Business in the new Iraq, Part II: Ties with Israel

Abu Aardvark looks at the Governing Council Finance Minister's recent rejection of Israeli participation in Iraq's rebuilding and subsequent business dealings. He notes that the minister says the council will consider Israel a "hostile state" and prohibit dealings with it. Finally, the Aardvark wonders what kind of coverage this issue will get in the US.

I don't think the issue will get much coverage in the US, but that's not really important. Bush and his henchpeople have already demonstrated that they don't really care what Americans think, and the US media has been happy to pass this lesson along. What matters, in this case, is what is going on Israel - the new Iraq's proposed business partner. And in fact, the Israeli government has already taken a number of steps to get in on what promises to be a fire-sale, a la Russia 1993:
-Most recently, Ha'aretz reported that Israeli Finance Minister Netanyahu several months ago (i.e., right after the US invasion) annulled regulations prohibiting Israeli companies from dealing with Iraq - which is still classified as an enemy country (or an "emery" country, according to the article).
-The idea to reopen the old Kirkuk-Haifa pipeline is getting more and more attention. Ha'aretz reported last month that Infrastructure Minister Yosef Paritzky said the US had asked him to draw up plans to reopen the pipeline to Haifa. The project is still at the preliminary stage due to the problems in Iraq.

Clearly, there is an interest on the Israeli side to do business, and there is a very strong interest on the American side to facilitate this business. As Abu Aardvark notes, Chalabi has repeatedly stated that he would normalize Iraq's relations with Israel he gets the chance. All of the necessary components of a business relationship are already in place (or getting there). The monkeywrench in this equation are the "dead-enders" who keep killing US soldiers and blowing up pipelines.

I suppose this whole episode can be seen as a test case for the Friedman Middle-East-reporting-maxim that only public statements matter. Frankly, I think the guy is full of shit; my reading is that, assuming Chalabi and his allies continue making headway into power, the public defences of "Arab unity" and "support for the Palestinians", etc. will continue, while discreet deals are made with Israel. But a project as big as the pipeline would require a full treaty and a secure country, neither of which is in the immediate future.

But I don't think that the US could countenance a new Iraqi government's refusal to sign a peace treaty and open Iraq up to business with Israel. Such an eventuality would be seen as too reminiscient of the rejectionist "old Middle East"; it would leave the US in the awkward position of having built up a major Arab ally that has nothing to do with its number one ally in the region; it would go entirely against the US's pledge to "democratize" the new Iraq.

And really, why wouldn't the region's only two democracies not work with each other?

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