Post-war Iraq is a pawn in Middle East's new Cold War



As he marshalled the United States for war in February 2003, President George W Bush declared: "A new regime in Iraq would serve as a dramatic and inspiring example of freedom for other nations in the region."
Since then, Iraq has indeed become a dramatic example for the Middle East, but not in the ways that Mr Bush and his administration envisioned. The release of nearly 400,000 secret US military field reports by the WikiLeaks website shed new light on how destructive the American invasion of Iraq had been - to Iraqis and the region as a whole. The documents emphasise how the Iraq conflict has unleashed a new wave of sectarian hatred and upset the Gulf's strategic balance, helping Iran emerge as the dominant regional power.
Today, nearly eight months after the March 7 parliamentary elections, Iraqi leaders still cannot agree on who should lead the country. Both Prime Minister Nouri al Maliki and his main rival, Iyad Allawi, the former premier whose coalition won the elections by two seats, insist that they have the right to form the next government.
As Iraq's Sunni, Shiite and Kurdish communities argue over sharing power and the country's oil wealth, violence is on the rise yet again. Militants loyal to al Qa'eda are seeking to exploit the current political paralysis and to further destabilise Iraq. On Sunday, gunmen besieged a Catholic church in Baghdad, leaving 58 people dead. On Tuesday, a series of bombings in mainly Shiite areas of Baghdad killed at least 90 people and injured several hundred.
More broadly, relations between Sunnis and Shiites throughout the Middle East are badly strained by the sectarian bloodletting in Iraq. Sunnis are worried about the regional ascendance of the Shiite-led regime in Iran; its nuclear programme; its growing influence on the Iraqi leadership; and its meddling in other countries with large Shiite communities, especially Lebanon.
Iran is the biggest beneficiary of the American misadventure in Iraq. The United States ousted Tehran's sworn enemy, Saddam Hussein, from power. Then Washington helped install a Shiite government for the first time in Iraq's modern history. As US troops became mired in fighting an insurgency and containing a civil war, Iran extended its influence over most of Iraq's Shiite factions.
Since 2004, the political struggle between the United States and Iran to influence events in Iraq has spread onto the battlefield. The Iranians have provided weapons, training and sanctuary to several Iraqi militias that in some cases have acted as Iranian proxies, according to the US documents revealed by WikiLeaks.
And the Iranian regime has gained the upper hand in the latest political manoeuvring. Tehran has brought together two of its staunchest Shiite allies: Mr al Maliki and the anti-American cleric Moqtada al Sadr. On October 1, the day that Iraq surpassed the world record - 207 days - for the time between a parliamentary election and the formation of a government, Mr al Sadr's bloc finally backed Mr al Maliki in his bid to remain in office. Although Mr al Maliki still has not secured a majority in the 325-seat parliament, Mr al Sadr's support is likely to help the premier in his effort to reach a deal with other factions, especially the Kurds.
But Mr al Sadr's political ascendance threatens to stoke sectarian tensions: his followers were responsible for some of the worst atrocities against Sunnis during Iraq's recent civil war. Mr al Sadr's militia, the Mahdi Army, unleashed death squads that assassinated Sunnis and drove them out of Shiite neighbourhoods. The Mahdi Army is among several Iraqi Shiite militias that received training and weapons from Iran, according to US documents in the WikiLeaks archive. These weapons included rockets, magnetic bombs, high-powered rifles and surface-to-air missiles that were used to attack US helicopters.
By joining with Mr al Sadr, Mr al Maliki has been trying to outmanoeuvre his rival Mr Allawi, whose secular coalition attracted strong support among Iraq's Sunni minority. Such backdoor tactics threaten to once again unleash the sectarian warfare that shattered Iraq. Washington and its Arab allies prefer Mr Allawi as the next leader of Iraq, while Iran wants to ensure that Mr al Maliki or one of its other Shiite allies remains in power.
Aside from Iraq, today's Middle East has been shaped by several other proxy wars. In Lebanon, an alliance between Washington and Sunni Arab regimes - Egypt, Jordan, Saudi Arabia and other Gulf countries - backed a Sunni-led government against Hizbollah, a Shiite militia funded by Iran. And in the Palestinian territories, Iran and Syria supported the militant Hamas, while the United States and its Arab allies backed Palestinian President Mahmoud Abbas and his Fatah movement. The region is experiencing a new Cold War.
With US influence waning and Iran ascendant, Iraq's other neighbours are still jockeying to gain a foothold with the new government in Baghdad. For example, Saudi Arabia's ruling Al Saud dynasty views itself as the rightful leader of the Muslim world, but Iran is challenging that leadership right now. Although Saudi Arabia has a Sunni majority, its rulers fear Iran's potential influence over a sizable and sometimes-restive Shiite population concentrated in the kingdom's oil-rich Eastern Province.
The brutal war between Iraqi Sunnis and Shiites unleashed sectarian hatreds that are difficult to contain. This blowback has been most keenly felt in Lebanon, a small country with a history of religious strife. During Lebanon's 15-year civil war, which ended in 1990, the sectarian divide was between Muslims and Christians. This time, the conflict is mainly between Sunnis and Shiites - and it is fuelled, in part, by the bloodbath in Iraq.
The trove of secret reports unveiled by WikiLeaks reinforced a sad truth: far from becoming a model of freedom and religious coexistence, Iraq remains a pawn in larger regional battles - and a powder keg that could ignite sectarian conflict across the Middle East.
Mohamad Bazzi is an adjunct senior fellow at the Council on Foreign Relations and a journalism professor at New York University

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”