BMI's Executive Summary

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The security situation in Iraq began to get better – or more accurately, become less bad – during Q407. There was a clear reduction in levels of violence, although the overall situation as far as the safety of the civilian population and the rule of law was concerned remained arguably one of the bleakest anywhere in the world. At the end of November 2007, US sources said that the total number of attacks across Iraq had fallen by 55% since the 'surge' in US troop strength reached its high-water mark of 30,000 extra troops in June. Overall civilian deaths calculated by the Iraqi authorities fell consecutively in each of the three months to November. In October they had totalled 758, compared to 1,971 in January. US military deaths were in their fifth month of a downward trend in October at 38, compared to 126 in May.

A variety of factors were credited for the improvement. The 'surge' had brought US forces out of their strongholds to patrol more visibly on a local level. Rebel groups had begun to fragment and fight between themselves. In the south the Shi'ite Mahdi Army was continuing to observe a ceasefire. Syria and Iran, two neighbours generally hostile to the US project in Iraq, had nevertheless appeared to collaborate, making it more difficult for foreign jihadists to enter the country and join the ranks of the insurgency. There were some early signs that the Iranians were cutting back weapons supplies to the insurgents. The US effort to recruit mainly Sunni militants into unofficial 'neighbourhood security' patrols seemed to be paying off.

Iraqi Prime Minister Nouri al-Maliki faces significant challenges if he is to take advantage of this window of opportunity and press ahead with political moves to build reconciliation between the country's different ethnic communities and political factions. Prospects on this front were not terribly encouraging. Extensive disputes over Iraq's constitution amongst the Shi'a, Sunni and Kurdish population, especially concerning oil-revenue sharing arrangements, remained unsolved. Various draft laws on these issues were deadlocked and seemed unlikely to progress quickly.

Despite the improvements, nobody expects to see an end to the violence any time soon. Similarly, not many people expect Iraqi security forces to take full responsibility for the whole country at any time soon, nor for the coalition forces to withdraw from the country on any large scale. Finally, with almost all military equipment entering the country through donations or at least at 'gifted' prices, any talk of establishing a functioning defence industry in Iraq will remain premature for the foreseeable future.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Iraq Political SWOT

Iraq Security SWOT

Iraq Defence Industry SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

New National Unity Government

Militias Consolidate Their Power, Creating Further Risks

Row Over Oil Rights

Kirkuk Will Be A Key Flashpoint

Zarqawi's Death: No Lasting Blow To Insurgency

A Fragmented Insurgency: The Complex Reality

Motivations for Insurgents Persist

Zarqawi's Role Has Long Been Overstated

The Economic Impact of Violence

Foreign Policy

Lebanon Crisis: An In-Depth Look At The Impact On Iraq

Very Different Priorities

Sistani's Ceasefire Call At Odds With US

An Issue That Unites Sunni And Shi'a?

Iran Tensions Another Source Of Strain

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Regional Risk Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East and North Africa 19

Inter-State Conflicts

Internal Conflicts

Iraq Conflict Risk

Iraq Terrorism Risk

Iraq Physical Safety Risk

Chapter 4 - Security Overview

Internal Threats

Table: Iraq Insurgent Groups

Over 100 Deaths A Day: Violence Worsens

More Kidnappings, But Fewer Foreigners Abducted

Violence Worst In Baghdad

Disillusionment

Several Insurgencies

Foreign Military Presence: No Clear End In Sight

The Killings Continue

Deterioration In Basra

External Threats

Kurdish Questions

Turkey Unlikely To Cross Border, But Iran May

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Current Strength

Historical Strength

Weapons of Mass Destruction

Market Overview

Arms Trade Overview

Procurement Trends & Developments

Chapter 6 - Industry Forecast Scenario

Table: Iraq Defence Sector - Historical Data & Forecasts

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Table: Iraq - Economic Activity

Chapter 8 - Company Profiles

Dabin Group

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 10 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: