Events on the ground in Iraq have been unfolding rapidly since the fall of the second largest city Mosul to the hardline Sunni ISIS (Islamic State of Iraq and al-Sham) insurgents on Wednesday, followed by their rapid advance into Tikrit and on southward all the way to the town of Udhaim, a mere 90 kilometers from the very outskirts of Baghdad.
Stunned by the shocking collapse and retreat of the Iraqi Security Forces – Iraq’s Shi’a dominated army – to the ISIS extremists in these heavily Sunni cities, the embattled government of Prime Minister Nouri al-Maliki has desperately reached out since for outside military assistance. In the meantime he has enlisted the Peshmerga fighting forces of the Kurdish autonomous region in the North and East of the country to divide and engage the ISIS on a second battle-front.
There is little doubt that the Syrian civil war has by now fully spread into Iraq through porous physical and ideological borders, and we believe has ushered in with it what is likely to be a prolonged period of violent fighting and renewed sectarian violence that could threaten the very survival of Iraq as a functioning unitary country.
*** This spread of instability into Iraq carries far greater risk to regional political stability and global financial markets than the Syria conflict did on its own, and we furthermore believe the widely held assumption that oil markets could be immune due to the location of the bulk of Iraq’s output deep in Baghdad-controlled territory in the South could be overly sanguine and dangerously shortsighted. ***
*** We nevertheless expect the Maliki government to be able to mount a successful counter-offensive in defense of Baghdad, ironically in part due to the very swiftness of the victories and advancement of the ISIS forces leading to a logistical and military overextension of the insurgent forces. ***
*** The ISF has already hastily started the mobilization of Sh’ia militias, with we believe the organizational help of 150-200 Quds Force Iranian Revolutionary Guard advisors, to reinforce Baghdad, the training base of Balad, Taji (20 miles north of Baghdad) and to defend against what is feared to be the most significant next target for the al-Qaeda inspired ISIS militants, the Sunni dominated city of Samarra, which was reportedly attacked once already by ISIS forces before the fall of Mosul. ***
*** And with so much at stake strategically and politically in Iraq, we believe the White House may be starting to converge around the use of drone strikes to support the Baghdad government, and possibly even manned air strikes.***
The need to raise and enlist from the Shi’a militia forces to fight the Sunni ISIS force and dependence on an unfriendly Kurdish regime in the north will nevertheless ultimately jeopardize any chances for a long term victory and attempts to build towards a pan-Iraqi future of coexistence through a more stable government of inclusion.
A Costly, Perhaps Fatal Defense
No matter what Washington does, Maliki’s counter-offensive will need to rely heavily on the reconstitution of local Shia militias in the south, including the enlistment of assistance from up to now hostile Shi’a rivals. Those include Muqtada al-Sadr, the firebrand populist who only recently returned from self-imposed exile in Iran.
That, and the reliance on Kurdish support, will only serve to further devolve Iraq deeply back into a war clearly cut across sectarian lines. In enlisting the Peshmerga, Maliki has had to turn to Masoud Barzani and the more hardline, autonomy seeking wing of the Kurdish Regional Government, the KDP, rather than the Talabani led Patriotic Union of Kurdistan (PUK).
With disputes between Baghdad and Erbil, the regional capital of the KRG, over oil revenue and pipelines still fresh and unresolved, the Peshmerga have already moved to raise the Kurdish flag over the multi-ethnic, strategically located city of Kirkuk just secured from ISIS attacks.
Kirkuk of course is the starting transit route of the famous northward Kirkuk-Ceyhan pipeline through Turkey – an alternative northern route to the southern port of Basra for 3-400,000 barrels of oil that has been inactive since March due to damage sustained in terror attacks.
The swift, successful, and strategic siege and occupation of the two small towns last night of Jalawla and Saadiyah last night by the highly efficient ISIS forces all the way east towards the border of Iran has now drawn a narrow line of ISIS control cutting off the Kurds in the north from the Baghdad government in the south.
It also encircles Samarra, and is deliberately aimed at pushing Iran closer towards military involvement in support of the Maliki regime.
A Hasty Defense against a new Sunni Uprising
The Iraqi Security Forces, in theory at least, has overwhelming forces of around 200,000 troops to deploy against an ISIS that is estimated at anywhere between 5,000 to at the most 15,000 hardcore fighters. Those ranks are believed to have been swollen by 2-3,000 released prisoners in the most recent sweep of Fallujah and now Mosul, and bolstered by a major arms cache captured from the al-Qayara base as well as a whopping $480m worth of gold and currency seized in the ISIS sweep.
Despite the imbalance on paper it may very well be close to impossible now for the al Maliki government in Baghdad to retake the Sunni strongholds without the highly unlikely support of an anti-extremist populace that has been deeply alienated by Baghdad over the years. Ramadi, and Fallujah in particular, are home to the bitterest chapter of Sunni resistance to Shia in the sectarian battles of 2003-2004 and 2006, which was only defeated with a massive flood of US boots on the ground after the famous “Surge” in Iraq.
The ISF also has no air strike capability to speak of beyond helicopters – since 2003 its fighter plane forces have been dismantled from 316 down to 3 Cessna aircraft. The US Congress has authorized the sale of Apache helicopters and AT 6C light attack planes – there is even talk of the delivery of 18 F-16s – in addition to Hellfire missiles and reconnaissance material, But Maliki’s forces urgently need air support now, and he has made those pleas clear.
President Barack Obama vowed yesterday that the US would come to the “near term” assistance of al-Maliki, with the clear exclusion of any resumption of US troop presence on the ground, but leaving open the potential for direct US air strikes or drone support against ISIS bases and targets.
This ambiguous and perhaps half-hearted hint at airstrikes has already been met with resistance from Capitol Hill, including from influential members such as Democratic Senator Carl Levin of Michigan and Republican Congressman Bud McKeon of California. Obama’s veiled threat of outright air strikes may well meet the same fate as did his threats of military intervention in Syria – blocked (with a sigh of relief) by Congress.
But with so much at stake strategically and politically in Iraq, we believe the White House may be starting to converge around the badly needed, yet lesser and still highly controversial possibility, of the use of drone strikes to support the Baghdad government, and may even possibly authorize manned air strikes.
The ISF has already hastily started the mobilization of Sh’ia militias to reinforce Baghdad, the training base of Balad, Taji (20 miles north of Baghdad) and to defend against what is feared to be the most significant next target for the al-Qaeda inspired ISIS militants, the Sunni dominated city of Samarra, which was reportedly attacked once already by ISIS forces before the fall of Mosul.
While the other avowed “apostate” ISIS targets of the Shi’a holy cities of Najaf and Karbala are buried deep in Baghdad controlled territory, Samarra, the home of the Shi’a al Askari Golden Mosque that was attacked in 2006 and incited that round of bloody sectarian warfare, is not. Its defense, as well as defending the line at the bases of Balad and Taji, will be critical, and we believe ultimately successful.
The air base at Balad has been used to train Iraqis to fly fighter jets and drones. Recent reports are that three plane loads of US advisors have just been evacuated from the airbase. That is certainly not a signal of confidence, but the evacuation may also have to do with the desire politically not to have Americans troops in Iraq, a country the US is meant to have fully withdrawn from now, directly in the line of fire of the conflict.
There are nevertheless 20,000 American private citizens still living in Iraq. Any US ground involvement in Iraq is clearly anathema to the Obama administration, but the US nevertheless has 7,500 troops nearby in Qatar, 5,000 in Bahrain, and 3,000 in the United Arab Emirates.
The Internationalization of Iraq
Baghdad’s forces we believe will be able to defend the south and even as far north as Samarra, and could even retake Tikrit as well. But most military observers caution that they may lack the adequate forces to actually retake Mosul and Fallujah, already under the control of ISIS, that would ultimately be needed to unify the country back together again.
There are reports that Iran has already sent in 150-200 Qods Brigade of the Iranian Revolutionary Guard Corps (IRGC) to support the Maliki regime. Iran has of course had strong ties with the Maliki regime from the start, and the IRGC has been quietly involved in Iraq since the 2003 war and is actively and much more forcefully present in Syria.
Iran has publicly vowed to protect its borders from terrorists and reinforced its borders with troops, but a Shi’ite parliamentarian in Iraq has recently gone so far as to boast in parliament that “Haj Qasem,” the nickname for Qassem Soleimani, the fierce leader of the hardline Iranian Qods force, has arrived again to save Iraq.
With nuclear negotiations under way with the P5 +1 and memories of its own brutal 8 year war with Iraq still alive in the Iranian population’s minds, the Rouhani government of Tehran and Supreme Leader Ali Khamenei will nevertheless be extremely hesitant to stage an overt show of military assistance across the border to Iraq. That would also only further inflame the Sunni narrative of jihad against the “Safavid” (Persian) infidels.
But with the hapless Maliki government at risk of collapse, we believe the reports of more targeted support are already likely true. And we would not rule out a deeper involvement were the forces currently aligning to stop the ISIS militant look like they were about to fall, putting Baghdad, and the Shi’ite holy cities of Najaf and Karbala, at risk.
Moqtada al Sadr, the Iraqi Shi’a cleric who spent some years in exile in Iran, pushed out by Maliki himself, returned to Iraq in 2011 and has vowed to reconstitute his Mahdi army. But that will ultimately be little comfort for the embattled Maliki himself – al Sadr is an open opponent of his regime and has even gone so far as to call him a dictator.
In addition to potentially pulling in Iran, whether in a clandestine or more overt show of force, the risk to the internationalization of the ISIS uprising westwards to Jordan – and eventually Lebanon – is also real.
Over the last few days our understanding is that Jordan has quietly arrested 100 radicals within its own borders, and moved troops to reinforce and shut down its border as much as possible. Jordan has already been flooded with an estimated 600,000 refugees from the Syria civil war as well as 500,000 from Iraqis since 2003.
Most ominously, intelligence sources estimate that there may be approximately 2,500 Jordanians actively fighting now for either the ISIS in Iraq or in Syria. The radical Sunni Association of Muslim Scholars also has a base in Jordan.
The risk of a blowback of Sunni jihadis has also alarmed Riyadh.
While traditionally supportive of its Sunni allies, including supporting rebels in Syria against the Iranian backed regime of Bashar al Assad, Riyadh has grown increasingly concerned that its support, including money that has illegally flown out from its own borders to extremist groups, will backfire.
Even more so money from Kuwait and massive assistance from Qatar to groups as radicalized as the Jubhat al-Nusra in Syria and now ISIS, could prove far too destabilizing, and could even risk a repeat of the return of 2003-4 battles Riyadh had back home on its hands with the return of hardened jihadis from Afghanistan and Iraq into the homeland.
Riyadh, with the support of The Cooperation Council of Arab States of the Gulf (previously known as “Gulf Cooperation Council”), has therefore been leaning heavily on Qatar to cool is support for the extremist groups, and has in the meantime engaged in a quiet outreach and attempt at a detente with Iran.
The Saudi Ambassador to Tehran reportedly met with former Iranian President and Rouhani ally, Akbar Hashemi Rafsanjani, recently, and its Foreign Minister, Prince Saud bin Faisal, has extended an open invitation to his Iranian counterparty Javad Zarif.
While the two Gulf powers remain on opposite sides on regional issues ranging in order of tension from Bahrain to Lebanon, Yemen, and Syria, there is nevertheless and attempt by both sides at a de-escalation of tensions.
A flare up in Iraq would strain those new-found ties – and Iran will have to keep the Saudi counterweight in mind in weighing how overtly to intervene in Iraq. But we believe there is little appetite for either side to embroil the other in another “proxy” Sunni-Shia civil war, no matter how much ISIS may try. Iranian Deputy Foreign Minister Hossein Amir Abdollahian in fact just met with his counterpart, the Saudi deputy foreign minister, in order to keep this critical back channel track alive.
Oil and the Northern Card
Back in Iraq, Maliki has of course also been forced to reach out to the Kurdish Regional Government for support. But while Baghdad has managed to maintain a tense peace with the Kurdish region – the elderly Kurdish PUK head Jalal Talabani even served as President under Maliki – there is no love lost between the sides.
Baghdad and Erbil, the regional capital of the KRG, have had a long standing dispute on the splitting of national oil revenues, including a fight over Kurdish efforts to reopen the Kirkuk-Ceyhan pipeline that has been damaged since March by Sunni terror attacks. That pipeline can carry 3-400,000 bpd of oil north through Turkey, effectively providing economic independence to the KRG from Baghdad.
The Maliki government was also angered at attempts by the KRG to invite Exxon in to develop its local oil fields without its approval. This fight over control and revenues has only been reinforced by political tensions, where Barzani has deliberately made Kurdistan a sort of safe haven sanctuary for defectors from the Maliki regime.
It is no coincidence that the Sunni mayor of Mosul who was just ousted by the ISIS is now in Erbil, and calling for a united front to fight the ISIS. And his ultimate objective is to then turn against Baghdad, along with the Kurds, to seek greater autonomy.
The ISIS, for its part, far from being a rag tag group of uneducated militia, is highly focused on seizing strategic oil assets for themselves.
In Syria, they already control oil rich Raqqa and are now targeting the Deir al Zar oilfields. There are conflicting reports as to whether they continue to hold the critically important refinery of Baiji in Iraq, despite assertions by Maliki that it has been recaptured.
Iraq too now had enjoyed a gradual upturn in oil reduction to around 3 million barrels per day, of which approximately 2.5 m bpd go to exports. The bulk of that flows through the south and especially through Basra, which alone accounts for approximately 1.5 million bpd.
And while the 400,000 bpd Kirkuk-Ceyhan northern pipeline has been closed since March, that does not mean there has been no oil exported from the north. A portion of that oil is now carried by truck through Turkey.
So ironically, the prospect of peace may not bring a material increase of oil flows out of Iraq, whereas a deterioration of the situation could curtail supplies.
On the global level, OPEC is currently pumping approximately 30 mbpd, of which almost a full third, 9.7 million, comes from Saudi Arabia.
Libyan exports have been crushed due to a low grade civil war raging in that country, production is around 20% of potential – and unfortunately there is little hope for a resolution to that war as well. EU officials, who have the most to gain from a resumption of exports from Libya, in fact privately concede that Libya is now in effect close to a failed state.
Iran is also producing at 5 to 700 thousand barrels below capacity, with little prospect of a near term increase in output barring an imminent full lifting of sanctions. That is unlikely to happen, and nuclear negotiations will most probably be extended for another six months (see 01/16/2014 “SGH Report: Iran: Bringing the Deal Home”). And even supplies from Nigeria from what we understand have been disrupted.
Saudi Arabia is estimated to have approximately 1 million bpd of near term extra capacity it can release, despite its claims of up to 2.5 million barrels. But all this is to say that the chances of geopolitical events leading to a further tightness in oil markets we believe far exceed the possibility of any actual increase of barrels due to a resolution of those conflicts.