NEW YORK—Iraq's national air transport sector may end up in the hands of oligarchs, the Open Society Institute (OSI) warned in a report released today. Despite Coalition Provisional Authority (CPA) claims that it intends to return control of Iraq’s air industry to the Iraqi people, a document obtained by OSI shows that a backroom deal has already sold off 75 percent of the country's air sector to a single family.
The secret deal is one among a number of suspect agreements that have occurred under the radar in a chaotic post-war Iraq. "This does not bode well for the reconstruction of Iraq's economy," said Isam al Khafaji, director of OSI's Iraq Revenue Watch project. "The CPA should be making sure that public industries are protected."
There are no mechanisms in place in Iraq to combat the ill effects of rapid privatization, and the report, titled "Controlling Iraq's Skies," cautions that Iraq risks following a similar path as Russia, where a class of oligarchs emerged after the fall of communism by buying up state assets at below market prices.
The CPA, which now controls Iraq's air industry, has publicly acknowledged the economic potential of the air transport sector, and has called for increased investment. But neither the CPA nor the Iraq Governing Council have allowed the domestic air transport sector to compete with foreign companies. Royal Jordanian airlines is currently using Iraqi airports and their equipment, while Bechtel Corp. and Halliburton have been contracted to manage the airports. Iraq's national carrier, Iraqi Airways, was denied permission to lease planes to fly pilgrims to Mecca for the annual hajj.
As Iraqi Airways languishes, plans are being made to privatize it without any public bidding. Iraq Revenue Watch obtained a contract to establish a joint venture named al Iraqiyya Air. It was signed by the Iraqi Ministry of Transport and three members of the powerful Khawwam al Abdul Abbas family, which, according to local news reports, had close ties with Saddam Hussein’s regime and were oil smugglers under United Nations sanctions. While the contract requires the Ministry of Transport to surrender Iraqi Airways planes, agreements, and other valuable assets, it is not clear what the other signatories are contributing to the deal.
"Controlling Iraq's Skies" recommends that this contract be frozen and an investigation be launched by the International Advisory and Monitoring Board, as well as by the CPA Inspector General. The report also calls on the CPA to compensate Iraqi Airways for damage to its facilities committed by occupying forces, and fees for the use of its facilities.