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While Iraqs war against terror is far from over, the conclusion of the Mosul offensive should mark the high point in the cost of war, and its gradual de-escalation has positive implications for the economy that will be explored here.

But first a quick look at the dynamics of Iraqs economy. The economy is driven by the state, which derives over 90% of its revenues from oil exports, while its spending dominates all aspects of the economy. It employs over 50% of the work force and is the largest player in the non-oil economy with its orders/contracts driving multiple industries.

The double whammy of the Daesh invasion of the third of the country and the collapse of oil prices in 2014 had a devastating effect on the economy as government finances were crushed by soaring expenses and plummeting revenues.

The diversion of resources to a war footing with escalating military spending, escalating spending on IDPs[i] at over 10% of the population while maintaining basic services forced the government into dramatic cutbacks that had knock-on effects on the economy. Exasperating the economic contraction was the fact the economy started a slow-down in early 2014 due to the uncertainties and violence ahead of the elections in April 2014.

The governments response to the crisis can be seen over three distinct phases almost mirroring the military progress to date: Mid 2014-late 2015 was dominated by shock treatment in response to the severity of the crisis; late 2015-late 2016 saw the emergence of economic strategies to address the crisis, and early 2017 onwards builds on the economic strategies and plans for post-conflict reconstruction and rebuilding.

The table below shows the three phases over the four-year period.

Moreover, the responses were felt over three different categories of government spending: salaries and pensions, oil & non-oil investment spending and military capital spending (military and security salaries included in overall salaries).

The government maintained overall spending on salaries and pensions, yet the composition shifted significantly towards military and security spending starting in 2014 with the re-allocation of human resources towards the war effort and later on by the incorporation of the Popular Mobilization Units (PMU) into the state.

The effect, while necessary, had a negative consequence on consumer spending, as the process was far from smooth and involved significant delays in the payment of salaries and pensions and the imposition of a levy on salaries, initially 3% increasing to 4.8%, as a contribution for the war effort and IDPs. Moreover, the government introduced new and increased existing consumption taxes on a large number of consumables while it also increased utility prices further denting consumer purchasing power.

Non-oil investments bore the brunt of the cuts as the government sharply curtailed all capital spending and investments, as the table above shows, with 2016 non-oil spending at 12% of peak spending in 2013. The process involved non-payment of finished and ongoing contracts/projects with the government accumulating significant arrears in the process (estimated in 2016 at USD 4 billion or 2.4% of GDP) and cancelling planned spending/investments.

The effects were disastrous for the private sector businesses at the receiving end of the cuts whose finances deteriorated which in turn affected the quality of bank loans as these businesses dominated bank lending. An unintended consequence of the declining quality of loans was the inability of a number of illiquid banks to honor consumer withdrawal of deposits further hurting consumer purchasing power.

Although oil investment spending declined meaningfully in 2015 and 2016, oil production/exports experienced significant growth of 20%/30% and 21%/12% respectively in 2015 and 2016 which came at the cost of accumulating significant arrears to International Oil Companies (IOCs). While these arrears are being paid, constraints on government finances will affect future production growth.

Looking forward, a combination of revival in non-oil investment spending in 2017[ii] and the benefits following the peak of the war effort should be a positive economic driver for the non-oil economy in the immediate term. The effects of the conclusion of the Mosul campaign are a mixture of cuts in military expenses and a pick-up in reconstruction activities with their associated multiplier effects. While, each on its own might be small yet the whole of the parts will be greater than the sum of the parts as they will re-enforce each other.

The immediate effect of the peak in military activities will be the sharp cuts in spending on weapons and ammunition, estimated annually at USD 2.5 billion[iii] or 1.5% of GDP, but likely to be higher given the intensity of the Mosul campaign. A similar peak would be in the number of IDPs and the costs of aid provisions for them. Concurrent with the peak in military spending should be a multi-month reduction in the number of the Popular Mobilization Units (PMUs) as its members would seek a return to civilian life (annual bill estimated at USD 2.5 billion[iv] or 1.5% of GDP).

These cuts in expenses will be accompanied by the efforts to stabilize the liberated areas starting with clearing the wreckage of war, re-installing basic services, repairing and rebuilding of homes, businesses re-opening and all efforts at return to normality, which crucially is coupled with an accelerated and unprecedented foreign aid led by the UN.

The immediate-term benefits should be felt over the next few months as the economy is gradually liquefied, while in the medium-long term the country will benefit from the expansionary effects of the reversal of the forces that crushed it over the last three years. The economic revival would gradually build momentum until the major post-conflict reconstruction process starts.

Disclaimer: Ahmed Tabaqchalis 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.

[i] Internally displaced Persons (IDPs). Data on IDPs from UNHCR, the UN Refugee Agency.

[ii] While it was planned for 2017 as a whole, it will likely unfold over the second half of 2017. Such capital spending will take time to move from the planning stage to the implementation stage given the chronic structural and institutional challenges that Iraq suffers from while at the same time all resources were focused on the battle to liberate Mosul.

[iii] The figure of USD 2.5bn was provided during a presentation by Iraqi government advisors in a recent conference. Data from the Stockholm International Peace Research Institute (SIPRI) for 2016 shows total military equipment spending at USD 6.2 bn but notes that data is highly uncertain.

[iv] As above the figure of USD 2.5 billion was provided during a presentation by Iraqi government advisors in a recent conference.

Note: All economic data is from the IMF through the Iraq country report and WEO and REO databases.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The AFC Iraq Fund is invested in Iraq.

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Ahmed Tabaqchali - CIO Of Asia Frontier Capital Iraq Fund - Some Of The Economic Consequences Post Mosul - Seeking Alpha

The ranks of the Islamic State militant group (ISIS) in northern Iraq are "worn out and demoralized," according to an Iraqi general,as Baghdad sets its sights on the next jihadihaven after liberating the city of Mosul last month.

Major-General Najm al-Jabouri, speaking toReuters in a video interview, said the battle for the cityof Tal Afar would not be as protracted as the nine-month slog for Mosul,the militant group's grandest prize.

"I don't expect it will be a fierce battle, even though the enemy is surrounded," al-Jabouri said.

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"The enemy is very worn out," he continued."I know from the intelligence reports that their morale is low."

He said that as many as 2,000 ISIS fighters may remain in Tal Afarand that they and their families are severely demoralized. Al-Jabouri is confident that Iraqi forces will secure a decisive and quick victory.

"It's a large number, but the terrain is favorable" to Iraqi forces, he said. He was referring to the lack of narrow streets and urban warfare that Baghdad's forces had to contend with in Mosul.

The clocktower of the Church of Our Lady of the Hour (also known as the Latin Church) and the minarets of a mosque in the old city of Mosul, Iraq, are seen on July 30. Iraqi forces are preparing an offensive on ISIS-held Tal Afar, where the group has some 2,000 fighters. Safin Hamed/AFP/Getty

While Mosul had a population of as many as 1 million civilians, Tal Afar will not be as precarious for Iraqi and coalition forces, with much of its civilian population already outside of the city. Human rights groups have criticized the conduct of militias linked to the Iraqi military, accusing them of ordering summary executions. They have also alleged that the U.S.-led coalition has carried out disproportionate airstrikes with a disregard for civilian well-being.

The Iraqi government has opened an investigation into the allegations. U.S.-led coalition officials say as many precautions to protect civilian life are taken as possible, but they admit civilian casualties are to be expected in conflict. Itsays ISIS has heldhundreds of civilians as human shields.

In Syria, the Kurdish-Arab alliance known as the Syrian Democratic Forcesis closing in on capturing the southern neighborhoods of the eastern city of Raqqa. The SDF ground forces and the air forcesof the U.S.-led coalition are besiegingISIS's de facto capital.

Despite losing half of the city, ISIS is still putting up fierce resistance, slowing the offensive with sniper fire, suicide car bombs and booby traps.

But the jihadigroup is losing significant tracts of land to campaigns in Iraq and Syria waged by the SDF, Iraqi forces andSyrian regime troops supported by Iranian-backed militiasand Russian airpower, as well asTurkish-backed Syrian rebels.

Link:
ISIS 'Worn Out' in Iraq, Says General, as Baghdad Eyes Rapid Victory in Next Battle - Newsweek

by: Carl Willis, Tom Regan Updated: Aug 2, 2017 - 9:46 AM

COBB COUNTY, Ga. - Police worked into the night Tuesday examining remains discovered in the same area where an Iraq war veteran disappeared 3 years ago.

Early Wednesday morning, Channel 2's Tom Regan confirmed that the remains belonged to a human.

A tip led Cobb County police to a Kennesaw neighborhood.

Channel 2s Carl Willis watched as investigators worked to determine if the remains found belong to Chase Massner.

"I've got a bad feeling," neighbor Amanda Gillette told Willis, after seeing a large number of police officers respond to the same home where Massner was seen leaving years ago.

Family and friends of Chase Massner who disappeared more than a year ago are hoping a new search this weekend will reveal clues about what happened to him.

"We did receive some sort of tip that led us to come back out here today and gave us some reason to start digging in the backyard. And once the detectives did the digging, that's when they located the remains," Alicia Chilton, with the Cobb County Police Department, said.

But police aren't sure if they have animal remains or the remains of Massner, a father and husband who was 26 when he disappeared in 2014.

Family members said he was diagnosed with bipolar disorder and had been treated for anxiety and post-traumatic stress disorder.

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But they said it was unlike him to not communicate with family.

Groups have organized and searched each year since. Then the tip that led police right back to Farmbrook Trail.

"This is unnerving, unsettling, crazy. I hope to get answers soon," Gillette told Willis.

"It's hard to think I stay at this house and there's all this crazy stuff going on," neighbor Amanda Moore said.

Police told Willis the remains have been taken to the medical examiner's office for testing.

They say a positive match would mean a heartbreaking end to this case but closure for a family seeking answers.

"I can only imagine how difficult is it to lose a loved one and not have any idea where they are and what happened to them," Chilton said. "The most important thing right now is that we want to identify what we collected."

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Remains found in area where Iraq War vet disappeared | WSB-TV - WSB Atlanta

Tony Blair presided over the UKs decision to join the US-led invasion of Iraq in 2003. Photograph: Stefan Rousseau/PA

Tony Blair should not face prosecution for his role in the 2003 Iraq war, the high court has ruled.

The lord chief justice, Lord Thomas of Cwmgiedd, and another senior judge, Mr Justice Ouseley, said on Monday that there was no crime of aggression in English law under which the former prime minister could be charged.

The decision blocks an attempt by a former Iraqi general, Abdulwaheed al-Rabbat, to bring a private war crimes prosecution against the former Labour leader.

The two judges recognised that a crime of aggression had recently been incorporated into international law, but said it did not apply retroactively.

The offence is not on UK statute books and it was for parliament to decide whether or not to do so, their judgment noted.

A recent supreme court case entitled Jones had ruled there was no crime of aggression in English law, Thomas said.

That judgment rejected an appeal by anti-war protesters that the damage they caused in 2003 was justified because they were preventing the greater crime of aggression in Iraq.

There is no prospect of the supreme court departing from the decision in Jones, Thomas added.

Earlier this month, lawyers for Rabbat argued that Westminster magistrates court was wrong to prevent the case from proceeding.

Michael Mansfield QC said the offence of waging an aggressive war had effectively been assimilated into English law.

The Chilcot inquirys conclusion that the invasion of Iraq was unnecessary and undermined the United Nations required the prosecution of Tony Blair, Mansfield told the high court.

The aim of the case was to force Blair as well as the former foreign secretary Jack Straw and the former attorney general Lord Goldsmith to answer for their actions in court.

Mansfield argued that the international crime of a war of aggression had been accepted by then UK attorney general Sir Hartley Shawcross QC in the 1940s, at the time of the Nuremberg trials of Nazi war crimes.

The attorney general, Jeremy Wright QC, who intervened in the case on behalf of the government, contended that the claim was hopeless and that the crime of aggression was unknown to the law of England and Wales.

In their judgment, Thomas and Ouseley conceded: We see the force of Mr Mansfields contention that if there is a crime of aggression under international law, there should be a means of prosecuting it as otherwise the rule of law is undermined.

Prosecution before an international court nonetheless presented significant practical difficulties, said the judges.

Within the UK, however, the clear principle is that it is for parliament and parliament alone to decide whether there should be a crime of aggression in domestic law.

Rabbat lives in Muscat, Oman, does not possess a passport and cannot travel to the UK. Responding to the judgment, Imran Khan, the solicitor who represented the general, said: [He] is extremely disappointed with the judgment of the high court in London which brings to an end the hope of prosecuting Tony Blair, Jack Straw and Peter Goldsmith for the crime of aggression in invading Iraq in 2003.

The invasion and subsequent occupation resulted in the deaths of hundreds of thousands of individuals as well as the displacement of over 4 million others including General al-Rabbat who has had to seek sanctuary and refuge in another country.

Iraq has been left decimated and in a state of chronic instability. Despite all of this, and the clear findings of the Chilcot inquiry which laid bare the conduct of those that should be held to account, the high court has confirmed that there is to be no accountability. Those responsible are to remain unpunished. This is not justice.

Khan said the government had been given de facto domestic immunity because as long as it fails to enact legislation which makes the crime of aggression a domestic criminal offence, any leader can act as he/she chooses knowing that whatever action they take, it can be taken with complete impunity.

Other countries, including Germany, Kosovo, and Serbia, have enacted domestic legislation, Khan said. The failure of the British government to give tangible commitment to the prosecution of the crime of aggression undermines the rule of law. It sets a dangerous precedent in times of global insecurity and sets an example to the rest of the world of how to commit the most serious of crimes and get away with it.

It is now the responsibility of the UK parliament to end this deplorable state of affairs and introduce legislation which ensures that the crime of aggression can be prosecuted in the criminal courts here.

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Tony Blair prosecution over Iraq war blocked by judges | Politics ... - The Guardian

KABUL, Afghanistan The Islamic State group targeted the Iraqi Embassy in Kabul on Monday, with a suicide bomber blowing himself up outside the gates, followed by three gunmen who stormed into the building. The assault set off a four-hour firefight that ended only after Afghan security forces said they had killed all the attackers.

Interior Ministry spokesman Najib Danish told reporters that two Afghan employees of the Iraq Embassy died in the attack. Three police were injured, he said.

As the attack unfolded there were conflicting reports of casualties, with a witness saying he saw bodies of at least two policemen lying on the road outside the embassy soon after the attack began.

In its claim of responsibility, the Islamic State group said its fighters had killed seven guards but the militant group often exaggerates its claims on the number of casualties inflicted. The IS attack likely meant to distract attention from the militants massive losses in Iraq and Syria in recent weeks.

Also, IS said only two of its followers were involved in the attack, not four as Kabul officials said, adding to the conflicting reports.

Earlier Danish said only one policeman was wounded and that there were no fatalities among the security forces or civilians. Danish told The Associated Press over the phone that all the embassy staffers were safe but that the building had suffered extensive damage with windows broken and several rooms badly burned.

It wasnt until the attack ended that both the embassy and the interior ministry realized two of their Afghan staff had died in the daring assault.

Afghan President Ashraf Ghani condemned the attack and said it was the governments responsibility to provide protection to international missions.

In Baghdad, Foreign Ministry spokesman Ahmad Jamal condemned the assault as a terrorist attack.

The attack began with a big explosion that rocked central Kabul shortly before noon, followed by gunfire that lasted for several hours, and two or three more subsequent large explosions.

Police quickly cordoned off the area, barring reporters from coming too close to the scene.

The Afghan Interior Ministry said a suicide bomber first started the attack, blowing himself up at the embassy gate, after which three attackers stormed inside.

Earlier, Afghan officials who spoke on condition of anonymity as they were not authorized to talk to the media, had said a car bomb started the assault. Later on, it became clear the suicide bomber was on foot and not driving a car.

The ministry statement said Afghan security forces quickly deployed to the scene, rescuing all the embassy diplomats and employees and taking them to safety.

While the attack was still underway, the Islamic State affiliate in Afghanistan claimed responsibility in a statement carried by the IS-linked Aamaq news agency.

A police officer in the area, who identified himself only as Abdullah, said the gunfire was initially intense but later became more sporadic. The area was surrounded by armored vehicles and a large contingent of police and Afghan soldiers.

At least one eyewitness, a store owner who goes by the name of Hafizullah many Afghans use only one name said he saw the bodies of two policemen on the ground before armored personnel carriers and police arrived to cordon off the area.

More than an hour into the attack, witnesses reported hearing another powerful explosion and said they saw black smoke billowing skyward. It wasnt immediately clear what had caused the later explosion.

The explosion was so strong. I was so afraid, said Maryam, a woman crying near the site of the attack said. She said she works at the nearby office of Afghanistans National Airline Ariana.

The Iraq Embassy is located in a part of the city known as Shahr-e-Now, which lies outside the so-called green zone where most foreign embassies and diplomatic missions are located and which is heavily fortified with a phalanx of guards and giant cement blast walls.

By comparison, the Iraqi Embassy is located on a small street in a neighborhood dominated by markets and businesses.

After Iraqi forces, backed by a U.S.-led coalition, recaptured the city of Mosul from the Islamic State group earlier in July, the Iraq Embassy had called reporters to its offices in Kabul to express concerns that the local IS affiliate might stage large-scale attacks elsewhere to draw away attention from the militant groups losses in Iraq. (AP)

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IS attackers target Iraq Embassy in Afghanistan - The Philadelphia Tribune