Last month, the jihadist Islamic State of Iraq and the Levant (ISIS) succeeded in advancing rapidly from Syria into north-western Iraq, seizing Iraq’s second largest city Mosul and declaring the establishment of a new ‘caliphate’ on the territories under its control in Syria and Iraq. Despite numbering only an estimated 15,000 fighters, the ISIS forces were helped by their ruthless image, weak resistance by the Iraqi army and a general aversion within the Sunni population to the Shia Prime Minister Nouri al-Maliki, who is accused of
trying to obtain too much power and marginalise the Sunni minority of the country. During its advances in the north-western provinces of Iraq, ISIS captured important financial and military assets. In a response to the sudden advances, militias from Iraq’s semi-autonomous Kurdish region stepped in to defend Kirkuk against ISIS. The formation of an Iraqi unity government could ease the frustrations of Sunni Iraqis, but so far, this has been rejected by al-Maliki.

Impact on country risk

Iraq’s most important oil production and export facilities are mostly located in the south of the country, in areas that are mainly inhabited by Shia Muslims and that have remained out of the hands of the advancing ISIS rebels. Nevertheless, it is reported that oil majors have already begun evacuating staff working in this region as well. While capturing Baghdad and Iraq’s energy assets in the southeast is much more difficult  than the recent advances (in mostly Sunni areas), there is a risk that ISIS and their allies do advance further to Baghdad, or succeed in plunging the capital (which is inhabited by both Shia and Sunni Muslims) into deep chaos. This would severely affect Iraq’s payment capacities, as well as regional stability. Therefore,
the Credendo Group went off cover for new risks on Iraq.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com