oil Minister Hussein al-Shahrestani paved the way for major oil contracts to be awarded in 2007 and 2009. Today exports reach over 3 million barrels a day, double the rate in the early 2000s. The state budget, which in 2021 reached up to $90 billion, is financed almost entirely by oil revenues. Still, the government fails to deliver essential services, including water and electricity.

In Basra, conditions rank amongst the worst in the country. Unemployment stands at 21%, above the national average of 16% according to a 2022 study by the International Labor Organization. Statistics for poverty rates vary from 10-20% according to various studies and local economists. Meanwhile, the province boasts around 70% of the country's oil production capacity.

The road leading to Jasim’s humble home is rocky and unpaved.

In 2003, he was a young man bewitched by the Bush administration’s rhetoric of building a democratic Iraq, he said. “We were full of hope,” he recalled. Twenty years on, he is middle-aged, tired of rampant government corruption and recovering from cancer.

The loan he had taken out to build a home was used up to pay for $30,000 in private medical bills. Basra’s decrepit public hospitals were overwhelmed and unable to provide treatment, he said.

His is a common story in Nahran Omar, a village of fewer than 2,000 people adjacent to a state-run oil field where cancer rates are disproportionately high. Every family here has a story of illness and debt, said Bashir Jabir, the mayor.

“After 2003, more and more oil was exported, and we expected to benefit from this,” he said. “Instead, it hurt us.”

The government long played down the link between cancer rates in the south and oil production activity, saying cases are only marginally higher than the rest of the country. This changed in 2022, when then-Environment Minister Jassim al-Falahi acknowledged that pollution from the fields was the main reason for the rise in sickness.

Nahran Omar highlights a tragic irony: The natural gas burned from the oil fields, if captured, could solve Iraq’s perennial electricity shortages and reduce pollution. But securing investment to do this has been set back by protracted contract negotiations, a common headache for most major foreign investors.

The entry of foreign investors also exacerbated competition between tribes, said Sheikh Muhammed al-Zaidawi, who leads an assembly of southern tribal elders. Tribes, which often wield more influence than government institutions in the south, pressure foreign companies for jobs, compensation, training for youth and development of their villages.

“Most of the problems between tribes today are caused by the presence of oil companies,” he said, “All of them want to benefit.” Tribal disputes often turn into deadly gun battles.

Reliance on the oil industry has stifled private sector development. Nearly every prime minister since the invasion has repeated calls to diversify the economy and boost incentives for Iraqi businesses.

Nidhal Musa is one success story.

She grew up in a poor suburb of Basra city and was 35 when the U.S. invaded Iraq. She spent subsequent years taking care of her sick and disabled husband. Desperate to earn money, she began sewing clothes to sell in the local market.

By 2013, she had gathered a group of women just like herself, beleaguered and in need of money to support their families. She pooled together enough funds to open a garment factory and became known for employing the poor.

But not everyone welcomed her success.

In 2022, Musa received a slew of death threats. “Be very careful,” one message read. She believes she is being targeted because she refused to use her local fame to back a powerful political party that asked her to promote their campaign in 2021 elections.

“They try to keep us weak,” she said. “They know perfectly well, if the people are hungry, they will be preoccupied only by their hunger.”