Economic reconstruction is one of the most important aspects of the nation-state-building process in the new Iraq. This is a necessary element for the emergence of a stable, developed Iraq, along with  other factors such as security-building, the formation of new security and military forces, a peaceful political process, and forging a compromise among  various ethnic-religious groups. However, in spite of the efforts made for the economic reconstruction of Iraq, little progress has taken place, and numerous challenges lay ahead.

The worrying fact is that even though more than four years have passed since the U.S. invasion of Iraq, economic indicators and conditions are notably worse than what they used to be in the pre-occupation period. The prevailing conditions in the oil sector, i.e. the pivot of Iraq’s economic infrastructure, clearly attest to this fact. Although Iraq is the third biggest holder of oil reserves in the world, the country currently ranks as the world’s 15th biggest oil producer, and the level of oil production has failed to catch up to that of pre-occupation period.

In addition, the Iraqi government and U.S. forces have failed to provide the population with their basic needs and to create employment opportunities, resulting in an unemployment rate of 37.2 percent. Sectarian violence and insurgents’ actions have caused the displacement of more than four million Iraqis, and every month around 60,000 Iraqis become refugees.  Unfavorable health

conditions have given rise to diseases such as cholera. The mortality rate in Iraq following the U.S. invasion has also increased rapidly.  The pre-invasion mortality rate of 5.5 per one thousand people has risen to 13.3 per one thousand in the months following the invasion.

Although some international meetings have been held for Iraq’s reconstruction, the states’ pledges to grant economic aid to Iraq have not been met, thus exacerbating Iraqis’ economic hardships and their deprivation from basic needs. The international community and organizations bear part of the responsibility for the dire economic and security situation in Iraq, because of their inattention to their pledges and duties towards Iraq's reconstruction.

In explaining the reasons for the lack of progress in Iraq’s reconstruction during this period, domestic instability and insecurity are often mentioned.  This failure, however, can also be attributed to several other factors, such as domestic variables, America’s weak management of the Iraq’s reconstruction, and insufficient regional support. In the meantime, the Islamic Republic of Iran has made vigorous efforts to improve Iraq’s economic reconstruction, given Iran’s approach toward the new Iraq as well as the new conditions emerging in the country.

 Domestic Background and Variables

Saddam's rule, including the destruction of the country's economic infrastructure as a result of Saddam's expansionist policies that led to three wars since the 1980s, as well as the imposition of economic sanctions, has increased the difficulties and challenges facing the reconstruction process. The aforementioned factors have made reconstruction a complicated task, requiring huge budgets and time-consuming efforts. On the other hand, there is a shortage in skilled human forces that has been created by Ba'athist policies that aimed at weakening the society.

Since the downfall of the Ba'ath regime, continuous instability and insecurity have had the greatest impact on the failure of reconstruction efforts in Iraq.  Terrorist and violent acts by insurgents have destroyed oil facilities and pipelines, interrupted the economic network, increased the costs of economic projects, and discouraged investment in Iraq. In addition, insecurity has led to brain drain, depriving the country of the necessary software instruments for economic reconstruction.

The lack of political compromise among various Iraqi groups and parties, continuing ethnic-sectarian feuds, and a rivalry over oil revenues add to Iraq’s economic problems and troubles. Factional rivalries and conflicts not only lead to a waste of energy in areas related to decision-making and implementation but also exacerbate internal economic competition, which is harmful for a national economy.

The structural weakness of the government and inefficiency of the bureaucratic system have helped impede progress in reconstruction efforts. This is related to the complete disintegration of former structures, the lack of experience among the new forces, and problems such as ethnocentrism, factionalism and even administrative corruption. Therefore, given the significant impact of domestic variables, any progress in reconstruction efforts would depend on an improvement in the country’s security situation, a political compromise among different groups, and serious reforms in the bureaucratic structures. 

Failure in Security-Building and the Weakness of Reconstruction Management

America’s unilateral approach in Iraq and Washington’s strategic mistakes have made U.S. efforts to bring stability and peace to Iraq unsuccessful.  Despite America’s strategic failures and the escalation of insecurity and instability, the United States still does not show any interest in a serious partnership with other actors and international organizations in security-building. This attitude constitutes an important obstacle to Iraq’s reconstruction process. Moreover, the United States lacked a realistic plan, including a reconstruction project, for the postwar period.  Most of Washington’s plans were chaotic, inadequate and unrealistic.

The U.S. has also pursued the monopolistic management of Iraq’s reconstruction, despite the interest that certain countries have shown in helping with the reconstruction endeavor. America’s management style and the reluctance of the United Nations and NGOs to participate in Iraq's reconstruction in existing unsuitable security conditions has led to the scant participation of the international community in the reconstruction process -- a factor that is paramount in the failure of Iraq’s reconstruction.

Despite the allocation of considerable budgets by various partners for the reconstruction of Iraq, the pace of reconstruction has been slow.  This is because of certain reasons including entrusting the reconstruction project to private companies, high collateral costs, and even corruption – leading to ambiguities about how these budgets are spent. Considering the adoption of U.N. Security Council Resolution 1770 for the activation of the U.N.’s role in Iraq, progress in Iraq’s reconstruction will depend on the increasing participation of international organizations and the international community, as well as the U.S. abandoning its unilateral attitude in exchange for more precise planning and attempts.

 Insufficient Regional Partnership and Cooperation

Most regional countries have apparently refused to cooperate with the new Iraqi government in bringing stability and security to the country. Indeed, a problem hindering the reconstruction efforts in Iraq is that international forces tend to weaken the process of development and stabilization there by supporting some specific ethnic or religious groups in Iraq.  The country has become a battleground for such regional and trans-regional actors in order to increase their respective influence in the Iraqi political scene. This is happening at a time when it has become clear that all international players still have a common interest in a democratic, stable and unified Iraq. All regional countries and the United States share mutual interests in a prosperous, stable and secure Iraq. If Iraq becomes fully developed and democratic, the countries in the region will trust it much more, and this, in turn, will prevent the escalation of disputes between Baghdad and the other regional nations into conflicts.  As a whole, democratic states are less willing to embark on non-peaceful means in order to resolve their disputes with their neighboring countries, as evidenced by Saddam Hussein’s invasion of IranKuwait in the 1980s and 1990s.  Nevertheless, up to now, most regional countries, particularly Iraq’s neighboring states, have regarded democratic developments in Iraq as contrary to their interests.  

Failure in the reconstruction project will exacerbate instability and insecurity in Iraq, which can easily spill over to other regional countries, given Iraq’s mosaic-like social fabric with all its ethnic and sectarian skirmishes. Thus, regional countries must pay attention to the adverse consequences that the current economic hardships in Iraq will have for the entire region.  At the same time, coalition forces must pave the way for the participation of regional players in the nation-state-building process and the reconstruction of the new Iraq in order to greatly reduce the challenges to reconstruction in the country.  However, continuing instability and insecurity in Iraq might lead to the expansion of international terrorism, too.

 Iran’s Approach

The Ba'athist regime and Iraq under Saddam posed a major security threat to Iran for nearly four decades, mostly because of the Ba’ath regime’s antagonistic approach towards Iran. With the downfall of Saddam's regime and the introduction of a democratic system in Iraq, Iran’s perception of Iraq has changed from a threat to a good, friendly neighbor.

Iran’s foreign policy toward Iraq from the beginning of the Iraqi crisis has focused on making attempts to preserve the stability and integrity of Iraq. Hence, in spite of little regional support for the new Iraqi government and its stabilization, a priority of the Islamic Republic of Iran’s foreign policy orientation has been to support the new Iraqi government and its efforts to create stability and security.

Iran believes that any instability and insecurity in Iraq will ultimately provide a pretext for an expanded presence of foreign forces in Iraq. Tehran thinks this would inflict huge security and political costs on Iran, considering the likelihood of insecurity along the long, common borders, and could lead to the worst-case scenario, the disintegration of Iraq.  This development may also have wider implications for peace and security in the entire region. For these reasons, the Islamic Republic of Iran has used its full capacity for alleviating the current human suffering in Iraq and for paving the way for Iraq’s reconstruction.

During the past four years, Iran has tried to meet the economic needs of Iraq in a variety of sectors, including energy, electricity, health, food and fuel. In this respect, Iran has granted Iraq a $1 billion loan with a 30-year reimbursement timetable.  Iran has allocated this loan to Iraq’s development and reconstruction to be spent on roads, electricity, health, and water and sewage system.  In 2006 the turnover of commercial transactions between the two nations reached $1.800 billion. Thanks to better security circumstances in Iraqi Kurdistan, most of Iran’s commercial exchanges with Iraq focus on that region, and more than 400 Iranian companies now work there.  Iraq is currently the fourth biggest importer of Iran’s goods and services. The expansion of common oil fields is one of the most recent areas of cooperation between the two countries. The operation of the railroad from Iran’s Khorramshahr to Iraq’s Basra city this year will also facilitate transportation between the neighboring countries.

 Conclusion and Recommendations

For Iraq -- a nation in transition from an authoritarian system to a democracy and developed country – democratizing and developing peacefully is a daunting challenge. Attempting to institutionalize democratic principles in societies that lack strong institutions and a history of popular participation in government can exacerbate conflicts and political competition and rip the country apart, as demonstrated by the continuous upsurge in violence in Iraq and America’s waning legitimacy there. Structural weaknesses and problems related to lack of institutionalization in Iraq as main obstacles to the political process need the acceptance and legitimization of the new power structure, support for the central government and helping to establish security and reconstruct the country in various dimensions. In this respect, an important point is that women should be involved in efforts to rebuild the country. Women’s involvement tends to moderate political extremism and ensure sustainable development.

The progress of the reconstruction process will also require putting aside the unilateralist and monopolistic attitude of the United States and will depend on the serious, comprehensive participation of all countries and international organizations. In this respect, the United Nations can and should take up more tasks and responsibilities to help bring about reconstruction.  The organization should also play a crucial role in managing Iraq’s transition phase from security-building to economic reconstruction.

Regional nations have played a scant role in Iraq’s reconstruction process up to now, signifying a lack of regional political support of the new Iraq and inadequate economic and commercial capacities. In order to reinforce the role played by regional players in the process of Iraq’s reconstruction, regional nations must first back the new Iraqi government in political and legitimization terms. Secondly, they should help bring security to Iraq by strongly guarding their mutual borders to prevent the infiltration of insurgents into the country.  Ultimately, these nations should take advantage of existing economic and geopolitical capacities like transit routes, electricity transfers, and fuel in order to assist with Iraqi reconstruction.

Regarding the prospects for development and democratization in Iraq, it can be argued that in spite of the dominant chaos and instability in Iraq, there is no mistaking that the country’s young electorate -- men as well as women -- are massively in favor of development in the direction of law, democracy and prosperity. Furthermore, there is increasing international interest in the enhancement of Iraqi reconstruction and the consolidation of its nascent democratic institutions. This will create a favorable environment in which development can take place. Apart from the responsibility of civil society in Iraq, the political elites have to stop perpetuating the leadership styles of their predecessors and simply modernizing and reproducing the same old ideological justifications for absolute rule.  Undoubtedly, Iraq now represents the only Arab government truly elected by the people in a democratic way, so the barriers to the development of modern efficient institutions are far fewer than those found in any other Arab country. Iraq’s society should seize the opportunity to accelerate reconstruction efforts and transform the country into a beacon of development and democracy in the Arab World.

A stable and developed country -- just like the establishment of democracy itself -- is not something that happens overnight, and the reconstruction of Iraq may take years to accomplish. The consolidation of Iraqi democracy is creating both a chaotic and transformative experience for Iraqis, but eventually the country will pave its own path to the development of a vibrant, purely Iraqi democratic system.