There is a great deal of news and some definite “movement” now as the pressure continues to be placed on Iraq to get its house in order. Here is a review of where I see the situation as of today.

The G20 meeting had as its agenda the “world financial crisis, exchange rates in the Middle East and exchange rates in the Far East.” This, then, is the backdrop for all discussions moving forward, IMO. Clearly the Iraqi situation has moved from a “local” phenomenon to an “international” phenomenon. I tend to agree with TerryK that this coming RV/RI will involve several countries at the same time. I also agree that there will not be an opportunity to “double dip”.

The pressure on Iraq is now immense. It appears to me that Obama and Geitner have let the cat out of the bag regarding the RV in Iraq. Obama’s statement to the effect that he would eliminate the US debt in 3 years can mean only one thing: the RV is truly at our doorstep now. There is no other “vehicle” that could make elimination of our debt possible other than the RV.

As I’ve stated many times in chat and on posts, the RV will turn out to be the single biggest economic event in the history of the planet. TerryK and I have often used the phrase “reboot the world economy” (RV4Me333 has also used this phrase as well). It summarizes quickly exactly how powerful this event will be. The RV will “fill up” the coffers of many countries in he world, allowing them the freedom to reduce their debts and at the same time begin rebuilding the world economy. I’ve also stated before that I believe that many underdeveloped economies also are holding smaller amounts of IQD which will help them “reboot” as well.

The short term (2 to 4 years) affect will be a great boost in the world economic situation. Trade will increase and factories will begin hiring again and producing at greater and greater capacity. The bloated inventory of homes in the US will be snatched up by “cash” buyers in many cases, but also by regular home buyers as their economic situation improves. We should see a real boost in the attitude of the people in the short term. In another post I will present another scenario that is not as bright, especially for the longer term. However, this is enough for now.

Regarding the internal situation in Iraq and the events that will enfold to get us to the magic RV/RI event, I’d like to summarize for you all where I believe we are and where this is heading. I will also try to put some time parameters on my comments.

As you all know there are 4 main political factions: the Kurdish Alliance, Iraqiya (Allawi), State of Law (Maliki), and the Iraqi National Alliance (INA, led by Jafaari and Mahdi). You also know that on June 11 the State of Law joined with the INA to form a super coalition called the National Alliance (NA).

You also know that Iraqiya has joined with the Kurdish Alliance so that now there are two major coalitions sparring to be allowed to form the new government. Allawi is insisting on his right under the constitution to be the first to attempt to form a government. On the other side the NA is now saying that the Court’s interpretation of Article 76 of the Constitution gives them the right to make the first attempt. This COULD be a problem as we approach the mandated July 14 deadline for the formation of the government.

However, we are seeing cracks in the structure of the NA. Here are the issues. First, the Sadrist faction of the INA has stated in no unclear terms that Maliki will not be allowed to run for a second term. He has since been backed by Jafaari in that view. Therefore, up until today, the overall NA has no clear candidate for the PM slot. Maliki, of course, believes that he has the “right” to be the nominee since he is the current office holder. However, we now see, just today, that the NA is moving ahead WITHOUT Maliki and that they are ready to announce their candidate tomorrow. The candidate will almost certainly be Jafaari, but might be Mahdi. In any case, by law they have to have a candidate before going in front of parliament.

The result of this “internal struggle” in the NA is that it is about to collapse. Maliki is very frustrated at his inability to secure his position as the nominee for the PM position from within the NA. The result is that Maliki, seeing the handwriting on the wall, so to speak, has now begun to make overtures to Allawi in an attempt to retain a position of some power in the newly formed government.

Now we move to the other “super coalition”. The Kurds have made their position clear in the last couple of days: they want to hold the position of President of the Republic and won’t accept either of the other two presidencies. Talibani, a Kurd, currently holds that position and would, presumably, remain in that slot. This could present a problem for Allawi as he continues to negotiate with Maliki. Clearly both men want the PM position, but Maliki is not in a controlling role at this point. So the question is this: what can Allawi offer to Maliki that will cause Maliki to leave the NA and join in the Kurd/Iraqiya super coalition?

The answer is that Maliki would have to accept one of the other presidencies. Neither of these is as powerful as the Presidency of the Republic which Talabani now holds.

Allawi then has to determine whether he can offer Maliki the position Talabani now holds without losing the Kurds entirely. I suspect that he won’t be able to do that. At the same time I don’t think that Maliki is interested in being the President of the Parliament. However, he might accept the position as President of the Government. In this way he would remain near the helm of power.

Maliki through out a “bone” to Allawi a few days ago, stating that he would even accept a position as “Vice Premier” as long as he also received the control of six of the key ministries. The ministries that he wanted to control are very big in the new economic reality of Iraq, so I doubt that Allawi took this seriously.

So as of today we see that they are very close but still at somewhat of an impasse. The NA believes that it now is ready to move forward with Jafaari or Mahdi as their candidate and will probably press for their right to form the government based on the court’s ruling.

At the same time, however, Allawi has been makin back door deals and is close to closing a deal with Maliki. Should he succeed in this then the NA will collapse and Allawi will have the sole right to form the new government, since at the election he received the most seats (91). I predict, as I have now for several weeks, that Allawi will succeed and because of this a Constitutional Crisis will be avoided.

Furthermore, I believe that Allawi will offer the other 2 presidencies to Jafaari and Mahdi of the INA, thereby securing a truly unified government with all major players obtaining some positions of power. Just what final concession will be given to Maliki to get him to come over to the Kurd/Iraqiya list is not yet clear, but I believe that it will happen.

Now, regarding timing we have some indications that this will all wrap up fairly soon, IMO. As you all know, Al-Sistani, the cleric, remains in the background as a threat to the secularists to get this process done within the legal framework (by July 14).

However, at the same time we have seen that the G20 is interested in a more restrictive “global time frame” due to the economic crisis in the world. We read yesterday that France is now ready to explode. Also we see that Germany is ready to leave the European Community and go back to the Deutch Mark. And we also now have indications that China is in deep financial troubles, as is Japan.

Therefore, IMO, this will not be allowed to drag out to the 14th of July, and then some time after. The situation is too critical worldwide for this to be delayed any farther.

I think it is a safe conclusion, therefore, to see the RV/RI come in the next day or so and that it will have been coordinated with China and several other countries to RV at the same time. This single event will bring a huge breath of “fresh air” into the world economic situation. To delay will only cause other countries in this “house of cards” to collapse into a pile of flattened cards on the table of the world’s economy.

I hope that this helps you all. I also hope that my analysis is RIGHT!

Of course, I could be wrong.

Steve