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Iraq's Faltering Infrastructure

Author: Lionel Beehner
June 22, 2006
This publication is now archived.

Introduction

Three years after the fall of Saddam, many Iraqis still lack basic amenities like potable water, regularly endure power outages, and have yet to fully benefit from their country's immense oil wealth. "Efforts to rebuild Iraq are failing," says Representative Henry Waxman (D-CA), a leading Democratic critic of Bush administration reconstruction efforts. "We've spent $2 billion and the situation is worse than when we arrived." With triple-digit temperatures fast approaching, "the amount of electricity has to improve for people to survive," said Iraqi Foreign Minister Hoshyar Zebari in a June 16 CFR meeting. Although security remains Iraqis' foremost concern, one out of every three Iraqis say restoring infrastructure—not job creation, amending the constitution, or expelling U.S. troops—should be the government's top priority, according to a March 2006 International Republican Institute poll.

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How is the quality of life for average Iraqis?

Iraq's human development indicators are among the lowest in the Middle East, according to the World Bank. Back in the 1970s and 1980s, Iraq led the Middle East in development of infrastructure, social services, and health care. Yet after years of successive wars and sanctions, many Iraqis today do not have access to basic staples like potable water and electricity. A shortage of hospitals and health-care facilities has added to their hardships. Current health statistics on Iraq are difficult to find, but a UNICEF report said Iraq's mortality rate for children under five rose from 5 percent in 1990 to 12.5 percent in 2004.

Of 142 health clinics slated for construction with $180 million in U.S. funds, only six have been built so far, according to a recent report by the Special Inspector General for Iraq Reconstruction (SIGIR), a U.S.-funded independent oversight office. Water access also remains limited. Only around 8 million Iraqis—one-quarter of the population—have access to potable water, compared to nearly 13 million before the war. Of the 136 water and sanitation projects originally planned by the U.S. government, just forty-nine are expected to be completed. Finally, a recent report by the New York Times claims that "black oil," a byproduct of oil refineries, is polluting the Tigris River and contaminating water supplies in northern Iraq.

What explains Iraq’s lack of electricity?

Iraq has generated roughly 4,000 megawatts per month since the fall of Saddam in March 2003, well short of the American government’s stated goal of 6,000 megawatts per month. In May 2006, there were less than ten hours of electricity per day nationwide; in Baghdad, that number dropped to below four hours a day. One neighborhood in central Baghdad had no power for over a month, according to a June 6 cable (PDF) sent by the U.S. Embassy in Baghdad, made public by the Washington Post. The reasons for these lingering electicity shortages are multifold. “We misjudged the environment,” says Frederick Barton, co-director of the Center for Strategic and International Studies’ Post-Conflict Reconstruction Project, “and decided to do the simplest solution, which was to build or refurbish large, centralized facilities, and misjudged there was going to be chronic sabotage, looting, and other things.” A better plan, he says, would have been to set up neighborhood generators, run by locals, capable of reaching between forty and fifty houses. “If there were a problem, everyone would know where to go to solve it,” Barton says. Iraq’s power outages are also due to interruptions at the micro level, experts say, which include damaged transmission lines  from insurgent attacks and insecure relay stations.

How does current power generation compare with the Saddam era?

Experts say power disruptions and brownouts also occurred under Saddam but that service is even less reliable now. "There's no question that [power outages] are worse now," says a UN development official, who would only speak on condition of anonymity. After the first Gulf War, when U.S. planes shelled Iraqi power stations and disrupted much of the country's electricity grid, Saddam's government acted relatively quickly to restore service, especially in Baghdad.

What is the estimated cost of reconstruction in Iraq?

The U.S. government has appropriated some $21 billion in supplementals for reconstruction and relief funding. In addition to the $5 billion Iraq Security Forces Fund, approved in May 2005, and the $19.6 billion Development Fund for Iraq, used for Coalition Provisional Authority contracts, the total reconstruction tab climbs to $45 billion, according to the SIGIR report. Prior to the invasion of Iraq, then-Deputy Secretary of Defense Paul Wolfowitz famously predicted oil revenues would cover the bulk of the reconstruction bill. But Iraq's postwar oil profits have fallen short of prewar expectations. To alleviate the U.S. and Iraqi financial burden of reconstructing Iraq, donor nations pledged to give around $13 billion at the 2003 Madrid Conference, and have since committed to an additional billion dollars. To date, however, just $3 billion has been paid. President Bush recently said he will dispatch diplomats to Europe, Asia, and the Middle East to press countries to follow through on their previous pledges.

What is the status of Iraq’s oil production?

Oil output, which constitutes roughly half of Iraq's gross domestic product, is still well below its prewar level of 2.5 million barrels per day (bpd), an output that was already attenuated because of UN sanctions against Saddam's regime. Despite $1.7 billion of U.S. investment, Iraq is still producing below 2 million bpd, well short of its official OPEC quota of 3.5 million bpd. Monthly oil revenues from exports remain a meager $2.9 billion (by comparison, Saudi Arabia, the world's top oil producer, had monthly revenues last year of around $13 billion). U.S. officials are eager to boost Iraq's oil revenues to support the newly formed government and help pay for a number of planned projects. Iraq holds one of the world's largest untapped reserves of oil but its existing fields are sorely outdated and underdeveloped.

Why is oil production so low?

The Iraqi government has been unable to fully secure the country's pipelines, which has led to looting, sabotage, and insurgent attacks. High government subsidies have also artificially lowered gas prices—at least compared to some of Iraq's neighbors—which has encouraged smuggling. Kenneth Katzman, a Middle East expert at the Congressional Research Service, says some 10 percent of the oil in Basra, an oil-rich city in southern Iraq, gets loaded onto trucks and hauled, illegally, off to Jordan and Syria. "There is a mafia in the country that controls the distribution of oil products," an oil ministry official told the Kuwaiti News Agency. "It's impossible to get rid of them or even to get close to them." Fuel shortages in Iraq have added to the country's black market. Corruption among oil ministry officials remains endemic. In addition, the government's inability to resolve how it will distribute oil revenue has stymied outside investment into Iraq's badly outdated and underfinanced oil sector. Iraq's constitution remains unclear on whether the revenue from future oil field discoveries will be equitably distributed to all Iraqis or not. Meanwhile, demand for gasoline has spiked since March 2003, as the number of registered cars in Iraq has more than doubled to 3.1 million, creating lines at the pump that can last twelve hours.

What steps are being taken to improve Iraq’s oil output?

Iraqi Oil Minister Husain Shahristani, a respected politician, has promised to raise production capacity at local refineries, curb corruption at the ministry, and reduce sabotage and smuggling. Yet much of his ability to control his ministry will depend on the distribution of Iraq's potentially vast oil wealth. President Bush recently suggested creating a national fund, not unlike the one created in Alaska, which would distribute oil revenues to Iraqi citizens. Barton of CSIS seconded the president's plan. "There must be some ownership from the Iraqi public," he says. "If they're not involved, there will continue to be sabotage and attacks." One suggestion, he says, might be to create an education fund for all Iraqis under the age of fifteen, financed by oil profits.

What progress has been made rebuilding Iraq’s infrastructure?

Perhaps the most significant improvements have come in Iraq’s telecommunications sector, experts say. According to the Brookings Institution’s Iraq Index, the number of telephone subscribers in Iraq is greater than 7 million, well over the estimated prewar level of 833,000 subscribers. More than 200,000 Iraqis now have Internet subscriptions, compared to just a few thousand subscribers before the war. Fitful progress has also been made restoring Iraqis’ electricity. “The United States has put over 2,500 new or refurbished megawatts onto the grid, and that's a good start,” says Stuart Bowen, the inspector general of SIGIR. The $3.4 million Bardaka Substation, in Iraq’s northern province of Sulaymaniyah, was recently completed and will provide power to more than 5,000 area households.

There are other hopeful signs. First, the buildup of Iraq’s police force should provide more security and reduce costs. Japan recently announced the withdrawal of its 600 noncombat troops from al-Muthanna province in southern Iraq, where they were engaged in reconstruction and humanitarian work. Iraqi forces will take over their duties and provide security in the province. Also, the World Bank has opened up a branch in Baghdad. “This could be somewhat of a turning point with the World Bank being more engaged on the ground,” says James Mitchell, SIGIR’s assistant inspector general for congressional and public affaris. The Bank’s trust fund has already financed ten reconstruction projects worth some $375 million.

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