The Report of the Iraq Inquiry

752.  Mr Jones reported on 23 May that he understood that the Iraqi Minister of Finance

had instructed the Iraqi Central Bank to freeze all development funds in its Basra

accounts until the conflict between Governor Waili and the Provincial Council had

been resolved.435 He had done so because Governor Waili had written to the Central

Bank requesting that those funds be transferred from both his own and the Provincial

Government’s accounts to another, unspecified, bank account. The Provincial Council

had protested. Mr Jones commented that the UK had been working for months to

persuade Baghdad to provide the finance that Basra deserved for development work.

The freeze was another incentive to resolve the political impasse as soon as possible.

753.  Mr Jones also reported that:

“All of our contacts speak of deterioration in the security situation … The electricity

supply has also deteriorated … The lack of power has stopped the electric water

pumps from working. Potable water is scarce and 70 percent of the city is without

a mains supply (worst affected are poorer areas such as the Shia flats).”

754.  In his evidence to the Inquiry, Mr Jones characterised the poor relations between

Prime Minister Maliki and Governor Waili, and between Governor Waili and the

Provincial Council, as a challenge to UK engagement in Basra but not a constraint.436

755.  On 12 May, Mr Brown’s Principal Private Secretary commissioned advice for

Mr Brown on how the UK might increase support for economic development and

reconstruction in Iraq and, in particular, Basra.437

756.  A Treasury official provided that advice on 24 May.438 Economic growth and

job creation had a vital part to play in building sustainable peace and stability and

reconciling Iraq’s divided communities. The three priorities which would do most to

boost economic growth were:

• building on existing macroeconomic stability;

• improving the efficiency and effectiveness of the public sector; and

• expanding and improving the efficiency of the oil industry. That required a

Hydrocarbons Law, improved security and an integrated energy strategy

covering investment and reform.

757.  The UK could also consider shorter-term initiatives (although those would become

harder to implement after the drawdown of UK forces), including:

• further initiatives on the lines of Op SINBAD; and

• initiatives which aimed to revitalise Iraqi industry.

435  Letter Jones to Aldred, 23 May 2007, ‘Basra: Weekly Report’.

436  Public hearing, 24 June 2010, page 81.

437  Email Treasury [junior official] to Treasury [junior official], 12 May 2007, ‘Iraq – latest situation/economic

development’.

438  Paper Treasury, 24 May 2007, ‘Economic Aspects of Stability in Iraq’.

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