Posted on Sep 07, 2021
On Monday, the French energy giant Total inked an oil, gas, and solar energy deal with the Iraqi government worth approximately $27 billion—the largest ever investment into the country by a Western company.
The announcement follows closely on the heels of Emmanuel Macron’s second visit to the country in less than a year, with the French president taking part in the Baghdad Conference for Cooperation and Partnership on August 28th and actively encouraging closer cooperation with Iraq on issues of regional stability and economic development.
There was, however, a glaring omission in the French President’s speech at the Baghdad summit: namely, the pervasive graft in the upper echelons of the Iraqi political class. As in Lebanon, where Macron positioned himself as the international community’s lead representative in the aftermath of the Beirut port blast one year ago, systemic state corruption along sectarian lines continues to prevent Iraq from implementing desperately needed reforms. Macron’s more recent endorsement of investments in Iraq comes despite Iraq’s ranking of 160 out of 180 by Transparency International, making it one of the most corruption-riddled markets on earth.
French investments in Iraq pile up
As part of his wider strategy to boost France’s presence in the Middle East, Macron was the first Western leader to visit Iraq after Iraqi PM Mustafa al-Kadhimi took office last year. If Macron is to protect the French companies now heeding his call to invest in these strategically vital but politically fraught Middle Eastern markets, however, he will have to take concrete steps towards tackling the endemic corruption that has already impacted European firms.
After anti-corruption protests led to the collapse of the previous government, al-Kadhimi has made notable moves to crackdown on graft, including the arrests of corrupt officials such as provincial governor Hassan Mandil Al-Sariawi and retired judge Jafar al-Khazraji. As a recent Chatham House paper explains, however, “Kadhimi has no more power to enact reforms than any of his predecessors,” especially as the countdown to elections in October has put the brakes on overdue reforms. The elections themselves have also become a battleground for anticorruption efforts – just last week, security forces busted a second attempt to rig the upcoming vote.
Despite the extent to which graft dominates Iraq’s institutions and daily life, with powerful political factions and militia forces divvying up important government posts and stealing from both the state and the general public at every turn, Total is only the latest French company to undertake new investments there. Encouraged by the French government’s pledge of $1.1 billion towards Iraqi infrastructure projects, Alstom penned a letter of intent to build an elevated metro system in Baghdad in October 2020, while ADP Ingenierie signed a contract to reconstruct Mosul’s airport this past February.
Foreign telecoms companies expropriated While these examples of French foreign direct investment (FDI) are unquestionably a positive development for Iraq, whose government relies on fluctuating oil sales for 96% of its budget, the past experience of other outside firms operating in the Iraqi market raises important questions about how vulnerable these investors might now be to graft, extortion, or political pressure. Perhaps the most egregious example of the risks associated with investing in Iraq comes from Macron’s own doorstep, involving the French telecoms giant Orange.
In 2011, Orange teamed up with Kuwaiti logistics firm Agility to acquire a 44% joint stake in Iraq’s Korek Telecoms for $810 million. Years after the deal was concluded, Iraq’s Communications and Media Commission (CMC) abruptly annulled the agreement, arguing the two companies hadn’t sufficiently invested in network expansion and maintenance. As a result, the firms’ investments in Korek were expropriated and retransferred – without compensation – to their previous owner, the Iraqi Kurdish businessman and peshmerga commander Sirwan Barzani.
Desirous to avoid a public dust-up, Orange reportedly relied on diplomatic backchannels to seek an agreement with the Iraqi state. After these efforts proved fruitless, Orange opened arbitration proceedings against the Iraqi government in October 2020. While the failure of the French state to protect Orange’s interests could bode ill for the latest set of French investors in Iraq, Macron himself does not seem to have allowed the dispute to colour his relationship with officials in Iraq or Iraqi Kurdistan. Instead, the French president met with Sirwan Barzani himself during his visit to Erbil, receiving as a gift a flag captured from ISIS forces by the peshmerga.
Will Lebanon serve as a lesson?
Many of the obstacles to French engagement in Iraq are also present in Lebanon, which ranks only fractionally higher than Iraq on corruption issues and is also at the mercy of sectarian elites who divert much of the country’s revenues into their own pockets. Just over a year ago, Macron was the first foreign leader to visit Beirut in the aftermath of the devastating port explosion which killed nearly 200 people, with revelations that hundreds of tonnes of ammonium nitrate were stored in the middle of the city for years underscoring the negligence of Lebanon’s political elite. Speaking from Beirut, Macron made declarations of “fraternity” to the shell-shocked citizens of France's former colony, while a petition for Lebanon to once again become a French mandate gained nearly 60,000 signatures.
In hindsight, however, analysts suggest that Macron’s interference only served to take the wind out of protesters’ sails. The French president recently handed over $118 million in aid despite stating “there will be no blank cheque for the Lebanese political system”, and his government has pushed for EU sanctions all while ignoring calls by Lebanese activists to freeze the French assets of corrupt officials. While Macron continues to exhort Lebanon’s corrupt politicians to form a government, the country’s economy has collapsed.
If Emmanuel Macron is serious about positioning France, and by extension the European Union, as constructive partners for countries like Lebanon and Iraq, he needs to do everything in his power to sanction graft and bolster anticorruption efforts in these countries’ political systems. Given the amount of French and European aid and investment directed towards these countries, Macron and his fellow EU leaders enjoy more influence, and carry greater responsibilities, than they give themselves credit for.
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