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This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

By Mustafa Habib.

Iraqi Internet Shuts Down, Fake News Blossoms During Information Blackout

When it came to disinformation, shutting down the Internet to prevent protests in Iraq may have backfired. Iraqis get most of their information from social media and there was none, so false reports circulated wildly.

On June 14, the Iraqi government shut down the Internet in an effort to try and prevent the spread of anti-government protests. The demonstrations, which called for better state services, power and water, had spread from the southern city of Basra to nine other provinces, including Baghdad. And clearly the government wanted to prevent them from going any further.

For the past few years, these types of protests have broken out every summer. In stifling heat rising to 50 degrees Celsius, the lack of power to refrigerate foods or keep houses cool and the fact that water coming out of the taps is salty, is enough to drive Iraqis to protest. But these demonstrations spread further than previous years.

And one imagines that the Iraqi government was trying to prevent the spread of information about the protests, in order to contain them. They are able to block the Internet thanks to the fact that most of infrastructure used for relaying the Internet is government-owned.

However the Internet blockage seemed to only frustrate Iraqis further. Locals here rely heavily on social media to get their news; they tend not to trust local media, believing it to be partisan or funded by interested parties who push their own agenda. What friends and relatives post on Facebook has become a major and important source of information – and when the Internet is down they obviously cannot access this.

So locals found themselves watching TV to get more information about the protests or resorting to VPN – virtual private networks – to access the online world. Iraqis have become accustomed to using this kind of software when the government shuts down, or throttles the Internet here, but as digital privacy experts point out, these too can be  dangerous, especially with regard to privacy.

Clearly Iraqis right around the country were interested to know more about the protests. But pictures and videos were hard to come by, given the Internet shutdown. This led dozens of Facebook pages, specializing in Iraqi news and current affairs, to write up stories about the protests – but as they did, they also used older pictures and videos and many ended up publishing unsubstantiated rumours.

Iraqis who sympathized with the demonstrators didn’t just publish news reports on their pages, they also uploaded pictures and videos to Facebook – some of these were real and some were not. News organisations, like NIQASH, received these kinds of items via messages from people who appeared to be private citizens; however, due to the Internet shutdown, it was difficult to verify the content that was being sent and some of it was certainly not from the current demonstrations.

In fact, as Internet-rights activist and head of the Ansam Network, Haidar Hamzouz, says, the Internet blockade may well have had the opposite of the government’s intended effect. “Shutting down the Internet is a violation of the freedom of expression,” Hamzouz told NIQASH. “And the decision to do this was not the right one – it actually contributed to the spread of false news and it also became very difficult to inform anyone that  certain items were false news.”

It seems that in Iraq, as elsewhere in the world, false reports and emotion-generating half-truths spread far faster than the truth.

Even though the government owns the public broadcaster, Iraqi Media Network, and they have huge resources, they still have not been able to stop the spread of these false reports and rumours, Hamzouz says. “We need institutions that are capable of relaying the facts and combatting fake news, rather than those who just shut down the Internet,” he argues. “Combatting fake news and untrue reports requires a change in the communal culture, one that values verification and checks sources. Unfortunately this doesn’t yet exist in Iraq,” he notes.

One of the more dangerous pieces of false news involved reports that the security forces, who were clashing with the demonstrators in the south, were actually from elsewhere, and more specifically from Anbar and Mosul. The message was that Sunni Muslim soldiers – who mainly come from central and northern Iraq - were abusing Shiite Muslim protestors, who mainly live in southern Iraq. It was clearly a report aimed at fuelling sectarian conflict.

“It is so unfortunate that this news incited hatred against us,” says Ali al-Rubaie, a police captain based in Rustafa, Baghdad. “The members of the security forces who were deployed to the protests were actually residents from the same cities. Each province has its own police and counter-terrorism forces. It would be impossible to do that job with troops from outside of the provinces in which the protests occurred,” he argues.

Additionally when the protests first started, news that the demonstrators were clashing with Iraqi security forces spread fast. But given the internet blockade, it was difficult to find pictures from incidents. One picture that was shared many times shows an Iraqi soldier pointing his gun at an unarmed civilian lying on the ground. However the picture was actually taken during a military training exercise in 2014, organized for a military training graduation ceremony in Karbala.

Another dangerous piece of news had Talib Shaghati, the head of Iraq’s special forces troops, commenting on the clashes between the demonstrators and the security forces. “This is not our battle and we will not stain our hands with the blood of our sons and brothers for the sake of some corrupt officials,” Shaghati was alleged to have said in a  statement that was widely circulated on social media.

The same report said that Shaghati  had been asked to send his troops to the protests but he had refused, and that he had asked the government to listen to the demonstrators’ demands before it was too late. Thousands of Iraqis believed this report and some even said that there should be a military coup because it was clear that the protests had no impact on the government, and the military were on the protestors’ side.

The US was not coming to the rescue either: One report said that US president Donald Trump had said his government was keeping a close eye on the protests in Iraq. This was followed by video footage of two military divisions landing at Baghdad airport. None of this was true: The video was an old one.

Saudi Arabia was not coming to the rescue either. As the protest movement gained momentum, its critics were divided. Some said Iran was behind the protests because the neighbouring nation was going to stop supplying power to Iraq. Others said Saudi Arabia was at fault and was pushing people to demonstrate in order to cause chaos in Iraq.

One of the obviously false reports was started by a page on Facebook called Saudi News. It said that Saudi Arabia’s ruling monarch had ordered water lines and electricity transmission lines to be built urgently for the southern parts of Iraq. The report spread quickly throughout Iraqi social media despite its fanciful nature.

KRG Prime Minister Nechirvan Barzani received a delegation from the Kingdom of Saudi Arabia including President of the Chambers of Commerce of Saudi Arabia Dr. Sami bin Abdullah Al-Obaidi, Saudi Ambassador to Iraq Abdulaziz al-Shammari, Saudi Consul General to the Kurdistan Region Mansour Faisal al-Otaibi and a number of officials and members of Saudi Chambers of Commerce.

Opportunities for investment in the Kurdistan Region and strengthening of economic and trade relations in various sectors were discussed. In particular, they highlighted areas of mutual interest in industry, agriculture and tourism.

The delegation expressed desire to encourage investment in the Kurdistan Region due particularly to the security and stability which prevail in the Region and its appropriate conditions for investment.

Starting direct flights between the Kurdistan Region and Saudi Arabia and the opening of a Saudi bank in the Kurdistan Region and Iraq were discussed as initial steps. They also agreed to hold a conference in the Kurdistan Region or in Saudi Arabia with the participation of investors and businessmen from Saudi Arabia, Iraq, and the Kurdistan Region. Establishing a joint committee to monitor progress on these initiatives was agreed.

Prime Minister Barzani expressed the KRG’s readiness to provide assistance and facilities for Saudi companies to invest in the Kurdistan Region and to promote and develop economic and trade relations between Iraq and the Kurdistan Region with Saudi Arabia.

Kurdistan Region Presidency Chief of Staff Dr. Fuad Hussein and a number of KRG officials also attended the meeting.

(Source: KRG)

The coalition and its partnered forces in Iraq and Syria continue to make progress in the effort to defeat the Islamic State of Iraq and Syria, the coalition’s senior French representative has said.

Brig. Gen. Frederic Parisot of the French air force, the director of civil-military operations for Combined Joint Task Force Operation Inherent Resolve, provided an operational update briefing to Pentagon reporters today via videoconference from Baghdad.

Coalition strikes in April and June killed six high-value terrorist leaders responsible for planning terror operations overseas, Parisot announced. He credited the Syrian Democratic Forces, the Iraqi security forces and the coalition for the progress in defeating the terrorists.

“Thanks to the operations conducted by the SDF, ISF and the coalition, we are stopping [ISIS] from being able to conduct terror across the world and degrading the ability to plan and finance such operations,” he said.

In a news release, the coalition said the removal of the six terrorists has prevented ISIS’ external attack planning, facilitation and operations targeting Saudi Arabia, Sweden and the United States.

The release says those killed were a Syrian-based ISIS member planning attacks in Saudi Arabia; a Belgian foreign fighter who came to Syria to plan attacks against the United States and its interests; and four people linked to a Swedish attack plot.

Focus on ISIS Defeat

Parisot detailed other progress in the fight, including the Iraqi security forces working with Kurdish peshmerga fighters in joint operations to clear an area in the mountains near Kirkuk, Iraq.

Additionally, along Iraq’s western border, the Iraqi forces continue to prevent terrorists from pouring into Iraq while the coalition continues to provide intelligence, overwatch and fire support to partner force on the ground, he said.

Parisot pointed out that Operation Roundup is in its 84th day of activating the offensive to defeat ISIS remnants in the Middle Euphrates River Valley. He noted the recent liberation of Dashishah in Syria, which was among the last terrorist strongholds in the area.

“Thanks to the combined SDF ground offensive, strikes by coalition and Iraqi forces and border security operation by the ISF, Dashishah has been freed after four years of tyrannical [ISIS] rule,” he said.

Fight to ‘Finally Rid the World’ of ISIS

France is steadfast in its support to the coalition, Parisot said, highlighting the strikes French forces have conducted operations as well as providing the training and other support French forces provide toward the defeat-ISIS effort.

“My country knows firsthand the horrific acts that [ISIS] is willing and capable of committing, and that's why we will remain committed to this fight,” he said.

He said the 1,100 French forces in Iraq, Kuwait, Jordan, Qatar and the United Arab Emirates are working side by side with coalition nations at the forefront of efforts to defeat ISIS.

“France is honored to stand among the 72 nations and five international organizations that comprise the most successful international coalition ever formed,” he said. “We remain committed to the fight to finally rid the world of [ISIS] once and for all”

(Source: US Dept of Defense)

By John Lee.

The Trade Bank of Iraq (TBI) has announced that it will open a branch in Saudi Arabia.

Faisal Al Haimus, Chairman of TBI said:

“This important addition to our bank accomplishments shall strengthen trading and banking relationships between the two countries."

(Source: TBI)

From Al Jazeera. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

Police and medical sources say at least 11 people have now died in protests in southern Iraq against the poor state of public services.

The unrest began in Basra last week and has spread to several other large cities.

One of the main reasons for the anger is the frequent power blackouts that are severely worsening living conditions.

Some in Iraq are hoping that Iran can supply them with electricity via Iran's national grid, prompting Saudi Arabia to offer aid.

The government in Baghdad is racing to find a way to meet some of the protesters' demands for economic and energy reforms and bring an end to the protests before they turn into a large, nationwide movement.

Al Jazeera's Imran Khan reports from Baghdad:

New pre-arrival clearance protocols and reduced terminal handling charges for containers in transit, mean that Jordan’s deep-water Aqaba Container Terminal (ACT), located on the Red Sea, is now a realistic alternative maritime gateway for Iraq-bound cargo, APM Terminals said in its press release.

Containers imported into Iraq will no longer have to be trans-loaded onto new trucks as they cross the Jordanian/Iraqi border.

“The Aqaba Container Terminal has been working hard over the years to develop a competitive gateway to Iraq," says ACT Managing Director Steven Yoogalingam. “This will enhance the already strong Iraqi port system and gives the business communities of both countries a fantastic transportation system to better support economic development in the region."

Ideally located, the ACT is 550km - or 36 hours by road - from the Iraqi border town of Traibil and 48 hours from Baghdad. This development comes as the volume of Iraqi imports experience rapid growth - 86% last year alone.

The ACT is a joint venture between ADC, the Jordanian Government's development arm for the Aqaba Special Economic Zone, and APM Terminals, which manages the facility. It is the second–busiest container facility on the Red Sea after Jeddah (Saudi Arabia).

A terminal expansion project completed in 2013 added 460 meters to the existing quay to create a total length of 1 km and increased the annual container throughput capacity to 1.3 million TEUs.

Iraqi imports grew by 86% in 2017 to $36.5 billion - the leading sources being China, Turkey, Iran, South Korea and the United States, with food, medicine and manufactured goods the primary products.

(Source: APM Terminals)

From Al Jazeera. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

It's been three weeks since the parliamentary election in Iraq and many Iraqis voted for a nationalist party opposed to foreign interference.

But both Riyadh and Washington want an Iraq that is sympathetic to their interests and pro-Iran militias were instrumental in defeating ISIL.

Worries in Iraq are increasing that tension between Iran and the US, along with its Saudi ally, could undermine stability in the country.

Al Jazeera's Osama Bin Javaid from Baghdad, Iraq:

By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Market Review:  The Elections, the Economy and the Stock Market

A key aspect of the Iraq investment opportunity is arbitraging the delta between real and perceived risk. The perceptions of the widely covered parliamentary elections fit within this arbitrage opportunity in that they miss the mark by a wide margin.

The May elections did not result in an overall winner with an outright majority (165 seats among the parliament’s 329 seats) enabling the formation of a government. Instead, they produced winners and losers who will eventually form a coalition government. At the lead is Sairoon, a coalition of Shia cleric Muqtada Al Sadr, Communists and Liberals, with 54 seats; followed by Fateh, a coalition of the political arms of the Popular Mobilisation Units (PMU’s), with 47 seats; finally, Nasr, the Prime Minister’s (PM) coalition, with 42 seats.

The rest are made up of: five different coalitions each with 18-25 seats; four coalitions each with 4-6 seats; and finally, a gaggle each with 1-3 seats. The next step would be the formation of an alliance of coalitions that would, on the first day of the new parliament by end of June, have the largest number of seats to enable it to have a PM with a chance of forming a government. The whole process should take a few weeks but, in the past, it took a few months.

The winning coalitions, irrespective of their lead player, are all cross-sectarian unlike the prior ethno-sectarian monolithic blocs that dominated over the past 14 years – a division that was the root cause of Iraq’s political and social instability since 2003. Moreover, for the first time since 2003 there was a strong mass opposition to these ethno-sectarian monolithic blocs that manifested in an active non-participation movement. This led to an election participation turnout of 44.5%, which in turn had huge effects on the seats won and lost by the different coalitions.

Drilling further into the leading blocks shows neither they nor their leading players conform to simplistic assumptions. For example, Muqtada Al Sadr is often described as a firebrand cleric who is anti-secular, anti-Western and pro-Iran as a result of his leading role in Iraq’s dark history since 2003. Yet, at least outwardly, he went through a transformation to a firebrand cleric who is anti-Iran and anti-its proxies in Iraq, whose alliance with Communists and Seculars kept the 2015 pro-reform demonstrations alive and relevant.

Moreover, he was a leading player in rebuilding Iraq’s relationship with Saudi Arabia and the UAE - both received him in their capitals in 2017 to further this rebuilding. The second leading coalition, Fateh, a grouping of the political arms of the supposedly pro-Iranian PMU’s, although not all are, is led by Iranian-allied Bader Organization. Yet Bader has been a part of every Iraqi government since 2005, responsible for the Ministry of the Interior, and as such a major part of the next phase of Western support for Iraq in rebuilding its security apparatus in the long-term fight against ISIS.

The most visible fruit of which has been the decline of violence since the end of the Mosul campaign and in the first violence free elections (see chart below). Finally, the Naser coalition which is led by the PM and while much admired for leading the fight against ISIS, he suffers from perceptions of failure to address the demands of the demonstrators since 2015. Although an unfair criticism given the overriding priority to deal with the ISIS invasion, it was behind much of the reason for his collation’s third place showing. Nonetheless, his chances of returning as a PM capable of leading a workable government are high.

UN Casualty figures for Iraq November 2012 - April 2018

(Source: United Nations Assistance Mission for Iraq (UNAMI), for 8 months from 2015 UNAMI, in some cases, could only partially verify certain incidents)

Optimists see the potential for a coalition governing with a clear reform agenda and with a proper opposition in parliament providing a check on the government. The pessimists however see a repeat of the prior coalition governments that were made up of all groupings in parliament, and thus no real change to the failures since 2003. However, irrespective of who would be right, a few things are clear that would have implications for Iraq’s economy, the investment opportunity in Iraq and the stock market.

The combination of the lead by Sadr’s coalition, the continued pro-reform demonstrations since 2015, and the large active non-participation movement together imply that the upcoming government would need to address the issues at the heart of the public’s anger. This would be the provision of services and reconstruction, which require much needed overdue investments in the country’s infrastructure and the reconstruction of the liberated areas.

The new oil price dynamics have a huge positive implication on Iraq’s ability to provide funds for this massive investment spending estimated at USD 88bn over the next five years. Current estimates for the country’s budgets for 2017-2022 are based on Iraqi oil price assumptions of USD 45.3/bbl in 2017 and increasing to USD 47.1/bbl by 2022. These estimates would result in a cumulative deficit of USD 17.6bn, thereby increasing the debt load, necessitating borrowing to fund the deficit and restrict the ability to fund reconstruction. This implies the need for outside aid and investment to fund reconstruction.

However, different assumptions based on the new oil price dynamics would provide a vastly different picture. For instance, using realized prices of Iraqi oil of USD 49.2/bbl for 2017, and assuming Iraqi oil prices of USD 60/bbl for 2018, then declining to USD 51/bbl in 2022, would produce a cumulative surplus of USD 47.4bn instead of the earlier assumed cumulative deficit of USD 17.6bn. In other words, this equals a turnaround of USD 65bn in potential available funds.

While, an assumption of an oil price of USD 64/bbl for 2018, then declining to USD 55/bbl by 2022 would produce a cumulative surplus of USD 78.2bn, or a turnaround of USD 95bn in in potential available funds.

Granted some of this windfall will result in higher government spending, especially on populist measures which would be detracting from the funds available for infrastructure investment. Though this would nevertheless be a large positive for consumer confidence and economic activity, all of which would ultimately support the earnings profile of consumer service providers and the banking sector.

In the immediate term, given the impossibility of forecasting future oil prices out to 2022, if Iraq’s oil price was to hold the YTD average for the remainder of 2018, it would convert the IMF 2018 projected deficit of USD 9.5bn into a surplus of USD 10.9bn. This means a turnaround of USD 20bn in potential available funds. Coupled with a slight positive variance to 2019 projections, this would provide Iraq with enough fiscal flexibility to start directly funding the immediate needs for reconstruction. This changed fiscal position would further allow it to comfortably access debt markets at reasonable rates to build upon this reconstruction. The potential addition of regional investments led by Saudi Arabia, as discussed here in the past, could lead to a self-reinforcing investment cycle.

The stock market’s action in the weeks before and after the elections has been business as usual and very much followed the same themes discussed over the last few months. This is an indication of how much negative news the market has discounted over the last three years that saw the index, as measured by the RSISUSD Index, decline -68% from its 2014 peak to the 2016 bottom.

Through 22^nd May the market was down -3.9% for the month, bringing the year to date gains to +5.8%. The daily market action has been almost identical to that of the prior month with the same low turnover, the same buying in the selected leading stocks and the same selling in the banks based on the same fears.

The response of the currency to the elections for the most part matches that of the market with the market price of the Iraqi Dinar (IQD) weakening versus the USD in the days around the elections but returning to the same levels at the start of the month. The upshot, is that the premium of the market price of the IQD over the official exchange rate increased from 1.2% at the end of April, reaching 2% just before the elections and is now back to 1.2%.

The issue that continues to dominate the market is the timing of the return of liquidity as a result of the expansionary effects of higher oil prices and the end of conflict. As discussed here in the past, the observed time lag between Y-Y changes in oil revenues and Y-Y changes in M2 has been about 7-9 months which suggests that M2 growth should see improvement over the next few months as the chart below implies: it shifts the Y-Y percentage change in M2 back by 9 months versus the Y-Y percentage change in oil revenues. However, it is complicated by the additional time taken up by pre and after elections, and the additional time needed for the formation of the new government. All of which will delay this recovery but would likely result in a large back-end loaded return of liquidity.

Oil Revenues Y-Y change (green) vs M2 Y-Y change (red)

(Source: ISX Central bank of Iraq, Iraq’s Ministry of Oil, AFC.)
(Note: M2 as of Jan. with AFC est.’s for Feb & Mar, Oil revenues as of Mar with AFC estimates for Apr & May)

As argued here in the recent past, the backdrop continues to be positive: historically the equity market, as measured by the RSISUSD Index, has tended to follow oil revenues with a time lag of 3-6 months as the chart below shows.

Iraq’s Oil Revenues (green) vs the RSISUSD Index (red)

(Source: Iraq’s Ministry of Oil, Rabee Securities, Iraq Stock Exchange, AFC)
(Oil revenues are as of Mar with estimates by AFC for Apr & May)

Given the time lag involved and the delay over the formation of the new government, this will probably unfold over the next few months and the recovery will likely be in fits and starts with plenty of zig-zags along the way. This continues to underscore the opportunity to acquire attractive assets that have yet to discount a sustainable economic recovery.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS). He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

_______________________

[1] Source of current estimates on Iraq (deficit, oil price, revenues etc) are from the IMF Iraq Country Report No. 17/251 (http://www.imf.org/~/media/Files/Publications/CR/2017/cr17251.ashx). Updated assumptions are the author’s calculations based on the above source

By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Sairoon (On the Move) Alliance formed by Muqtada al-Sadr and the Iraqi Communist Party is ahead in the preliminary results of the Iraqi elections. More than 90% of the votes in all of Iraq's provinces have been counted so far, with the exception of Dahuk and Kirkuk, where counting was postponed.

Sairoon has so far secured 54 out of a total of 329 parliamentary seats, while the Al-Fatah Alliance, formed by the Iranian-backed Popular Mobilization Units, has won 44 seats, followed by 39 seats for Prime Minister Haider al-Abadi's Al-Nasr Alliance. The State of Law Coalition led by former Prime Minister Nouri al-Malik has secured 25 seats, and the Al-Wataniya Alliance of former Prime Minister Ayad Allawi has obtained 22 seats.

The results have raised the chances that the Sairoon Alliance will form the largest bloc in the next parliament, which will be tasked with appointing the prime minister and forming the next government. Sairoon leaders rushed to express their desire to put together the largest bloc and voiced their opinions on the next government's shape and inclination.

“The door is open” for Sairoon to work with any of the rival blocs, said Dhia al-Asadi, head of the political bureau of the Sadrist Movement, on May 14 after the announcement of the preliminary results of the elections. “Sairoon has the right to claim the post of prime minister,” he said. On May 16, Sadr, the head of the Sadrist Movement, confirmed his wish to form a government of technocrats free of partisanship and sectarianism.

In a May 14 tweet, Sadr hinted at the alliances and broad nature he hopes will characterize the new government. Using a play on words derived from the meaning of various political entities' names, he wrote: “We are Sairoon (On the Move) with Hikma (Wisdom) and Al-Wataniya (Patriotism) to make the people's Iradah (Will) our demand, to build Jilan Jadidan (a New Generation), to witness Taghir (Change/Gorran) toward reform and for the Al-Qarar (Decision) to be Iraqi," continuing the puns with, "So we raise the Bayariq (Banners) of Al-Nasr (Victory), and to make Baghdad, the capital, our Hawiyatuna (Baghdad is Our Identity) and our Hirakuna (Democratic Movement) move toward the formation of a paternal government from among technocratic Kawadur (Cadres) free of partisanship.”

Sadr used parenthesis in his tweet to denote various Iraqi political entities, including Abadi’s Al-Nasr, Ammar al-Hakim’s Hikma and Allawi’s Al-Wataniya alliances, and others — excluding the Iranian-supported militia Al-Fatah Alliance and Nouri al-Maliki’s State of Law Coalition.

If Sadr can achieve an alliance that includes the aforementioned forces, he would form the largest bloc and isolate his rivals, the Al-Fatah Alliance and the State of Law Coalition.

Arab powers opposing Iran, led by Saudi Arabia, welcomed Sadr's victory and expressed hope that it will undermine Iran’s influence in Iraq. Thamer al-Sabhan, the minister of state for Arabian Gulf affairs at the Foreign Ministry and a former Saudi ambassador to Iraq, commented on Sadr’s tweet and retweeted, “You are really Sairoon (on the move) with Hikma (wisdom), Wataniya (patriotism) and Tadhamon (solidarity). You have taken Al-Qarar (decision), toward Taghyir (change) to have Iraq raise the Bayariq (banners) of Al-Nasr (victory), to [secure] independence, Arabism and identity. I congratulate Iraq for having you."

Some Sunni Arab forces, including the Al-Qarar Alliance led by Khamis al-Khanjar, also welcomed Sairoon's victory. Khanjar even voiced his desire to ally with it. Abadi congratulated Sadr on his victory, which could imply a desire to ally with him.

But this does not prevent Sadr's rivals from seeking to sideline Sairoon by forming a larger bloc in a rival axis.

State of Law Coalition spokesman Abbas al-Musawi expressed skepticism May 16 that some electoral lists (in reference to Sairoon) will be able to form a government, stressing that “historic leaders” will be the key drivers in this matter. State of Law Coalition parliament member Mohamed Sahyoud said May 15 that efforts are near completion to form an alliance between the State of Law, Al-Fatah and Al-Nasr coalitions, which would secure more than 100 seats and account for the largest bloc in parliament. If this occurs and the bloc gets support from some Kurdish and Sunni forces loyal to Iran, the next government could be formed by the axis opposing Sadr.

Al-Monitor learned from sources who asked not to be named within the State of Law, Al-Fatah and Al-Nasr coalitions that the commander of Iran's Quds Force, Qasem Soleimani, who has been in the Green Zone in Baghdad since May 14, is leading efforts to strike an alliance deal between the State of Law Coalition's Maliki and Al-Fatah Coalition leader Hadi al-Amiri, and then to encourage Al-Nasr's Abadi and Al-Hikma's Hakim to join this alliance. If Soleimani succeeds, this could prevent Sadr from forming the largest bloc.

Soleimani was said to have proposed that these alliances refrain from nominating any of their leaders. Other names are being put forward as a consensus prime minister, including Muhammad Shayya al-Sudani, who is one of the Dawa Party leaders and the minister of labor and social affairs in Abadi’s government.

An earlier report by Al-Monitor indicated that negotiations by Soleimani in Erbil led to an agreement with the Kurdistan Democratic Party not to support Abadi as prime minister. Nechirvan Barzani, the prime minister of the Kurdistan Regional Government (KRG), revealed upcoming plans for a visit by a KRG delegation to Baghdad to participate in talks aimed at forming the next government.

Hisham al-Rekabi, who heads Maliki's media office, said May 16 that all discussions to form the largest bloc “will be completed within the next 48 hours.” Dawa Party leader and parliament member Kamel al-Zaidi spoke of “semifinal” understandings between the State of Law and Al-Fatah coalitions, in addition to current attempts to include other [parliamentary] blocs in this larger bloc. Zaidi added, “There are ongoing contacts with the National Union Front and Barham Salih's party, as well as with Sunni political authorities to form an alliance that guarantees a national political majority.”

On May 15, US State Department Spokeswoman Heather Nauert answered a question about Soleimani’s interference in the ongoing consultations to form the Iraqi government. “That is certainly always a concern of ours, but we have a great deal of trust and faith in the Iraqi people and whoever ends up governing, whatever the structure is, the governing of that country going forward,” she said.

Iran appears to be in a hurry to strike a deal between its loyalists for fear of Sadr's success in dominating the next government, which would curb its influence in Iraq.