2018 election


Election Recount: Sadr Retains Victory

By John Lee.

Moqtada al-Sadr has reportedly retained his lead in Iraq’s parliamentary election following a full recount.

According to Xinhua, the results showed no change in 13 of Iraq’s 18 provinces, and changes in four provinces involving five seat-winners within their own coalitions.

The recount did not alter the initial results significantly, with Sadr keeping his total of 54 seats.

(Sources: Reuters, Xinhua)

Electoral Recount Completed – UN Congratulates IHEC

SRSG Kubiš congratulates the IHEC Board of Judges on completion of the electoral recount and looks forward to a timely conclusion of the remaining stages of the electoral process

The Special Representative of the United Nations Secretary-General (SRSG) for Iraq, Mr. Ján Kubiš (pictured), welcomes today’s announcement by the Board of Judges of the Independent High Electoral Commission of the completion of the electoral recount in all 18 Iraqi governorates and also out-of-country voting.

SRSG Kubiš said:

I congratulate the Board of Judges on this important milestone towards the conclusion of Iraq’s 2018 electoral process.

“The timely, transparent, well-organised, credible conduct of the recount was made possible by the hands-on impartial work of the Board of Judges, and the dedication and professionalism of all recount staff, including Independent High Electoral Commission staff and judiciary personnel. The manner in which they have handled the recount has increased public confidence in the electoral process, and election results.

“I now encourage the Board of Judges and relevant state institutions to devote their attention to the timely announcement of provisional results and the speedy resolution of any outstanding appeals.

“Throughout the recount process, an experienced team of United Nations electoral experts has followed the process, providing advice and assistance. The United Nations remains available to provide further expert advice and assistance to the Board of Judges as they supervise the tabulation of recount results and all subsequent stages in certification of the results by the Federal Court.”

(Source: UN)

Market Review: “Frenzies and Market Bottoms”

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market, as measured by the RSISUSD index, marked an important bottom in July as part of a likely bottoming process. The multi-month bank selling shifted into high gear. This intensified into a frenzy, climaxing by the middle of the month with the liquidation of a large foreign position in the Bank of Baghdad (BBOB) – one of the top banks on the Iraq Stock Exchange (ISX). At the worst point in July, BBOB and the index were down -24% and -12% respectively for the month, after which both reclaimed these losses to end up +2.4% and +0.5%.

The selling in the banking sector over the last few months, driven by concerns over declining FX margins (as explained here in the past), was paced by consistent foreign selling in BBOB. The size of the selling exaggerated the stock’s declines which had a knock-on effect on other banks which declined in-tandem and dragged the market with them given the sector’s dominance of trading on the ISX.

Local retail trading is dominated by speculators, yet locals tend to appreciate the true values of local assets especially at extreme valuations. At the worst point, BBOB’s market capitalization was equal to about 0.3x Book Value, 8.5% of assets and 15% of cash (based on the trailing 12 months) which would suggest that the stock was discounting some sort of end of the world type event. The locals, aware that such a catastrophe was not around the corner and that the decline was a function of a portfolio liquidation, raised funds from family, friends and banks in order to buy BBOB. Joined by a few foreign investors, undoubtedly aware of the same valuations, the combination absorbed all the significant selling, after which the stock began to climb.

Irrespective of BBOB’s strong position among local banks, it too suffered from the same forces that crushed the sector’s earnings, as discussed in last month review of banks (Of Banks and Budget Surpluses). Furthermore, it had its share of company specific issues and structural weaknesses that were exposed by the pains of 2014-2017, including the recent pressure on FX margins. The bank’s focus on addressing these weaknesses at the expense of revenue growth is hindering near term growth. However, given the quality of its management, strong position with high quality customers (in particular foreign companies) and the strength of its franchise, it should emerge in a position to resume growth in the recovering economy.

As explained last month, the banks’ leverage to the economy crushed their earnings. In particular, the double whammy of the ISIS conflict and the collapse in oil prices squeezed government finances as expenses soared while revenues plummeted. The government resorted to dramatic cuts to expenditures by cancelling capital spending and investments which, due to the centrality of its role in the economy, led to year-year declines in non-oil GDP of -3.9%, -9.6% and -8.1% for 2014, 2015 and 2016 respectively. Ultimately, the government had a cumulative deficit of around USD 41bn during this period and accumulated significant arrears to the private sector in the process.

The same leverage should work in reverse as the expected budget surpluses of USD 28.5bn for 2017-2019 should have simulative effects on economic activity which ultimately should translate to stronger future earnings for the banks. These were discussed in further details at: “Forget the Donations, Stupid.”

For BBOB, the changes for the worse during the years of conflict can be seen through the three charts below that look at loans/non-performing loans (NPL’s), deposits and trade finance and their association with budget surpluses/deficits. BBOB Data as supplied by the research team at Rabee Securities is gratefully acknowledged. Data from 2010-2014 are based on Iraqi accounting standards, while data from 2015-2017 are based on IFRS.

BBOB’s loan book growth peaked in 2015, while NPL’s grew at the height of the crisis in 2016. The sharp decline in the loan book since then exaggerated the growth of NPL’s as a percentage of loans, as NPL’s declined in absolute terms marginally in 2017 vs. 2016.

Bank of Baghdad: Loans, NPL’s & Loan provisions 2011-2017

(Source: Central Bank of Iraq (CBI), Rabee Research, Asia Frontier Capital (AFC))

Though NPL’s are relatively high, even during the relative boom times, loans as a percentage of deposits have been very low at the mid-20%’s level as can be seen below.  Moreover, most of these loans are collagenized by property as most banks’ loans are in Iraq where the norm is for collateral value at 2x the loan. BBOB’s relatively large NPL’s were a function of the relative size of their loan book which meant a larger exposure to riskier loans taken during the boom years.

Bank of Baghdad: Deposits and Loan/Deposit ratio 2011-2017

(Source: Central Bank of Iraq (CBI), Rabee Research, Asia Frontier Capital (AFC))

The decline in deposits as a function of the economic contraction was made worse by the decline in BBOB’s trade finance business as that meant the loss of funds deposited as partial collateral required for the provisioning of trade finance.

Trade finance, once an engine of growth for the bank suffered as a result of the sharp economic contraction brought about by investment cuts and the slowdown in consumer spending.

Bank of Baghdad: Trade Finance 2011-2017

(Source: Central Bank of Iraq (CBI), Rabee Research, Asia Frontier Capital (AFC))

It’s logical to conclude that the sea change which has taken place in the government’s financial health would reverse the trends that affected the sector’s earnings as the significant stimulus to non-oil GDP should lead to sustainable economic activity which would provide BBOB room to recover, address its weaknesses and grow.

The question- when will these budget surpluses find their way into the economy through government action- has been partly answered by the government’s response to nationwide protests that erupted in early July, demanding the provision of services. The first response was to allocate USD 3bn to the city of Basra to fund long delayed infrastructure projects, a USD 669mn injection into the country’s housing fund to provide about 25,000 housing loans, plus a number of smaller projects in the southern governorates.

The eruption of protests in the city of Basra and their spread across the southern governorates right to Baghdad has, as is the usual case in all Iraqi events, led to two polar views. The first dismisses these as the usual ritual of summer protests ignited by the scorching heat that would soon settle with a few government handouts and the end of summer – echoing perhaps an old Iraqi politician who likened Iraqis’ anger to effervescent salts that erupt with a great fanfare before settling down. The second warns of the emergence of instability given that the Iraqi political establishment is incredibly slow to change its bad old habits, if at all, but that the young angry population is running out of patience.

While both arguments have merit, current protests should be seen from a wider prism in that they are the fourth instalment of a protest movement that began in 2010 and developed in both scope and maturity. The last incarnation in 2015 had a profound effect on how the election was fought and its ensuring results, as it led to the break-up of the ethno-sectarian monolithic blocs that were dominant over the past 15 years and which were at the root of Iraq’s instability. Thoughts supporting this line of thinking appear in (The Protest Movement, the Politicians and the Elections).

The influential religious leadership has supported the protest movement calling for the quick formation of a government focused on meeting the demands of demonstrators. This should hasten the formation of the government ending the current uncertainty. However, irrespective of how it is formed, the government would have the financial wherewithal to start the reconstruction of the country and the provisioning of infrastructure in the form of cumulative two-year budget surplus of USD 18.8bn by end of 2018- equal to a stimulus of 14.5% of non-oil GDP once reconstruction projects are underway. These would be enhanced by potential budget surplus of USD 9.3bn in 2019 or a further 6.8% stimulus to non-oil GDP. (Details available in a recent article).

It worth noting that while Iraq has its share of challenges, none are unsolvable in that the key issue of the last few years has been a sequence of crises that have forced successive governments into short -term solutions without providing overall long-term solutions. For instance, the current demonstrations were started by anger over the lack of electricity coverage beyond a few hours each day. Yet, “of 26 gigawatts installed generation, theoretically enough to meet the current 23 GW of demand, less than 17 GW is operable because of lack of fuel, maintenance and transmission capacity: source.” As such, these are addressable in a reasonable timeframe by a focused government with a clear mandate which could emerge given the current pressures from the electorate supported by the religious authority.

Finally a report on Iraq’s debts addresses a number of misconceptions on its debt profile that would have a huge implication for its ability to fund the needed reconstruction and the provisioning of services is here (Understanding Iraq’s Debt).

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS). He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

 

Video: Coalition talks “still under way”

From Al Jazeera. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

Negotiations are still under way to form a governing coalition in Iraq. No party won a majority during May’s national election, and the result is not yet confirmed, because a manual recount was called over allegations of vote rigging.

The parties trying to lead Iraq have major differences in their attitudes towards the United States and Iran.

But the big winner in Iraq’s contested election is expected to be Shia leader Muqtada al-Sadr, who confidently expects his party to lead the next government once the revised result has been confirmed by the country’s Supreme Court.

Meanwhile, protests, which began in the oil-rich southern city of Basra in early July, have spread to eight Iraqi provinces, leading al-Sadr to call on all the winning lists of Iraq’s May 12 parliamentary election to suspend government formation talks until the demands of protesters are met.

Al Jazeera‘s Imran Khan reports from Baghdad:

Anbar’s Would-Be MPs Still Owe Millions

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

By Kamal al-Ayash.

After Elections, Anbar’s Would-Be MPs Still Owe Millions

Candidates in the recent elections spent millions of dinars on their campaigns in Anbar. Or at least, they promised to. Many small businesses, including copy shops and butchers, are still waiting to be paid.

There were almost 7,000 candidates running for office in the Iraqi elections, held May this year. The central Iraqi province of Anbar had about 350 of their own – and many of those candidates spent big on their campaigns.

In some provinces, local authorities reported that candidates spent as much as US$350,000 and even as much as US$1 million on campaigning. That’s a huge amount of money for Iraq and local small and large business owners are well aware of the windfall the elections can bring them.

But there are also dangers, especially if a candidate didn’t win. Companies that print posters, provide required services for events, or host elector-pleasing conferences will often strike a deal with a politician.

Possibly the politician will only pay a deposit upfront and promise to pay the rest after the election. Or possibly they will work through a broker, who organizes the campaign materials and the deals around them. And sometimes, those promises of payment are not honoured.

Hamid al-Fahdawi, 48, knows all about that. The Ramadi print shop owner says he is still owed more than IQD5 million (around US$4,200) and he’s been trying to contact his creditors. But they appear to have used a mobile phone during the election campaign and then discarded that number afterwards.

“I am still trying to call the candidates who owe me money,” al-Fahdawi says. “I hate hearing that automated tone on the phone that tells me ‘this number is out of reach’.”

Local businesses are relatively savvy about this, says Khalil al-Mohammedawi, a 55-year-old who owns a small printing office in central Fallujah. “There are a lot of people making money during the elections,” he explains. “That includes brokers who act as contact persons between service providers and the politicians. But because of our previous experience, we also know who is going to pay his debts and who is not.”

Al-Mohammedawi also says that some businesses build this risk into the prices they charge and they still make a profit even if they don’t get paid the full amount.

The print shops and small advertising agencies are not the only ones suffering from political non-payers. Large restaurants have catered meals for hundreds of candidates’ constituents and colleagues, often at substantial cost.

“Most of us trusted these candidates and we allowed them to place large orders on their tabs, without asking for payment,” says Hikmat al-Hazimawi, a restaurant owner in Ramadi. “We knew many of them personally, that’s why. What we didn’t know is that things would change after the elections and they would not pay us and would try to avoid us.”

The debts cause a chain reaction, al- Hazimawi adds, because now he cannot pay the people from whom he bought his meat and so on.

Another copy-shop owner in Fallujah disagrees with some of the complaints though. “The people who are owed money are those who never did this before,” Hazem al-Mohammedi suggests.

“They’re new to the business and they don’t know how to deal with these people, or who to deal with. Most of the candidates are actually respectable people and if you deal with them directly, you will be paid. It is the brokers that cause the trouble. Most of the money in those cases is not being spent on goods and services, but on the broker’s margins.”

Market Review: “Of Banks and Budget Surpluses”

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Activity in the economy at large, and the market in particular, came to a virtual standstill at the start of the month as it coincided with last two weeks of Ramadan which ended with the Eid holiday’s in the middle of June.

The start of the summer heat in earnest further contributed to the slowdown of activity. However, the intense focus on the political activity around the election results took the spotlight over the major markers of economic recovery and the banks’ leverage to it.

Average minimum and maximum temperatures in Baghdad in degrees centigrade

(Source: World weather and climate Information)

The elections produced winners and losers who will eventually form a coalition government as reported last month, a process that should take a few weeks but could extend to a few months. Claims of fraud surfaced as in past elections, however this time there was an unusual action by parliament to force a manual recount of the whole vote and a wholesale annulment of certain types of votes (overseas, IDP’s and security forces votes). The parliament’s action was made possible by investigations that suggested that fraud was made possible by hacking the electronic readers of the ballot papers –introduced for the first time this year.

The potential disruption could have resulted in a delayed government formation until early 2019. However, objections to parliament’s action were raised to the Supreme Federal Court, whose ruling on 21st June was a master class response to the conflicting political reactions following the elections. The ruling, provided a framework for a workable compromise as evidenced by its wholesale acceptance by all of Iraq’s political parties.

The ruling is discussed in a recent article: in a nutshell it led to a manual recount of only of those election centres whose results were disputed, and thus should be concluded in a few weeks. The impact will likely be felt in a changed balance of power among the Kurdish parties and among some Sunni parties, but ultimately will not significantly change the balance of power of the main election winners. The process of government formation continued unabated during this period and the broad outlines of it are taking shape.

However, irrespective of how the upcoming government is formed, it would need to address the issues at the heart of the 2015 protest movement that had such a profound effect on how the election was fought and its results. These would be the provision of services and reconstruction, which require much needed overdue investments in the country’s infrastructure and the reconstruction of the liberated areas, estimated at USD 88bn over five years.

Prevailing negative perceptions of Iraq’s ability to fund this have not reflected the transformative effects of higher oil prices and the end of conflict on Iraq’s ability to self-fund the reconstruction of the whole country. These were discussed in detail in a recent article, the highlights of which are: By end of 2018, based on realized oil prices of 2017 and average year-to-date for 2018, Iraq is on its way to have a cumulative two-year budget surplus of USD 18.8bn instead of the initially projected cumulative deficit of USD 19.4bn. This would be equal to a stimulus of 14.5% of non-oil GDP once reconstruction projects are underway, thus further accelerating economic activity. The effects of this stimulus would be enhanced by a potential budget surplus of USD 9.3bn in 2019 or a further 6.8% stimulus to non-oil GDP.

The stock market’s action in June was a continuation of the same trends discussed here over the last few months. By end of June, the market, as measured by the Rabee Securities’ RSISUSD Index, was down -3.5%, bringing its year to date performance to -0.6. Average daily turnover was among the lowest of the last three years and most stocks, in particular the banks continued to decline.

The market’s focus continues to be the effects of the shrinking FX margins on banks’ earnings brought on, paradoxically, by the increasing signs of an improvement in liquidity in the broader economy. These were brought by the steady increases in the market price of the Iraqi Dinar (IQD) versus the USD, lowering its premium over the official exchange rate to 1.2% – the lowest point in a number of years from just under 6% at the end of 2017 and 10% at the end of 2016. FX spreads are one of many sources of revenues for the higher quality banks but constitute the bulk of earnings for the lower quality banks. However, almost all banks were caught in the group’s sell-off which accelerated in recent months.

However, valid as these concerns are, they fail to take into account the transformative effects of the expected budget surpluses of USD 28.5bn for 2017-2019 on the banks’ future earnings through the simulative effects the surpluses would have on economic activity. This same leverage worked in reverse during the double whammy of the ISIS conflict and the collapse in oil prices as government finances were crushed by soaring expenses and plummeting revenues.

The government resorted to dramatic cuts to expenditures by cancelling capital spending and investments which, due to the centrality of its role in the economy, led to year-year declines in non-oil GDP of -3.9%, -9.6% and -8.1% for 2014, 2015 and 2016 respectively. Ultimately, the government had a cumulative deficit of around USD 41bn during this period and accumulated significant arrears to the private sector in the process. The outstanding arrears are estimated by the IMF to be at USD 3.6bn as the end of 2017.

The effects were disastrous for private sector businesses at the receiving end of the cuts whose finances deteriorated, and which in turn affected the quality of bank loans as these businesses accounted for the bulk of bank lending.  As a result, the banks’ earning suffered from the increasing non-performing loans (NPL’s) coupled with negative loan growth, as well as from declining/negative deposit growth.

The changes for the worse for the banks during these years can be seen through the three charts below that look at loans/NPL’s, deposits and trade finance and their association with budget surpluses/deficits. The charts consider only loans/NPL’s, deposits and trade finance for the private sector but not those for the government as they conducted through state banks.

Loans and NPL’s 2010-2017

(Source: Central Bank of Iraq (CBI), Asia Frontier Capital (AFC))

Loan growth peaked in 2015 after slowing in the prior year and has declined since, while NPL’s soared in 2015-2016 as the effects of the capital spending cuts fed through to deteriorating loan quality. These negative effects were made worse by a flight to safety as more of the private sector borrowed from state banks instead, in the process increasing their share from 59% to 63% of all private sector lending. The ultimate effects of budget surpluses and deficits on loan growth and quality can also be seen from the above chart.

Deposits 2010-2017

(Source: Central Bank of Iraq (CBI), Asia Frontier Capital (AFC))

The same story is repeated with private sector deposits which for commercial banks peaked in 2013 and declined since then. The flight to quality was again evident in the slower decline in total deposit growth and its pick-up in 2017 as the expansionary effects of the recovery in oil prices and the ending of conflict were being felt. In the process, the state banks increased their share of total private sector deposits from 61% to 68%.

Trade Finance 2010-2017

(Source: Central Bank of Iraq (CBI), Asia Frontier Capital (AFC))

The only area where commercial banks increased their share was that of trade finance for the private sector- increasing from 71% to 87%. However, trade finance suffered significantly in this period as trade declined due to investment cuts and the slowdown in consumer spending. This further hurt the commercial banks as it was a major source of revenues and growth.

Its logical to conclude that the sea change which has taken place in the government’s financial health would reverse the trends seen in the charts above as the significant stimuluses to non-oil GDP should lead to sustainable economic activity, providing room for the banks to recover and grow again.

It should be noted that these are aggregate figures for the whole sector which hide significant variations in the performance of individual banks. The pains of 2014-2017, including the recent pressure on FX margins, would have exposed the structural weaknesses of many of the banks and will likely lead to failures among the weaker ones. However, the stronger banks that weathered the storm and addressed any structural weaknesses should benefit disproportionally from the expected benefits from a recovering economy.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS). He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

Video: Manual Election Recount to begin on Tuesday

From Al Jazeera. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

The mandate for Iraq’s parliament has expired – with no new leadership confirmed.

The country’s still waiting for the results of a manual recount of suspect ballots from last month’s election.

That’s due to get under way in some regions on Tuesday and will take about two weeks – leaving Iraq in political limbo.

Al Jazeera‘s Mohamed Vall explains:

Iraq may soon be Without a Government

By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq may soon be Without a Government, as Clock Runs Out

The term of Iraq’s current parliament ends June 30, but a mandated manual recount of votes cast in the May 12 election hasn’t even begun, and disputes are deepening among some political blocs. This could create a constitutional vacuum, which would worsen an already-bad situation.

Parliament was slated to meet June 27 to vote on a bill to extend its term until the Federal Supreme Court confirms the election results. The court, however, was proactive and issued a decision June 26 rejecting an extension, citing the constitutional mandate that parliament serves four calendar years. The current parliament first convened July 1, 2014.

The court’s decision stated that any legislation passed after July 1 will be unconstitutional and “its consequences shall be null and void.”

The ruling sparked mixed reactions among Iraq’s political forces. Parliament Speaker Salim al-Jabouri and some political parties had supported the extension, and warned of a possible constitutional vacuum. Jabouri failed to secure a seat during the election.

Meanwhile, the winning political blocs, including the Sairoon Alliance headed by Muqtada al-Sadr, which won the largest number of parliament seats, condemned the idea of extending parliament’s term. Kurdistan Democratic Party (KDP) member Hoshyar Zebari called the proposed extension “a new trick.” Jamal al-Karbouli, head of the Iraq is Our Identity party, said it was an attempted “political coup.”

To speed up the recount process, the Federal Supreme Court decided the review will include only votes from areas where results were contested, whether within Iraq or abroad. The court also approved parliament’s vote to dismiss some senior members of the Independent High Electoral Commission and replace them with judges. Adel al-Nouri, the commission’s head, said the dismissed members were accused of election tampering.

After a storage unit containing ballot boxes was set on fire in early June, protection measures were tightened at stations where ballots are stored. More than 5,000 members of the police, army and counterterrorism forces have been deployed to 21 such stations across the country.

“All managers of polling stations and offices where there have been complaints are instructed to transfer the ballot boxes and the electronic verification devices to designated locations in Baghdad,” Electoral Commission spokesman Laith Hamza said in a statement.

“The recount will take place in the presence of representatives of the United Nations, political blocs, as well as representatives of the candidates,” he added.

Skeptics of the election results are trying to get more monitors involved in supervising the recount. Iraqi Vice President Ayad Allawi, who heads the National Coalition, called on the Arab League and judiciary to participate in monitoring.

As the controversy over the vote results escalates, political parties are still discussing how to form a majority bloc that will be entrusted to choose the next Cabinet.

Iraqi Prime Minister Haider al-Abadi, during a June 23 visit to Najaf where he met with Sadr, announced an alliance between his al-Nasr bloc and Sadr’s Sairoon.

In a joint press conference with Abadi, Sadr said, “The alliance between the two sides will lead to formation of a cross-sectarian, technocratic government representing all the Iraqi people.”

He added, “The agreement includes supporting the army, placing all arms and weapons under the control of the state, developing a program to reform the judiciary, activating the role of the general prosecutor to continue combating corruption and holding accountable those accused of corruption,” Sadr added.

He also stressed that foreign forces in Iraq should commit “to not interfere in Iraqi domestic affairs.”

Sadr forged some alliances earlier this month, first with the National Wisdom Movement led by Ammar al-Hakim and Allawi’s National Coalition, followed by another alliance with the Fatah bloc led by Hadi al-Amiri, which comprises several Popular Mobilization Units factions and is close to Iran.

He didn’t touch on his previous alliances in the latest announcement with Abadi. This raises the question, is he looking for the best alliance partners for the future government, only to renege on alliances with other forces? Or is he looking for a comprehensive alliance that will bring together the various forces under his electoral list?

Abadi, who would like to keep his position as prime minister, said his alliance with Sadr doesn’t conflict with the latter’s declared alliances and doesn’t mean Sadr is “against other coalitions.” It appears Sadr doesn’t oppose forming a comprehensive alliance, as long as the different blocs come under his list, which would lead the Cabinet selection.

As things stand now, it seems that selecting a Cabinet using a comprehensive coalition is a possible option. This would happen shortly after the commission finishes recounting the votes and the federal court confirms the official results. This would spare the country a lengthy constitutional vacuum or an extension of parliament’s term.

Will Abadi have a Role in Forming New Govt?

By Omar Sattar for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News

On June 21, Iraq’s Supreme Federal Court ruled that parliament’s decision to cancel the votes of Iraqis living abroad, displaced people and members of the peshmerga forces was unconstitutional. The results of the elections are expected to remain as they are, and the formation of the next government is supposed to pick up speed in light of this recent judicial ruling.

Iraqi Prime Minister Haider al-Abadi, the leader of al-Nasr coalition, expressed his intent to host the leaders of the winning blocs before the end of this month to discuss the paths of forming the next government and outline the next phase.

“We launched a national initiative before Eid al-Fitr [June 15] for a broad national meeting that includes all political blocs to agree on the state administration programs, not just the government,” he said at a press conference on June 20.

He explained that the national consensus aims to speed up the proper formation of state institutions after the elections, noting, “Political blocs welcomed our national meeting initiative with arms wide open.”

Abadi called on “political blocs to cooperate to form an operation room, or as we call it, a preparatory committee to lay the foundations of any political agreement to set the next government program.”

Spokesman for al-Nasr coalition Hussein al-Adli told Al-Monitor, “We called on all bloc leaders who won in the recent elections to meet before the end of this month so we can all agree on the process of forming the government and general frameworks regarding state affairs, so as to avoid a constitutional vacuum.”

He added, “Al-Nasr coalition has not yet identified its direction when it comes to [potential] alliances, nor do we believe that the largest bloc, which is constitutionally mandated to form a government, has been formed yet.”

Adli pointed out that “Abadi would rather hold discussions with all blocs directly and collectively and draw out the upcoming phase, based on results of the elections.”

On June 12, Muqtada al-Sadr, the leader of the Sadrist movement and the Sairoon Alliance that won 54 seats in the recent elections, announced that it was allying with Fatah, a bloc led by Hadi al-Amiri that won 47 seats. This new alliance aims to form the largest parliamentary bloc.

According to a source from al-Hikma bloc, which secured 19 seats and is led by Ammar al-Hakim, the Shiite blocs have yet to confirm that they will attend Abadi’s national meeting.

The source told Al-Monitor on condition of anonymity, “Abadi tried to convince the Shiite blocs to attend, but they are not having it. They do not see why there needs to be a meeting before naming the new prime minister during parliament’s first session to discuss the next government.”

The source said, “Abadi will fail to hold this meeting unless he forms an alliance able to compete against the Fatah-Sairoon alliance.”

The Shiite lists believe that Abadi is trying to get around the idea of “the largest blocs,” after failing to ally with Sadr and Amiri. He has not yet decided whether he is staying or withdrawing from al-Dawa party, headed by Nouri al-Maliki, the leader of the State Law Coalition, with 25 seats.

Meanwhile, Maliki said he would participate only “if all forces attend the meeting and everyone commits to hard work to reach solutions to the serious crises plaguing the country.” However, a statement published by Maliki’s press office on June 16 announced that he will be attending.

The Sairoon Alliance decided to only attend if “Abadi sends a written invitation, not only calls on political blocs though the media.”

On the other hand, Kurdish and Sunni forces were pleased with Abadi’s initiative and confirmed their attendance.

On June 15, the National Forces Alliance, which includes the majority of Sunni blocs in parliament, issued a statement, saying, “We welcome Abadi’s initiative and we believe this is a step in the right direction toward an all-embracing national project.”

Leader of the Iraqi Decision Alliance, Ahmed al-Massari, told Al-Monitor that his alliance “supports dialogue between the winning lists for the purpose of solving the country’s many crises,” noting that his bloc “believes Abadi’s initiative is not limited to discussing the formation of the largest bloc, but also aims at setting a national program of action, regardless of sectarian differences.”

The coming days will reveal to what extent Abadi’s initiative can contribute to overcoming differences and discussing the future of the country while steering clear from the “largest bloc” project. This initiative is no more than a political “tactic” through which Abadi is trying to include Sunni and Kurdish blocs in the process of choosing the new prime minister.

This way, he might be able to make up for his inability to find a good parliamentary majority that guarantees him a second term. So far, no other Shiite alliance has as many members as the Sadr-Amiri alliance.

The broad acclaim Abadi’s initiative received among Kurdish and Sunni blocs indicates their desire to have a new prime minister, agreed upon by all forces instead of one imposed by the largest bloc. At the same time, the Kurdish and Sunni blocs do not necessarily want rapprochement with a Shiite bloc.

The true advantage of holding Abadi’s meeting is to spare the country from having a constitutional vacuum, hold the new parliament’s first session early next month and put an end to Abadi’s own “caretaker” government.

Supreme Court Confirms Election Re-Count

By John Lee.

Iraq’s Supreme Federal Court has reportedly upheld a law mandating a nationwide recount of the votes from May’s parliamentary election, which had been ordered following claims from Prime Minister Haider al-Abadi that there had been serious violations.

The court has also ruled that the cancellation of votes from people overseas, the displaced, and Peshmerga was unconstitutional.

Earlier this month, Iraq’s top judicial authority, the Supreme Judicial Council, took over the Independent High Electoral Commission (IHEC), replacing the local heads in each of the provinces with judges.

Last month’s elections saw a low turnout, and an unexpected victory for Shia leader Moqtada al-Sadr.

(Sources: Reuters, AFP)

(Picture credit: Essam-al-Sudani)