Iraq’s looted treasury.. the exodus from a horrendous financial crisis

Shafaq News/ Iraq’s economic outlook does not seem to be quite optimistic; The novel Corona virus outbreak and the consequent measures instituted by the governments of Baghdad and Erbil added on the plummeting oil prices, political deadlock and reduced global appetite for a bail-out, pushed Iraq to the cusp of a financial calamity.  

By the end of 2019, the budget was 40 billion dollars short, while Iraq’s external debt is estimated by 23 billion dollars, without taking into consideration the 40.9 billion dollars legacy of the pre-2003 era. In a country with a budget of 135 billion dollars, a deficit like this -which is the highest in decades- cannot be taken for granted, as Iraq relies almost entirely (93%) on oil revenues. On the other hand, External financial support, even on the short term, cannot meet the demands of the high-maintenance state of Iraq. This raises the now classic question, what is the solution?

Sa’eed Yasin Mousa, a member of the Supreme anti-corruption Council  in Iraq, revealed to Shafaq News agency that more 500 billion had been stolen over the past years, wondering if Baghdad and Erbil will open up the case files in their bid against corruption within the framework of their legitimate movement. Mousa explicitly asked if the "Ritz model" is replicable in Iraq.

In late 2017, the crown prince Salman bin Abdulaziz announced the composition of the Supreme Anti-corruption commission. Shortly after, Saudis and observers around the world were left in shock as a group of well-regarded high-profile figures -including 381 princes, officials, businessmen and economists- were detained in the luxurious Ritz Hotel in Riyadh with no phone calls or visits. Their houses were placed under surveillance and their private jets were confiscated to prevent any of them or their relatives from escaping. A settlement was made with 87 of the 381, while 56 were referred to the Public Prosecution to complete their investigation and eight rejected the settlement offers. Despite the legal problems raised by the "Ritz model", the whole incidence received a popular approval in Iraq, Lebanon, Egypt and other countries in the region. 

Among the detainees was billionaire Prince Alwaleed bin Talal, Chairman of the giant Saudi Bin Laden Group Bakr Bin Laden, Chairman of the MBC television group Al-Waleed Al-Ibrahim, billionaire Saleh Kamel, Minister of Economy Adel Al-Faqih and former Minister of Finance Ibrahim Assaf. On the level of senior politicians, the National Guard Minister, Prince Miteb bin Abdullah bin Abdulaziz, former Prince Turki bin Abdullah bin Abdulaziz, former Deputy Minister of Defense Prince Fahd bin Abdullah and others, and the former head of the Royal Court, Khaled al-Tuwaijri.

It is rumored that this move of Saudi Arabia targeted mainly the sons and allies of the late King Abdullah bin Abdulaziz, to kick them outside the circle of influence and strengthen bin Salman's grip on the reins of the government. Back then, Saudi official statements confirmed that this arrest campaign Returned 100 billion dollars to the Saudi treasury. Despite the political motives, Many Saudis valued this gesture as it recovers 400 billion Saudi Reyal to the treasury, as the budget experienced a shortfall of tens of billions of dollars for the fourth year in a row.

The Saudi Anti-Corruption Commission swiftly fulfilled his tasks either by arresting or negotiating detainees, to extract money from them. On contrary, the scene in Iraq seems different. Efforts counter corruption in Iraq have not led to any significant achievements so far; despite the self-evident prevalence of embezzlement, bribery, misuse of public funds and the questionable wealth of many personalities who had held major responsibilities and positions in Iraq.

Is it possible to replicate the "Ritz model" in Iraq?

 Mousa says it is not possible, as Iraq is not ruled by monarchy where obedience is obligatory. In his opinion the only solution lies in reinforcing the hand of the law over the corrupts with strict judiciary measures. He also indicated that, "more than 500 billion dollars were stolen by corrupt personalities. Retrieving stolen funds will enable Iraq to overcome the financial crisis”. Mousa  suggested that Iraq should enable the 3x3 plan and arrest three high-ranking corrupt figures , according to judicial warrants, and recover funds they stole from the international banks they deposited the money in.

The experiences of other countries may provide a legal and political example for Iraq. In Italy, a group of impartial judges, led by Judge Antonio Di Beatro, decided to join efforts to confront corruption in the country. Their campaign, named The White Hands, caused the overhaul of the entire political class in the early 1990s and chased thousands of businessmen, representatives and state employees. Many judges and prosecutors lost their lives in this bid of integrity. Although that confrontation did not achieve a complete victory, it stood out as it shook the pillars of corruption.
The Iraqi judiciary system needs to have courage and independence to recover the stolen funds. However, a lesson must be taken from Lebanon, in which, despite more than seven months passing since the beginning of the anti-corrupt demonstrations of October 17, the response of the political class and the judicial system was next to nothing; neither single achievement was accomplished nor a single reform was implemented. Observers believe that the judiciary's suspicious connections with the political class makes it almost impossible to restore tens of billions of dollars that have been stolen since the 90s of the past century.

Iraq can benefit from the international cooperation in the quest of recovering stolen funds. Switzerland, for example, despite its banking secrecy, did not hesitate to cooperate with countries that provides clear legal documents about suspicious funds in Swiss banks. Nigeria, for example, successfully recovered 1.2 billion dollars of stolen fund, back in the era of the dictator General Sani Abacha, including 700 million dollars from Switzerland alone. However, the course of the cases was long and complicated, as it was done under the supervision of the World Bank, which imposed obligatory numerous financial conditions on the Nigerian government in exchange for cooperation; including investing the stolen funds in particular development sectors.

After the outbreak of the “Arab Spring” revolutions, many Swiss banks admitted that huge funds are deposited in accounts linked to deposed Arab leaders, including the former Egyptian President Hosni Mubarak, Yemen’s former President Ali Abdullah Saleh and the former Tunisian President Zine El-Abidin Ben Ali. However, the subsequent government have not yet recovered that funds, despite being frozen by the Swiss government.

Similar to Nigeria, Philippines and Zaire struggled to retrieve funds stolen in the eras of Ferdinand Marcos and Mobutu Sese Seko respectively. Although the Filipino dictator plundered up to ten billion dollars prior to his fall in 1986, authorities in Manila had to heave through 18 years of heavy judicial and legal procedures against Swiss banks and internal political challenges, to finally recover 683 million dollars, in 2004.

Peru provides a promising model  of proper management of retrieved fund ransacked in the era of president Alberto Fujimori. The government formed a national fund council to supervise the management of the money retrieved, to ensure that it is spent correctly. The council included representatives of five Peruvian anti-corruption parties to ensure the integrity of the procedure.

Based on the experiences mentioned above, it seems that plans to recover stolen money, whether inside or outside Iraq, must be mediated via various mechanisms. Starting from a strict political decision backed by popular and parliamentary support, an effective and independent judicial system, a serious committee to pursue this quest and –last, but not least- a council that properly manages the recovered funds.

In conclusion, the path to restoring the plundered treasury is neither a bed of roses nor a pleasure cruise. However, it is a must and both the governments of Baghdad and Erbil need to cooperate to pursue this quest in order to overcome the current financial crisis. So will it be a successful experience for Iraq?