ACTION MEMORANDUMTO: The President of the United States CC: Secretary of Defense Robert Gates, Secretary of State Hillary Clinton, National Security Advisor Gen. James L. Jones FROM: Douglas A. Ollivant & Eric D. Chewning DATE: March 1, 2010 SUBJECT: Starting Over in Iraq
In Iraq, your Administration has inherited perhaps the least popular U.S. foreign endeavor in a generation. With the June 30, 2009 U.S. military pullback from the urban areas now complete, civil violence contained, the government of Iraq better established, the situation in Afghanistan deteriorating and challenges from Yemen looming, the chorus of voices calling for a complete withdrawal from Iraq grows louder every day. This reaction is understandable, but also potentially dangerous, because the coming U.S. drawdown, if not properly executed, will significantly damage American influence during Iraq’s formative years or, worse, create a political vacuum that will destabilize the region. Iraq’s successful emergence from decades of Ba‘athi depredations, war, occupation and near civil collapse is not a foregone conclusion. Plenty could still go very wrong, and some of it surely will, though it’s impossible to predict just what (for example, an impasse over the status of political candidates with previous ties to the Ba‘ath Party). American statesmen need to summon the imagination needed to think about Iraq as it is today, without the baggage of recent years. Iraq’s strategic location, vast oil wealth and newfound political realignment matter significantly to the U.S. national interest. We need what amounts to a soft-power campaign plan for Iraq along three lines of operation. First, the United States must retain a small residual military presence for continued advisory and assistance missions. Second, the State Department must expand the scope of its diplomatic effort to include building Iraqi institutions, serving as an honest broker between sectarian factions and supporting Iraq as it deals with its neighbors. Third, the U.S. government must increase its efforts to develop and diversify the Iraqi economy. Residual Military Assistance
After toppling Saddam’s regime, America’s military mission in Iraq took on three roles: to neutralize internal elements hostile to the government of Iraq and the multinational coalition; to defend Iraq from external threats; and to train the Iraq Security Forces (ISF) to eventually take up the first two roles. Today, the ISF is capable of conducting this internal security mission on its own, and a small, residual U.S. military presence, combined with offshore airpower, can deter a regional aggressor. The key to continued U.S. military engagement, then, is adding to ISF capability without exposing American troops to attacks they cannot effectively respond to, given the constraints of the November 2008 Status of Forces Agreement.As you announced in your February 27, 2009 speech to U.S. Marines in Camp Lejeune, a U.S. military mission will remain in Iraq at least until the end of 2011. During this period, U.S. forces will perform four core military missions: train, equip, secure and conduct counter-terror operations. These same missions, however, will likely continue after December 2011, even if there are few or no U.S. forces in Iraq to conduct them. Let us review them in turn. Train: Training the Iraqi Security Forces (ISF) has been a work in progress since 2003, when Major General Paul Eaton initiated the mission. This work has now been codified under the United States Forces-Iraq’s Deputy Commanding General, Advise and Train (DCG, A&T;, formerly the Commander Multi-National Security and Transition Command, Iraq), who has responsibility to train both the Ministry of Defense forces—the Army, Navy and Air Force—as well as the Ministry of Interior forces such as the National Police and local police units. The reconstitution of the Iraqi Army has been perhaps the most successful U.S. initiative to date. With significant help from NATO allies, the Iraqi Security Forces have made substantial gains both at the unit level and also at senior tactical headquarters, such as the Baghdad Operations Command, led until December 2009 by General Abud Qanbar al-Maliki and now by General Ahmed Hashim Ouda. However, less prestigious functions such as administration and logistics have progressed more slowly. Part of this lag reflects American priorities. During the first years of the occupation and throughout “the surge”, generating combat units that could put “boots on the ground” quickly was of premier importance. Iraqi troops usually then relied on U.S. logistics trains for their “beans and bullets.” Now, with the ISF maturing and U.S. troops withdrawing, these issues must be addressed. In the Ministry of the Interior, the National Police have transformed from the sectarian force of 2005–07—which the audit by retired General James L. Jones considered so bad as to require disbanding—into a generally competent and neutral force. The surprisingly capable leadership of both Minister of Interior Jawad al-Bolani and the National Police Commander Lieutenant General Hussein al-Awadi enabled a three-part strategy for reform. First, the rank and file of the National Police were pulled from combat to be retrained or “reblued.” The most sectarian-minded leaders were then fired (sometimes in several rounds of firings to purge leaders at multiple levels) and finally Italian carabinieri conducted advanced training under the NATO Training Mission. These forces suffer from the same lack of administrative and logistical support as do the Ministry of Defense forces, but otherwise they have achieved an acceptable level of competence and reliability. The local Iraqi Police forces, however, have lagged far behind their paramilitary counterparts. This lag has several causes. First, local police have never received the emphasis that the Army and National Police enjoyed. The transition teams devoted to the Army and National Police permitted American forces to live with their counterparts in most cases. The police, in contrast, might have received a two- or three-hour assistance visit from American military police, perhaps with one civilian adviser of widely ranging quality, at most two or three times per week. This “drop-by” approach could never hope to achieve the results of an embedded Coalition presence. Further, the U.S. Army knows how to train armies—after all, it is one. In contrast, it knows very little about training civilian police forces. The advisory effort in Iraq did yeoman’s work in recruiting the police, giving them weapons and uniforms and ensuring they had a functional building. However, these police recruits were given the skill-set to be effective fixed security guards and little more. Remedying this deficiency is one of the major soft-power challenges the United States still faces in Iraq. Equip: The second military mission, equipping the ISF, is also becoming a problem for lack of resources. In the past, the U.S. government would grant equipment, but further purchases must now be paid for by the Iraqis themselves. Unfortunately, the Iraqis are broke. Depending as it does on a single-commodity economy, Iraq’s budget has been devastated by the crash of the price of oil, despite the slight rebound. Further, the U.S. system of Foreign Military Sales demands up-front payment from recipients; the Iraqis are in no financial position to make such payments. The Secretary of Defense can waive up-front payment from recipients with good credit ratings, but the Iraqi credit rating was abysmal even when oil was at $140 per barrel. The Secretary could still waive up-front payment for a special case, which Iraq arguably is. But to do that responsibly he would have to essentially budget for default; he does not have the money to do that. This confluence of U.S. policies is creating an opening for other counties to sell defense equipment to the government of Iraq. The South Koreans, French, Ukrainians and Russians all view the Iraqi military as a potential market. The U.S. government cannot and should not object to all such sales, but the development of extensive Iraqi military supply relationships with other countries is not in the U.S. national interest. With the loss of business goes a loss of post-occupation influence over what Iraqis do with the weapons they buy. With weapon systems come doctrine development, training support and lifecycle sustainment. Given the status of Iraq’s manufacturing base, supplier states will need to assist the government of Iraq in development of its military-industrial infrastructure for years to come. It would therefore be wise to revise the FMS rules to account for the special instances in which America needs to stand up a partner military in a combat environment. Advise: The third task will require American forces to continue to secure the various U.S. government advisory missions in Iraq, most notably the Provincial Reconstruction Teams (PRTs). This will not be simple. Through 2010 and into 2011, the PRTs will have military support. As we get closer to the end of 2011, that support will disappear. Embassy Baghdad will then have to make some cost-benefit calculations as to whether the advantages of having the PRTs are worth the risk of having them outside the military footprint. Overall, the Iraqi security forces will continue to require embedded U.S. or NATO member-state advisers until at least December 2011 and continued military-to-military engagement thereafter. In addition to tactical training and professional mentorship, this relationship helps offset the underlying sectarian tension in many units as well as facilitate the ongoing integration of Sunni and Kurdish militias into the formal security apparatus. That is as it should be: An independent, Western-style professional military requires significant institutional maturity, and our role is to help catalyze this process, while recognizing that the ultimate outcome does not need to exactly mirror our system. It can be good enough, not perfect. This is a long-term endeavor, and in many ways it is better that they do for themselves imperfectly what we might do for them perfectly. Counter-terror: As a final mission, the U.S. government has reserved the right to conduct counter-terrorism operations on and from Iraqi soil. Simply put, this means that high-end (read: highly trained and covert) special operators will continue to locate and then kill or capture al-Qaeda in Iraq operatives, as well as Iranian-sponsored proxy forces. In the vernacular, such individuals will continue to be “withdrawn from the population.” New Diplomatic “Surge”
While the military adjusts to its new, reduced role, Embassy Baghdad must lead some of the most ambitious civilian programs in recent history. With this new mandate, the State Department’s new portfolio should include brokering sectarian interests, strengthening political institutions, training the civil police force, continuing community outreach and resolving international tensions.Currently, the Sunni and Kurdish minorities look to the United States as the guarantor of their interests in Baghdad. The more we abdicate this responsibility in the future, the more likely the Kurdish and Sunni communities will seek to secure their self-interest in ways that could be destabilizing to the situation as a whole. Potential points of confrontation include: the settlement of Kirkuk; reconciliation of Sunni-Shi‘a political interests; and division of decision rights between the government of Iraq and the Kurdistan Regional Government (KRG). Arab-Kurdish issues are of greatest concern. While intra-governmental warfare between the government of Iraq and the KRG is unlikely, the continuing political tensions make the possibility of rogue violence in disputed territories quite likely. So, ironically, despite having disrupted the previous status quo by its invasion, the United States is the only power that can now act as an honest broker between Iraq’s main ethnic communities. Therefore, maintaining progress toward a sustainable political accommodation among Sunni, Shi‘a and Kurds depends on continued U.S. diplomatic engagement. The success of such an accommodation rests ultimately on the strength of Iraq’s national political institutions. We must therefore continue to develop capacity in the various ministries of the Iraqi government, focusing on lagging ministries, particularly finance, oil, electricity and health. This program already exists and is budgeted. At present, some of these advisory teams are augmented by military officers whose presence may soon be unwelcome, so we must plan now for the withdrawal of all uniformed officers from the civilian ministries. That means that the State Department will have to shoulder a bigger burden. Over the coming years, we will also see the transition of the civilian police training mission from the Department of Defense’s Central Command to the Department of State’s Bureau of International Narcotics and Law Enforcement. This transition will demilitarize the police training mission, significantly reduce the number of people involved in the training effort and should lower the profile of the mission, transforming it into something that will sit easier in the current context of Iraqi politics. However, since this mission will be conducted by civilians not currently on the U.S. government payroll and must be put on a contracting basis, it will cost at least $500 million per year, and could well approach or exceed $1 billion. From this first major program to transition from Defense to State we learn one of the stubborn facts of soft power: It’s a very costly way to do business because, while the instruments of hard power are already in place, many soft power mechanisms are immature and require fresh investment. One mission that has been budgeted, paid for and is starting to come to maturity is the aforementioned Iraqi PRTs. Unlike their counterparts in Afghanistan, the Iraqi PRTs are composed almost entirely of civilian experts. Despite some rough starts in the early years, PRTs have become a valuable tool in the reconstruction effort, allowing American assistance (and influence) to extend well beyond the capital city. There are at least two issues that a PRT strategy must deal with. The first is its reliance on the U.S. military presence. The military currently provides vital services—most notably escort, quick-reaction forces, combat air support, medical evacuation coverage and hospitals—throughout Iraq. As the U.S. military presence shrinks, these services will either shrink with them or be less responsive as the footprint diminishes. Second, there is a sizable faction within the State Department that sees the PRT effort as a distraction from the core mission of the Foreign Service. Under the mantra of “normalizing” relations with Iraq, this faction would like to abandon the PRTs and set up a series of consulates that would serve as mini-embassies, but have the same sort of isolation from the Iraqi populace as the Embassy in Baghdad. While this is a laudable goal for the future, to aim for it now would undermine U.S. interests. Iraqi refugees and internally displaced persons will also be a challenge. While their numbers and circumstances are disputed, millions of Iraqi refugees, disproportionately Sunni, reside in neighboring Syria and Jordan, with lesser numbers in other countries. The U.S. interest in this population is both humanitarian and practical. The humanitarian crisis for this group is real; the vast majority cannot find legitimate work, making both crime and prostitution “popular” occupations. But this population also disproportionately contains members of the Iraqi professional and middle classes. Their return would bring the educated technocrats who could catalyze Iraq’s economic rehabilitation. Additionally, Iraq continues to have delicate relations with its neighbors. Issues range from water rights from Turkey and Syria, gas pipelines going north through the Kurdish region to Turkey, Gulf War-related compensation to Kuwait, and border security with Syria. These will all be difficult to move forward without active U.S. involvement. Many of these challenges, like the tension between the Kurds and Turkey, involve important U.S. allies. Others, like the Iran-Iraq relationship, warrant special focus for their direct impact on American interests. A critical natural balancing agent against Iranian regional ambitions is a stable, wealthy, pluralistic Iraq. This fact is not lost on the mullahs in Tehran, and it is very much in our interest to skillfully reinforce this reality—particularly as Iranian democrats look across the border for political inspiration. In all, shaping the arc of Iraq’s development will require a degree of active “retail” U.S. diplomacy that your Administration has not yet undertaken in any area. Iraq is proudly reasserting sovereignty, but its institutions are immature. The appointment of Vice President Biden as an “unofficial envoy” and de facto intra-agency coordinator for Iraq will help provide the focus required to engage various levels of the government of Iraq and regional governments, but more needs to be done. Continued Economic Revitalization
Under Saddam, oil revenue formed the foundation of Iraq’s system of state patronage and corrupt bureaucracy. It was the government-owned oil enterprises that enabled the Ba‘ath regime’s financial autonomy from society and its centralized authoritarianism. In the short-term, such a powerful mechanism for a strong central government could be in Iraq’s interest as a revenue source for reconstruction, but an economy dominated by one government-controlled industry would ultimately reinforce corrupt bureaucracies, state patronage and autocratic habits. Expanded economic diversification is thus a critical driver toward sustainable democratization.Oil is therefore a double-edged sword for the government of Iraq. On the one hand, Iraq’s economic recovery must be fueled by petro-dollars. Oil currently accounts for nearly all of Iraq’s exports, 90 percent of its revenue, and about 60 percent of its nominal GDP. Something like those numbers will continue for many years, since Iraq sits on 115 billion barrels of proven reserves, the third largest in the world. And Iraq is one of the least prospected countries in the Middle East. The problem with oil is not only a long-term economic one, but also a short- and mid-term political one. The country’s hydrocarbon map illuminates the current sectarian divide, as the preponderance of Iraq’s oil and natural gas reserves are in the Shi‘a-dominated southeast. The balance lies in the north, near the sectarian flashpoints of Kirkuk, Mosul and Khanaqin, while the Sunni western desert remains largely unexplored. This is why economic concerns underwrite much of Iraq’s sectarian tension. It is hard to envision resolution of the outstanding issues between the government of Iraq and the KRG, or reconciliation of Sunni concerns, without a politically acceptable and viable fossil fuel agreement—something that has over the years taken on the dimensions of a political Holy Grail. Beyond the favorable governance implications associated with a hydrocarbon law, Iraqi infrastructure requires significant investment. Iraq’s low reserve-to-production ratio suggests significant revenue potential once fuller production is online. The current 2.4 million barrels per day is up from post-invasion lows, but remains below the prewar capacity of three million barrels per day. The government of Iraq aims to boost production to six million barrels per day, at an estimated cost of $35 billion. Helping the Iraqis achieve this should be an American priority given the pressures the Iraqi budget is under. The total cost of reconstruction could exceed $150 billion, obviously a very large sum for a country of about 26 million people. At the start of Operation Iraqi Freedom, moreover, Iraq’s aggregate debt exceeded $100 billion. The 2003 Madrid and Paris Conferences made progress in reducing Iraq’s debt, but accessing international capital markets will remain problematic as developed countries continue to borrow to fund domestic stimulus spending. Other sources of investment capital—foreign direct investment, international development agencies and Iraqi savings—are potential answers. Despite the sizeable risk premium one would expect foreign investors to demand, Iraq’s oil ministry has had surprising success attracting foreign investment on terms that are favorable to the central government. Between June and December 2009, Iraq was able to award oil service contracts to several international firms, including BP, China National Petroleum, Exxon-Mobil, Royal Dutch Shell, Petronas, LUKoil, Sonangol and Eni. Additionally, the KRG has awarded contracts to more than twenty independent oil companies, in spite of official objections from Baghdad. Converting these agreements into increased oil exports, however, will require additional investment in energy infrastructure (pipelines, for example) and that elusive hydrocarbon agreement. Development within Iraq’s banking sector also remains problematic. Prior to the U.S. invasion, Iraq’s financial institutions were largely government-owned and closed to international capital flows. Efforts are underway to modernize Iraq’s financial institutions and begin linking them to global financial networks, but care must be taken, as some state assets might be seized by creditors. Enabling such basic services as electronic funds transfers will facilitate the flow of remittances from Iraqis living abroad and help modernize the Iraqi economy. Diversifying Iraq’s economy and reducing its estimated 25–40 percent unemployment rate will also require rehabilitating its war- and sanctions-damaged industrial base. Iraq’s non-oil economy is currently dominated by small businesses, many of which got a helping hand from the U.S. military either through PRTs, Commanders Emergency Response Fund (CERP) monies, or USAID microgrant programs. Without such support, local economic revitalization might not have occurred. In Iraq, like America, entrepreneurial activity is a critical engine for job growth. Therefore, a robust microfinance program needs to become a core element of America’s continued economic engagement. The importance of small business notwithstanding, a return of the state-owned enterprises might also help drive job creation, though their potential to discourage entrepreneurship cannot be dismissed. During the last Administration, the Department of Defense’s Task Force for Business and Stability Operations in Iraq (TFBSO) made strides to revive state-owned factories, with an eye toward their integration into the global economy, but it is unclear what lasting impact these efforts will have. Beyond already identified security, governance and infrastructure challenges, the suspension of many import tariffs has led to trade dumping by Iraq’s neighbors. More needs to be done to develop Iraq’s non-oil economy, as fostering entrepreneurs and ensuring an equal playing field for Iraqi industry will require U.S. support beyond the 2011 withdrawal. Iraq’s economic security will be the long-term driver of its stability—and achieving this ultimately rests on the Iraqis themselves. In order to compete in a global economy, the government of Iraq (and its allies) must invest in Iraqi human capital. This includes preventing (and hopefully reversing) the brain-drain that plagued the nation during the height of the sectarian war. The establishment of vocational training schools and the restoration of international standards of academic excellence to Iraqi universities and colleges are both needed. In the end, security is about more than statistics. All Iraqis—Sunni, Shi‘a, Kurd—must view themselves as stakeholders in the country’s economic future, or there won’t be much of one. * * * As the power that removed the old Iraqi regime, the United States has a moral responsibility to assist Iraq in putting itself aright. But, more importantly, we have a practical interest in doing so as well. Iraq’s young, multi-ethnic population, abundant natural resources, rich arable land and strategic location ensure that it will impact regional stability (or instability) for years to come. As Iraq grapples with another political reset in the wake of the March elections, it is important to remember that fostering civil society, enabling responsive government and building economic resiliency take time—and that some drivers for long-term stability (like democracy) can create short-term instability. The U.S. government must signal its intent to be a long-term partner to a stable and peaceful Iraq. That will demand this Administration to take the long view, which recognizes that the U.S.-Iraqi relationship still requires an investment (albeit a sustainable one given our sizeable portfolio of other commitments). Calculations about Iraq’s future and what it means to the United States should not dwell on what has already been spent, but on the returns that can come from additional support. We owe such support to the Iraqis, and to ourselves.