Finally, some good news from Iraq. Citigroup has announced that it will open an office in Baghdad, the first major U.S. bank to enter Iraq. Citi bets that Iraq could be a $2 trillion economy by 2050. That may be a bit optimistic, but Iraq has far more potential than conventional wisdom among the American foreign policy community would allow.
There is already significant investment in Iraq—oil companies, of course, but also car dealerships, hotels, and various goods and services—and there will surely be more now that the United Nations Security Council has voted formally to lift sanctions on the war-weary country. The successful visit to Iraq last month of Kuwait’s prime minister has also infused the Iraqi business community with optimism, especially in Basra, quickly becoming the financial capital of Iraq, which is desperate to have investors to balance out Iran, which often charges exorbitant prices for inferior work.
While terrorism remains a threat in Iraq—and, alas, it may get worse as sectarian winds continue to blow through the region—the biggest obstacle to the country remains corruption. The victims of terrorism may number in the thousands, but corruption affects millions. Modern banking is essential to the fight against corruption. Ministries in Iraq operate with perhaps ten times the number of employees they need. Most employees do not do anything, and many do not even show up to work except to collect salaries, which are paid in cash. Sometimes, officials hire employees on the condition that they get a cut of their salaries on payday. When deposits are made electronically directly into Iraqis’ bank accounts, it’s not as easy for senior officials to skim money from those below them. I explained the scam here, in the context of Iraqi Kurdistan.
Iraq may be finally turning a corner. Lukman Faily, Iraq’s talented new ambassador to the United States who arrived just last month, was right earlier this week to suggest there could be a new, more positive era in U.S.-Iraq relations. Indeed, the ball is in America’s court. As Faily writes (and as Prime Minister Nouri al-Maliki stressed when we met last month):
The next clear step is for the U.S. and Iraq to fully implement the Strategic Framework Agreement, signed prior to the 2011 withdrawal of U.S. forces, which defines the overall political, economic, cultural and security ties between our two countries. Americans should see this agreement not as a ticket out of Iraq, but as the foundation for a long-term partnership with the people and government of Iraq… With Iraq taking its place as a partner, not a protectorate, Americans can help by providing political, diplomatic and security assistance, in addition to technical know-how and investment capital. Now that Iraq is moving toward a market economy friendly to foreign investment, Americans can provide what our nation needs: expertise on energy technologies, engineering, design, construction and financial services. Iraq offers tremendous investment opportunities for developing and servicing telecommunications, health care, education, water treatment, and bridges and highways, to name a few.
Citi is making the right move, and the Iraqis are asking for other American firms to follow. We have nothing to lose and everything to gain. Alas, it seems that too many in the administration would sacrifice the mutual development and increased commerce that could result from more sustained American investment, on the belief that Iraq either represents original sin, or that it remains the metaphorical four-letter word. Alas, from the point of view of America’s interests, there is no attitude as short-sighted and counterproductive as the Obama administration’s unwillingness to grasp Iraq’s outstretched hand.