According to the Associated Press, Iraq is slashing its spending on rebuilding projects by 40% next year because of the drop. Iraq gets more than 90% of its revenue from the sale of oil, which has dropped by nearly $100 per barrel from its highs last summer. US military commanders in Iraq are warning that a slowdown in reconstruction could lead to a new surge in violence. That's because, like in Afghanistan, the military realizes that economic development projects are one way of drying up the pool of potential terrorists and insurgents. The logic is that if people see their lives improving, they are less likely to be swayed by extremist elements trying to recruit them. But take away those projects, leaving people in poverty with little or no hope of ever having a better life, and their willingness to join extremist movements goes up.
In Iraq, the government has used oil revenue to create jobs in places like Sadr City, the sprawling slum in Baghdad that has been a hotbed of Shiite extremism. Recently, Sadr City has been relatively quiet, but if the job programs go away, there is a real fear that the sectarian strife between Sadr City's Shiite population and Sunni neighborhoods elsewhere in the city will return. Mosul is another Iraqi city where the government was hoping more jobs would mean less terrorism. According to Iraqi Police General Khalid Soltan “half the terrorists” could be defeated “if we defeat unemployment,” which is estimated at around 60%.
The Iraqis are hoping that oil prices will soon return at least to $50 per barrel - they are suspending some projects, but so far have not cancelled any, hoping to restart them when (and if) the oil prices rise. What will happen to the fragile peace in many Iraqi cities remains to be seen, as does what will happen to the provision in the Status of Forces Agreement signed by the US and Iraq that dictates US troops withdraw from all Iraqi cities by July of this year.
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