Saturday, June 7, 2008

US Holding Iraqi Funds Hostage Over SOFA

On Thursday, I wrote about Patrick Cockburn's reporting on the pending status of force agreement between Iraq and the US, one that would include US leases of 50 bases, control of Iraqi airspace, and freedom of operations and immunity for US forces and civilian contractors. The deal was clearly an infringement on Iraqi sovereignty and extremely unpopular with the Iraqi populace--and, by extension, the Iraqi parliament--so President Bush is trying to push it through as a deal between Nouri al Maliki and he.

Part of this strategy, incredibly, includes a threat to Iraq's $50 billion foreign reserves.

The US is holding hostage some $50bn (£25bn) of Iraq's money in the Federal Reserve Bank of New York to pressure the Iraqi government into signing an agreement seen by many Iraqis as prolonging the US occupation indefinitely, according to information leaked to The Independent.

US negotiators are using the existence of $20bn in outstanding court judgments against Iraq in the US, to pressure their Iraqi counterparts into accepting the terms of the military deal, details of which were reported for the first time in this newspaper yesterday.

Iraq's foreign reserves are currently protected by a presidential order giving them immunity from judicial attachment but the US side in the talks has suggested that if the UN mandate, under which the money is held, lapses and is not replaced by the new agreement, then Iraq's funds would lose this immunity. The cost to Iraq of this happening would be the immediate loss of $20bn.

Because Iraq is technically still listed as a danger to world stability under UN chapter 7, a Saddam hangover, the US is bribing its new friend by establishing the price of losing that stigma as signing the SOFA as is, and granting US forces free reign within the sovereign state. That the US would expect any independent state to allow its forces the right to conduct operations and arrests its citizens all with full immunity is incredible in itself, but to force through the agreement as if it's getting Johnny Fontane a contract defies credulity.

The US has already cost the Iraqi government around $5 billion dollars through the Treasury Department's handling of the funds, held in the Bank of New York.

Iraqi officials say that, last year, they wanted to diversify their holdings out of the dollar, as it depreciated, into other assets, such as the euro, more likely to hold their value. This was vetoed by the US Treasury because American officials feared it would show lack of confidence in the dollar.

Iraqi officials say the consequence of the American action was to lose Iraq the equivalent of $5bn.

In spite of the US attempts to strong-arm the Iraqis into accepting the deal verbatim, snags are already appearing, as Iraqi officials are speaking out against the SOFA's affront to Iraqi sovereignty.

Iraq said on Friday it would not grant U.S. troops freedom of movement for military operations in a new agreement being negotiated on extending the presence of American troops on its soil.

Deputy Prime Minister Barham Salih said the United States wanted its forces to operate with no restrictions, but this was not acceptable to Iraq.

Tension particularly arises when considering al Maliki's precarious position within his own government, a position which just got even more shaky. Maliki knows the deal will be unpopular, but also knows he is dependent upon the US for both military backing and legitimacy. The US, of course, knows this as well, which is why it's in a position to threaten Iraq. Grand Ayatollah al Sistani and al Hakim, the leaders most supportive of the central government, have not come out fully against the deal, but have stated that no deal which allows the Americans free reign would be acceptable. Maintaining their support is vital to the success of any long term alliance between the two nations.

Already Maliki's hold on stability is faltering however, as Juan Cole reports his Da'wa Party has "decisively split."

The new branch, Da'wa- National Reform, has been formed by former PM Ibrahim Jaafari, and the local leadership of Islamic Mission political offices in many cities, including in Najaf, has defected to it.


These 90 MPs oppose the soft partition of Iraq and generally have a strong Iraqi nationalist orientation. Several have expressed opposition to the US-Iraqi security agreement now being negotiated.

Of those 90 MPs, 30 are Sadrists. While Maliki is supposed to hold the country together, he is being forced at gunpoint into a wildly-unpopular alliance on one side and facing the crumbling of his own political party on the other.

Apparently, al-Maliki has been maneuvered by the Bush administration into a position where he has virtually no popular or party support, and is left with Washington has his only anchor.

Which makes Bush three-for-three on backing unpopular leaders, as he continues to push his relationship with Musharraf despite his plummeting import among Pakistanis.

An overview of the tempest surrounding the SOFA is not hard to ascertain. President Bush, knowing the unpopularity of such a deal, is trying desperately to keep both congresses out of it, forcing Maliki's hand by holding funds hostage and forcing him into a position that may very well turn out to be politically untenable. Maliki is dependent on the US for support, but should he sign a unilateral deal which signs away Iraqi sovereignty he will forfeit nearly all popular support.

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