Risking Everything in Baghdad

Whiz-bang technology alone won’t make people feel safe enough to invest big money into a place like Iraq. The lack of political stability leads to a security vacuum, which leads to car bombs, which leads to further capital flight. “The situation right now in Iraq is not stable. There are many challenges for the stock exchange,” says Salam gloomily. “The investors are all waiting for things to happen to the economy, the services. I believe everyone here is waiting for good things to happen.”

BAGHDAD — Bassam Talal, a wisp of a man with large ears and doleful eyes, is in his element on the floor of the “Iraq Stock Market”:http://www.isx-iq.net/. Every Monday and Wednesday morning, he pirouettes between the other 50 or so brokers, nipping up to the white boards that line the wall of the trading pit. He marks 10,000 shares of Baghdad Carbonated Drinks bought for 2 dinars a share (a $13 trade), 5,000 shares of al-Hillal Water Company sold for 2.05 dinar a share (less than $7). He waves colored order slips above his head and darts between the white boards and the investors, separated from the pit by a waist-high barrier. About 200 individual investors eye the Arabic scribbles of the orders on the wall. Some bring opera glasses. They’re mostly older, heavyset men in suits, with a few traditionally dressed Bedouin guys hanging around. When the see a price they like, they gesture to Talal or another broker and point.

All investment comes with risk, but Iraq’s investors face special — and deadlier — risks. Baghdad is the prize in a civil war that rages even as the Iraq Stock Market attempts to rebuild itself and Iraq’s shattered economy. The fighting that often rages outside the old hotel which houses the bourse is marked by violence that is indiscriminate and savage. In Baghdad, car bombs, ethnic cleansing and massacres are the hallmarks of this fight. Located in Hayy al-Awaya, a Christian neighborhood, massive concrete barriers surround the entrance to deter car bombs, and grim gunmen carefully search anyone who gets close.

“During the session, I have about 15 minutes of watching the prices,” says Taha Ahmed Abdul Salam, the president of the Exchange. “The rest of the time I will be in the street watching my guards who are watching the buildings. And I have some information from the police. When I hear something bad, believe me, I will go and search around the building myself.”

He’s constantly engaged in a juggle of security and business. His refusal to halt trading for anything is a point of pride for him, a show of defiance. On Feb. 22, the day the “Askariya shrine in Samarra was destroyed”:http://www.back-to-iraq.com/archives/2006/02/game_on.php, touching off Iraq’s latest round of violence that has yet to subside, “I didn’t stop the trading,” he says. “I let the trading go on, and I didn’t mention anything to anybody.”

The story of the Iraq Stock Exchange has as many ups and downs as a penny stock. It opened in 1992, but Saddam’s government heavily regulated and manipulated it, and often used it for money laundering. Prices were only allowed to move 5 percent in either direction. By the time U.S. troops bore down on Baghdad in April 2003, about 140 companies were trading on it and its clientele was composed of businessmen and wealthy Ba’athists who had socked some cash away. The Americans closed the old market but re-opened it in June 2004 under Coalition Provisional Authority Order No. 74. The new market has just 15 companies, many of the old brokers and traded about 500 million Iraqi dinars a day back then — about $333,000.

Today — from a business point of view — things aren’t much better. Though there are 94 companies listed, the market sees only about $1 million in business each session, Salam says. Banking is the largest and most active sector, because they have holdings of hard currency and have formed partnerships with foreign banks like HSBC.

The high-point of the market, according to data provided by the economic section of the embassy, was around the end of October, when the permanent constitution was approved. Total market capitalization surged to almost $2.5 billion, but it’s since plummeted to $1.25 billion as the political process drags on with no end in sight. (Iraq’s market is the smallest in the region, with even the Palestinian stock market dwarfing it at $25 billion — and they don’t even have a real state yet.)

Although it’s legal for foreign investors to own up to 49 percent of an Iraqi company, it’s not yet been implemented because of technical hurdles, which means the flood of foreign investment predicted when the market reopened hasn’t happened yet. What local investment there is also sidelined because of a steady exodus of wealthy Iraqis and their money to neighboring countries drives a vicious cycle of violence, insecurity and poor economic performance that might lessen the violence.

“People are worried about their money,” says Talal in a break from trading. “The price drops continue, so people are trying to sell as fast as they can so they don’t lose a lot.”

There is a notional regulatory regime with the Iraqi Securities Commission, but there Salam and the brokers, who own the market, do the real regulation. They all know one another from the old Saddam-era exchange, which helps prevent insurgents or criminals from gaming the market. Such familiarity feels good to Iraqis, but it seems sketchy to westerners used to more transparent, rules-based trading rather than a system run by a bunch of buddies.

But if you talk to June Reed, a senior consultant for private sector development at the embassy, things are going pretty well. “This market has functioned very well through several interim governments,” she said. “Make no mistake: There is investment in Iraq.”

Reed, a former investment banker from New York for Merrill Lynch and Credit Suisse, refused to budged off her cautious optimism about the market, stressing that great things were in store for the Iraq Stock Market when a permanent government is in place and a planned automation program is established. “Here it is truly the potential that is the most important thing,” she says. But given the archaic, anarchic and opaque nature of the market (“It was unusual to see grease boards, handwriting, etc.,” Reed says) any foreign investors are rightly worried that they could lose their shirts before they ever know what happened.

In the coming weeks, she says, that’s going to change, thanks to a proposed automated system for trading securities that will create a central, networked electronic depository, due to be completed by the end of the year. There will be automated sales, clearing and depository functions like the NASDAQ, she says. “It’s very high tech.” Brokers like Talal will be able to respond to orders from his desk at his firm, the Nineveh Brokerage, rather than navigate the IED-peppered streets of Baghdad. There are even plans for trading over the Internet.

But as the American military has learned, whiz-bang technology alone won’t make people feel safe enough to invest big money into a place like Iraq. The lack of political stability leads to a security vacuum, which leads to car bombs, which leads to further capital flight. “The situation right now in Iraq is not stable. There are many challenges for the stock exchange,” says Salam gloomily. “The investors are all waiting for things to happen to the economy, the services. I believe everyone here is waiting for good things to happen.”

[Ed. note: I wrote this for “Fast Company”:http://fastcompany.com/homepage/index.html after I left Baghdad, but it was killed because I had the bad luck of filing it the day before the NYT story ran. Such is the journalism biz. But better to blog than to never been seen at all!]

New Zarqawi video online

Abu Musab al-Zarqawi has doffed his mask and gone public with a new video released on the Internet. But the real audience isn’t the West.

Zarqawi holding weapon
Photo Courtesy of “IntelCenter”:http://www.intelcenter.com

Al Qaeda in Iraq has released a video of Abu Musab al-Zarqawi on a jihadi web site, which is the first time he’s been seen in video since the Nick Berg beheading video.
“Your mujahideen sons were able to confront the most ferocious of crusader campaigns on a Muslim state. They have stood in the face of this onslaught for three years,” Zarqawi said on the video.
I’m working on getting a copy of the video, but so far, this is the first time AMZ (as he’s called in U.S. military parlance) has appeared in a video without a mask. (He was concealed in the Berg video.) It’s a well-produced video, with slick graphics and professional titling, of a kind with many videos from insurgent and jihadi groups. I’ve seen pictures of AMZ and this video appears authentic.
So the question now is why the video and why now? There are a number of factors. There have been persistent rumors that AMZ was replaced as the leader of Al Qaeda in Iraq (AQI) on Jan. 20 by an Iraqi, Abdullah Rashid al-Baghdadi, on the orders of the Mujahadeen Shura Council, the umbrella organization for the jihadi groups in Iraq. I’ve never quite believed that, and instead thought it was a ploy by AQI to make itself more palatable to nationalist Iraqis who don’t follow the extreme Islamism of Al Qaeda. AMZ has been catching a lot of flack for the last year or so because of his suicide bombers and brutal tactics. This is why you no longer see the gruesome beheading videos. There are still a lot of suicide bombings, but there are likely less than there were, and they seem aimed more specifically at American and Iraqi security forces with more care taken to reduce civilian casualties. So, by releasing this video, he’s showing the world — and Iraqis, insurgents and civilians alike — that he’s still around, still the man and still commands the loyalty of AQI.
Secondly, by literally putting a face on himself, AMZ is humanizing himself and attempting to quell the discord with the Ba’athist groups that has been splitting the Sunni insurgency — a split that has been exploited with limited success by the Americans. By putting himself forward less as a spectral bogeyman and more of a heroic leader — as the images in the video do — the thinking may be that when the civil war finally breaks out, as many in Iraq anticipate, AMZ will be seen as a leader among the Sunnis, and not as an outsider among Iraqis. While the Ba’athists and jihadis generally despise one another, they despise the Iraqi Shi’ites who hold power more. The Ba’athists see them as Iranian stooges (not entirely inaccurate, frankly) and the jihadis have adopted a toxic anti-Shi’ite ideology that holds the sect as unbelievers (_kafirs_.)
But this video’s audience is not primarily the West. Many people think the insurgents produce videos and stage attacks in sight of western media to influence the populations back home. This is only partially true. By creating the impression — and the reality — of chaos, they can undermine support for the U.S. presence in Iraq among Americans. But the real purpose of these videos is recruitment. Instead of scared westerners, the real audience is the disaffected and angry young men of the Muslim world. They will download this video, like they do all the others, and pass it among their friends and watch it at Internet cafés in Jakarta and Riyadh over and over again.
In the 1970s and ’80s, you couldn’t claim to have any juice as a terrorist group unless you had a decent media arm. This is why Hezbollah pioneered the filming of its attacks against the Israelis and started al-Manar, its broadcast arm. The need for an effective media campaign is still true, but there is no longer really a need for Western media to publish a screed or air a tape. It can be distributed online for less money, with more reach and hit a more targeted audience than before.
It’s likely not a coincidence that the video was released now, just a couple of days after the deadlock over PM Ibrahim al-Jaafari was broken with the selection of Jawad al-Malaki, the brains of Jaafari’s Dawa Party. While the Iraqi government remained in limbo, the political chaos allowed the Sunni groups room to move. But with the deadlock broken, the formation of the new government will probably proceed apace, with the further strengthening of the Shi’ite-dominated security forces. The Sunnis have to pre-position themselves if they’re to stand a chance in the coming civil war, and AMZ’s video is part of his effort to position himself with the Sunnis.
*UPDATE 4/26/06 8:58:50 AM +0200 GMT:* Interesting. According to “IntelCenter”:http://www.intelcenter.com, in the video, AMZ is briefed on two new rockets allegedly developed by the insurgents in Anbar province. The two rockets are the “Qaeda 1” and the “Quds 1.” The first allegedly has a range of 40km and is capable of carrying a 50kg explosive, while the second is designed to be fired horizontally and is designed to pierce armor. “God willing, these rockets will be used in the next phase,” the briefer tells Zarqawi.

The Qaeda 1 rocket
Photo Courtesy of “IntelCenter”:http://www.intelcenter.com

Wow, donations for journalism?

Hey, a bold, new experiment in journalism … not.

It is with no small amount of mixed feelings that I notice that Michael Totten has embarked on a daring new experiment in reader-funded journalism.
Oh, wait. It’s not new at all. (See: Iraq.com, Back-to-)
On the one hand, I’m glad that more people are working to do their own thing and bringing nuanced, insightful journalism to the reading public without the baggage that mainstream media often attach. On the other hand, Totten usually has a somewhat conservative rah-Amurricah tone that sets my teeth a-grate. That said, he does get out there and do some reporting. While he’s not my cup of tea — I find his Middle East reporting naive and American-centric — give him a read. I’ll let you decide if it’s worth donating. I’m going to pop him $5 on principle.

Munich 2006

Go read Billmon, please. I wish I were this smart:

And so the most promising opportunities for a rational settlement have all passed us by. Instead of a moderate reform president and a group of nervous ayatollahs anxious to cut a deal, America now has Ahmadinejad — and the dawn of what could conceivably become an explicitly fascist regime in Iran, or at least a very close substitute for one.
The good news, such as it is, is that Ahmadinejad’s end-times ideology doesn’t seem to include any grand territorial ambitions: no “Greater Iran” (Iran is already a greater Iran), no lebensraum in the east. We also have time — time to see how things shake out, to see if the ayatollahs can hamstring their troublesome protege, to see if the democracy movement can make a political comeback. Time for Ahmadinejad to lose some of his popular shine as Iran’s internal problems worsen. Time for our own hardline warmongers to be booted out of power.
But unfortunately, our divinely ordained president may not be prepared to wait (and the last sentence of the preceding paragraph appears to be one of the reasons.) Which means at this point we probably should be worrying less about what happened in Munich in 1938, and more about what happened there in 1972, when the German police moved in and tried to disarm the terrorists.
Multiply that carnage by a thousand, or a million, and you’ve got more than a political slogan; you’ve got a war.

Redlines

Shot…

MATTHEWS: Where is the heart of the zealotry here? Do you have a name of a person who is really saying, we will do anything it takes to stop Iran from developing a nuclear weapon?

HERSH: The one that’s on the record is George Bush, and so is Mr. Cheney. Bush has said repeatedly, again, people talk to me and they use the word messianic. He has had two red lines that the Iranians cannot cross. _One is Iran is planning to run a small pilot program for enriching uranium, probably in the next month or two, maybe six week. If they do that, that’s it for Bush. That’s a line they can’t cross._

*Chris Matthews and Seymour Hersh on “Hardball,” April 10, 2006*

… and chaser.

TEHRAN — Iran announced Tuesday that its nuclear engineers had advanced to a new phase in the enrichment of uranium, and President Mahmoud Ahmadinejad and a series of the country’s ruling clerics declared that the nation would now speed ahead, in defiance of a United Nations Security Council warning, to produce nuclear fuel on an industrial scale.
President Mahmoud Ahmadinejad, in a speech that was broadcast live from the city of Mashad, said Iran is determined to develop production on an industrial scale.
“Iran has joined the nuclear countries of the world,” Mr. Ahmadinejad said during a large, carefully staged and nationally televised celebration in Mashhad, which included video presentations of each step of the nuclear process that he declared Iran had mastered. “The nuclear fuel cycle at the laboratory level has been completed, and uranium with the desired enrichment for nuclear power plants was achieved.”

“Iran Reports Big Advance in Enrichment of Uranium”:http://www.nytimes.com/2006/04/12/world/middleeast/12iran.html?hp&ex=1144900800&en=b9ad13587321bba1&ei=5094&partner=homepage
New York Times, April 11, 2006