No End to Impasse

The withdrawal of the last US troops in late 2011 has not triggered a descent into civil war, but Iraq remains far from achieving the degree of political stability needed to address key issues affecting the future of the Iraqi state. Sectarian tension continues to be fueled by terrorist attacks carried out by Sunni extremist groups linked to Al Qaeda. More worrisome, in terms of the prospects for long-term stability, is the mounting evidence that the cohabitation of Sunnis, Shiites, and Kurds within the national government, which most observers agree is essential to Iraq’s survival as a unified state, is incompatible with effective governance.

Prime Minister Nuri al-Maliki has fended off attempts by his own coalition partners to topple him, but his strategy highlights the dilemma that will confront any leader of a broad-based coalition, namely, the fact that satisfying the demands of any one group is bound to alienate one or both of the others. Confronted by that reality, Maliki has sought to use it to his advantage, wooing each of his coalition partners in turn, thereby keeping them divided and consolidating his own power at their expense.

For now, it appears that the status quo will be maintained. Iraqiyya will struggle to reach the required number of votes to oust the prime minister, and Maliki has warned that he will call an early election if the Sunni bloc persists in its efforts to remove him from office. In that event, it is quite likely that Maliki’s State of Law will emerge as the largest bloc, ensuring that Maliki gets first crack at forming the next government.

Most evidence suggests that Maliki remains the preferred choice of both the US and Iran to head the government, if only because there are no alternatives with a proven record of success at sustaining a national unity coalition, which, despite it obvious weaknesses, remains the least bad option.

Forecast Summary

SUMMARY OF 18-MONTH FORECAST

REGIMES & PROBABILITIES National Unity Coalition 45% Divided Government 35% Civil War
20%
RISK FACTORS CURRENT
Turmoil Very High SLIGHTLY LESS SLIGHTLY MORE MORE
Investment
  Equity High SLIGHTLY LESS Same Same
  Operations Very High SLIGHTLY LESS SLIGHTLY MORE MORE
  Taxation Low Same Same Same
  Repatriation High SLIGHTLY LESS SLIGHTLY MORE MORE
  Exchange Moderate Same SLIGHTLY MORE MORE
Trade
  Tariffs Low Same Same SLIGHTLY MORE
  Other Barriers Very High SLIGHTLY LESS SLIGHTLY MORE MORE
  Payment Delays High Same MORE MORE
Economic Policy
  Expansion Low SLIGHTLY MORE MORE MORE
  Labor Costs High Same Same SLIGHTLY MORE
  Foreign Debt Low Same SLIGHTLY MORE MORE

SUMMARY OF FIVE-YEAR FORECAST

REGIMES & PROBABILITIES National Unity Coalition 40% Divided Government 35% Formal Partition 25%
RISK FACTORS BASE  
Turmoil High SLIGHTLY LESS MORE SLIGHTLY MORE
Restrictions
   Investment High SLIGHTLY LESS Same SLIGHTLY LESS
   Trade Moderate Same SLIGHTLY MORE Same
Economic Problems
   Domestic High LESS SLIGHTLY MORE Same
   International Moderate Same SLIGHTLY MORE Same
   * When present, indicates forecast of a new regime

For more information, check out the Iraq Full Report!