Iraq: Four Years of War

JANE ARRAF:  Hi.  I think we'll get started, if that's okay.

Thank you, everybody, for coming and welcome to today's Council on Foreign Relations meeting.  I'd like to remind you all that this meeting is indeed on-the-record.  Participants around the country and the world are participating in this meeting as well via live webcast on the council's website.  Please remember to turn off your cell phones, BlackBerrys and all wireless devices.

Now, we are extremely lucky to have with us this evening Dr. Ali Allawi, the former minister of finance, defense and trade and the author a compelling recent history of Iraq that has just been published; and the Council's Steven Simon, who has just come out with "After the Surge:  The Case for U.S. Military Disengagement in Iraq."  So we're going to have an interesting discussion on that aspect as well.

But first, I wanted to ask you, Dr. Allawi, one of the things that struck me is a "big picture" question about -- or understanding of the very nature of Iraq.  You describe the United States as superimposing an imagined country on the realities of religious and ethnic divisions.  How does the Iraq you know differ from that imagined country that U.S. troops went into four years ago?

ALI ALLAWI:  Well, I must say that we are also -- I mean, the Iraqi exile opposition community also had an imagined country in mind.  So it's not just the United States that failed in this assessment as to what was the type of country it was getting involved in.  But also, the Iraqi opposition -- especially those that have spent years in the West -- the country of memory that we had was that of, as it were, the urbanized, to some extent westernized, modernized middle classes.  And that world ended decades ago.

The Iraq that reemerged, as it were, in its true shape -- the Iraq where the main divisions of society had not yet resolved themselves between various sects and ethnicities and between urban and tribal values -- this Iraq reemerged with a vengeance in the last 20 years of the Ba'athist regime.  And that did not feature whatsoever in the planning regarding the war or in terms of what people expected as being the kind of society that they were going to be involved in.

ARRAF:  And that seems to translate now into the kind of government which you define as being essentially a government that has failed to have a national leader emerge.  In fact, the people in Iraq keep saying that they're looking for a strong man.  And the closest I can think of is your cousin, Iyad Allawi, the former prime minister:  a forceful personality, a secular Shi'a.  He is now making a bid to essentially topple the Shi'a government that's in place now.  What do you feel about that?

ALLAWI:  Well, good luck to him if he can manage it.  (Laughter.)  I find it extremely implausible.  I mean, with my great regard and respect for my cousin -- and he's also a formidable political leader -- he had a very great chance, frankly, during the interim government where not only were the entire state apparatus under his control, but he was also supported by a large number of Arab countries as well as by the United States and England -- the U.K.

And that chance did not translate into effective political majorities in parliament.  And that majority dwindled over time.  Now, parliamentary majorities are, by their very nature in Iraq, subject to -- they're quite brittle.  So he may be able to peel away certain segments of the ruling Shi'ite alliance, the UIA, and try to convince the Kurds to switch their allegiances, but the arithmetic is really against him.  And the fact is that you cannot change the power relations in Baghdad without looking at the parliamentary situation.  You can't do that by mobilizing, you know, Saudi Arabia and Egypt and Jordan and even the United States.  You have to take into account that we are now, for better or worse, a parliamentary democracy of sorts.  And the UIA and the Kurds have, I think, a strategic alliance that is possibly not breakable in the short term.

ARRAF:  Now, Iyad Allawi was someone backed by the U.S.  Steven, you seem to make the point that now we've gotten to the point where the U.S. doesn't actually have that much control anymore over what happens.  What leverage do we have any more?

STEVEN SIMON:  Well, you know, 150,000 troops buys you something.  You do get some leverage out of that.  We're still in a situation where, unlike the Iranian head of government, our own secretary of State has to arrive secretly and at midnight to avoid risks to her personal safety that suggests a certain lack of leverage over events in Iraq.

I think that the key point for me, embedded in your question, is what effect U.S. forces really have on the level of violence.  And this is very troubling when you consider that the latest surge is the fourth surge since our initial entry militarily into Iraq.  Up until this point they weren't called surges and they didn't have the same political valance as the latest surge does have, but they were surges nevertheless and we've been as high as 180,000 troops in Iraq.  And yet during this entire period, the level of violence has gone fairly consistently upward, regardless of the trend lines of the U.S. troop presence.

So this suggests that there is probably not a very robust correlation between the presence of U.S. forces and the level of internecine violence in Iraq.  And there are some who suspect, possibly with some justification, that the presence of U.S. forces is an incitement to violence -- at least in some instances and some places in Iraq -- rather than a suppressive factor.  The other thing I'd mention in this regard is that we know that U.S. forces, for all their valor and determination on the ground in Iraq, have not been able to operate very effectively in Iraqi context.  And this is due to a lot of factors, which I don't have to belabor here.  I think it's self-evidently very difficult for American troops to do this sort of thing.

The new American commander, David Petraeus -- who got his fourth star and is now out there -- has literally written the book on counterinsurgency and he's got some ideas that he'd like to see employed.  But ideas like those take a good deal of time to circulate among a very large force that's scattered in a country that is very different in its parts.  So it's unlikely that we're going to see in the meaningful future the U.S. Army and Marine Corps actually operating more effectively, knowledgeably and sensitively in Iraq.

ARRAF:  Dr. Allawi, you believe that if the U.S. troops left, that one of the key problems -- as I understand it -- would be that it would -- that the U.S. troops are essentially one of the only things holding Shi'as from taking over more Sunni territory.  In your mind, is that a compelling reason for them to stay?

ALLAWI:  Well, this is one reason, I think, is that the United States is not only acting as a kind of proxy defense for the Sunni-Arab community, it's also paradoxically acting as a support for certain factions inside the government that look to the United States to impose security, strengthen the central government and in the process allow them to strengthen their hands vis-a-vis rivals outside the government or who are partly inside the government.  By that I really mean the power struggle in the world of the Shi'a is not within secularist Shi'as and religious Shi'as.  It's within the Shi'a-Islamist movement -- in particular between the SCIRI group and the Sadrist and the Dawa Party is somewhere in between.

And here have the U.S. military strengthening the government to which -- which is anchored the UIA, which is in turn anchored along SCIRI.  And to some extent, I think, this will probably strengthen the hand of SCIRI, if they succeed in stabilizing Baghdad, which really means attacking and decimating, if possible, the Mahdi Army.  Of course, we have to take into account that there are counter responses are brewed right now with, I might add, Iran -- Iran's involvement.

And these people are not going to take this lying down.  So the U.S. military is not only involved or enmeshed in this civil war -- or civil conflict between Shi'as and Sunnis, it is also, perhaps unwittingly, playing a part in pushing the fortunes of one side versus the other.  And the responses to this are already being, as I said, worked on right now.  So it's not that clear as to what will be the outcome of a precipitous withdrawal.

ARRAF:  Let's talk Iran for a moment.  How much of a threat is Iran to Iraq?

ALLAWI:  I think Iran is a country which has very great interests in Iraq, probably more so than any other of its neighboring countries with the exception of Turkey, but Turkey's interests are limited to the Kurds.  Iran sees itself, in some ways, as a gainer or even a victor in the overthrow of Saddam and the imposition or installment of a majority Shi'a Islamist or Shi'a government or Islamist bent.  Nearly all the threads that connect the Shi'a Islamist groups to Iran, in greater or lesser extent, give it enormous leverage.  So I think Iran has a number of objectives in Iraq.  One of them is to make sure that this ascendancy is not dismantled, that you don't go back into a situation where we had distorted sectarian violence or where we had a kind of super-nationalist (Arabist ?) state.

Iran also doesn't want to, I think, bring this pot to the boil where it has to face head-on the United States in Iraq.  So there's this talk about them following a policy of managed chaos, which I think is partly true.  But they don't want to see the breakup of Iraq either.  I think their preferred end state is a central state that is dominated by the Shi'as and its parties, which coordinate at a very, very broad and distant level with Iran's main strategic thrust but have, obviously, their own Iraqi policy.  But this will be, I think, their desired end state.  The second outcome they would accept would be, if that is not possible, is some kind of super region in the south.  What they don't want to see, I think, is the breakup of Iraq as a state, as a unified, geopolitical entity.

So Iran has then, obviously, the relationships between Iran and the United States transfer also to the struggle inside Iraq.  But that's another dimension on the problem.

ARRAF:  Steven, with your long experience in national security, is Iranian influence in Iraq as much of a threat that Americans are told that it is?

SIMON:  Well, you know, we and the Iranians have a perverse and a tacit alliance in Iraq.  I mean, we're both supporting a Shi'a government.  The Iranians look back at the Iran-Iraq war which was so devastating for them, and they have concluded that it probably would not have happened if Sunnis had not been running that country.  So, to prevent the kind of strategic catastrophe visited on Iran by the Iran-Iraq war in the '80s, there is one priority, there can be only one priority, and that's that Sunnis don't run that country.  That's more or less the American position.

You know, when you conquer a country, if you're a colonial power or an occupying power, there's always the crucial question of, who do you recognize when you go in?  And that leads ineluctably to the question of whose side are you going to be on?  And in effect, as Dr. Allawi I think has said quite eloquently, the U.S. did choose sides, the same side, as it happens, that the Iranians chose.

So, this is why I say it's a perverse and tacit alliance, because we do regard the Iranians as a threat.  And Iranians, since, in my view, serial numbers on weapons don't lie, Iranians have been doing things that have led to the deaths of a fairly large number of American soldiers.  So they are a threat in that way.  In southern Iraq, you know, they've also been a profound commercial and financial influence which has had the effect of consolidating Iranian influence in that very large and very rich part of the country.  You know, the Iranians are the source of credit in Iraq.  They're the source of crucial commodities that are used by ordinary people.  This is, of course, in southern Iraq.  So you know, they do have a very strong influence.

Are they necessarily a threat to the U.S. position?  You know, in my view, not a threat that can't be managed into something more cooperative provided that other things don't get in the way.  For example, the dispute over Iran's nuclear program.  Presumably, if hostilities arose from the tensions existing over that program, they would erupt in a very forceful and probably bloody way in Iraq between Iranians proxies and the United States.

So, that's a kind of muddy answer to your question.  I guess I could have just said yes/no. (Laughter.)

ARRAF:  Excellent, that's helpful.  Thank you.

Dr. Allawi, you have suggested a solution to what you describe as -- was it incredible mess?  Was that the answer that you used?  A mess in any case.  A regional conference, an international conference that would both reassure Iran, Turkey and have constructive participation by Iraq's neighbors.  Can you tell us -- there have been other conferences like that.  Why would something like that work now when others haven't?

ALLAWI:  Well, I'd like to change the word conference to congress, and I'm thinking more in terms of 19th century congresses where there was an attempt to use the result of a catastrophic event for that particular region or a cataclysmic event.  I think what has happened now in Iraq is no less important, in terms of the balance of power, in terms of its effects on a large number of countries and peoples, as, for example, the creation of the state of Israel in '48 and even going back into time into the collapse of the Ottoman Empire.  The state system in the Middle East has been severely disrupted by the invasion and occupation of Iraq.  And the upending, as it were, of the power structures inside Iraq have had dramatic effect, not only (in country ?) but also to all the countries surrounding Iraq.  There are definite winners, and there are definite losers.  And it's not going to get -- (inaudible) -- of 100 years war.  These have to be contained in some kind of new, reconciled balance.

Now, whether this is premature or even idealistic to assume it's going to happen in the short term -- but if you are going to design a new system that takes into account the consequences of the Iraq war, and then I think you need to have some kind of really major congress that's backed by, obviously, the United States, where each party clearly articulates what it expects in terms of the new arrangements without necessarily trying to reverse them.  So, if you are a gainer, you should be prepared to give up part of your gain.  If you're a loser, you should acknowledge that there are certain losses but not catastrophic losses.

Rearranging, as it were, the table settings in the Middle East, as a result of the Iraq invasion, is really critical.  And for that, I think we need to know what the interest of the United States is in Iraq.  I mean, we talked about Iranian interests, and I think it, to some extent, is clear what they want.  There are five or six priorities that they are working on.  I really don't know what is the United States' interest in Iraq right now beyond the military aspect and beyond the presence of large numbers of troops that impinge on domestic American politics.  So, what does the United States want to see as an end state in Iraq?  And I think to say that we want to have a state that can or a government that can sustain and defend itself is, to some extent, you know, platitudinous really.

And we are now talking about a very, very major and significant change in the power relations in the Middle East, and it can't really be handled through a unilateral approach.  That's why I'd like to focus on the word "congress," rather than conference.  I mean, conferences can go on interminably, with no end result, and people just grandstand.  But if you go into it with a vision that you are trying to come up with -- it's a horrible word, but I'll use it -- with a new architecture of security, as a result of the Iraq invasion and as a result of the upending of the domestic power arrangements, I think you may end up with a reasonably good end state which would not please everyone, but would be sufficiently stable to allow Iraqis to resume a normal life, which is what people want, after all, in Iraq.

ARRAF:  That's a great question that you raised.  Stephen, at this point in time, four years on, what can the U.S. expect, do you think, as a best-case scenario from Iraq?

SIMON:  (Sighs.)  (Laughter.)

ARRAF:  Take your time.  You have 30 seconds.  (Laughter.)

SIMON:  Well -- (chuckles) -- in 25 words or less, I think there are, you know, two best cases for the United States, which doesn't necessarily translate into best cases for Iraqis.  Iraq's and America's interests are necessarily going to be diverging, and for a lot of reasons, I think it's over-determined.  But in any case, you know, for the United States there could be something along the lines of the power-sharing arrangement reached by exhausted parties, as Dr. Allawi I think alluded to in something -- a very interesting piece he wrote for The Independent, the London newspaper, back in January.  Or in the alternative, there could be a coup d'etat in Iraq that brings to power somebody that the United States may know about, or may never have heard of, who is capable of marshalling enough of the army's units to take over from a government that the new leadership would declare to have been completely incompetent and unable to control violence in a way that the army can -- something along the lines of what transpired in Turkey in 1980.

Now, Turkey and Iraq are vastly different countries, and I don't intend this to be a perfect analogy, by any means.  But in any case, a coup d'etat along those lines that actually succeeded in restoring order -- especially, thinking again of American interests, if that anonymous colonel who -- or brigadier -- who pulled together the forces for the coup was someone who was known to U.S. forces and had trained or worked with U.S. forces.  Well, that could conceivably redound to American interests and lead to a productive relationship down the road.

ARRAF:  Sounds like the makings of a good book or a movie or a -- (scattered laughter).

SIMON:  I'm going to talk to my agent -- (laughter) -- get out of here.

ARRAF:  I think we're going to open it up for questions now.  Just a couple of reminders.  We do invite members to join us with their questions.  Please limit yourself to one question only, and if you could keep it as concise as possible, that would be wonderful.  Please wait for the microphone when it comes around and speak directly into it, and if you could stand, state your name and affiliation, that would be marvelous.

Our first question we are taking from one of our web cast viewers, Robert Abboud, who is with A. Robert Abboud and Company in Fox River Grove, Illinois.  And he's actually asking about something that I'm sure is on a lot of people's minds.  It's the oil law.  His question is what is holding up passage of the oil law?  But more than that, Dr. Allawi, if you could give us your view, is this a law that should pass, and will it pass?

ALLAWI:  Whether it should pass or will pass, I really cannot at this point make up my mind, but it's a law that was not -- it was drafted by -- first of all, by consultants -- (chuckles) -- by Bearing Point.  And the Iraqi ministry of oil think it -- it was thought -- I mean, the speed with which it was written up has to do obviously with the markers that have been set for the Maliki regime in order to continue to receive U.S. support.

There are the -- two issues have not been adequately looked at in the law, and the first issue is actually who owns the oil, the oil fields, in those regions and those areas where oil has been discovered or may be discovered, but where production has not taken place.  And the Kurds are insisting that the constitution gives them the right to assign these oil fields to the regional authority and to undertake whatever they see fit within a term of a consensual agreement as to distribution of revenues between them and the center.

The other issue that has not been tackled is -- as they say, the devil is in the details -- is how is revenue going to be distributed between the regions?  Both of these issues have been left to an indeterminate future.  Now, an oil law without these two key problems resolved and clearly articulated will not result in the desired end, which is to bring large-scale foreign investment into the country.

The idea, or the belief, that foreign investment should be the motor for increasing oil production is also not necessarily accepted universally inside Iraq.  There are very large lobbies, including inside the oil ministry, that think that the capabilities of the Iraqi oil sector, Iraqi oil engineers and their ability in the past to run oil fields, could easily manage the development of explored oil fields that haven't yet been developed -- demarcated oil fields that have not yet been developed.  And frankly, revenue is not a problem right now, because the Iraqi budget is consistently underspent.  The budget that we -- that I was working on, left about an $8 billion underspent, underimplemented amount to the next year.  And the same amount is going to take place now.  So the oil industry in Iraq does not lack for resources.  I think it is not correct to say that it's a capital-starved industry and is waiting for foreign investment to pour in.

So we now have, I think, the beginnings of a long dispute as to whether the oil law works to the advantage of Iraq or not, and I'm afraid if it's passed the way it is, and if it's sort of run through as a result of pressure from the U.S. Embassy on the government and then the government pressuring the parliamentary blocs because they will see that may collapse, the government may collapse, then I think you would not get an oil law that will be -- will lead to the desired -- desired result.  So the public as a whole has been told that foreign -- foreign companies have the technology and have the capital wherewithals to develop the oil industry, but reality is that the capital is not really required for the discovered oil.  And it's very easy to bring them into production, from a technical and engineering point of view and to increase the actual oil production to maybe 3.5 (million), 4 million barrels.

At the same time, the Iraqi oil industry is a very, very -- it's like a sacred cow, and a lot of myths have evolved around it and a lot of reputations are made or unmade in terms of how you relate to it.  It's a very sensitive issue.  So I don't think it will have the desired effect.

ARRAF:  Thank you.

So we can start with questions.  And I'm sorry, it's a little blinding here, but I see -- (inaudible) -- raised your hand?

QUESTIONER:  Susan Woodward at Graduate Center of City University of New York.  Dr. Allawi, you said in your initial remarks that this idea of Iraq and urban -- I've forgotten the words -- I'm sorry -- urban, sophisticated -- has long gone 20 years ago.  Could you elaborate and tell us a little bit more about the political consequences of that now, including whatever people are calling the insurgency?

ALLAWI:  Well, I think the main political consequences is the weakness of the liberal, secular, nonsectarian center, which was based on an urban middle class.  And that urban middle class, in the last 20 years, has been decimated.

First of all, I mean, the Iran-Iraq war obviously was a great disruptive factor, but then the hyperinflation that took place in the 1990s, and the sanctions -- the sanctions had a terrible effect on Iraqi society.  And throughout the 1990s, both the United States and the Iraqi opposition, unfortunately, did not really pay much attention to the effects of the sanctions on change the structure of Iraqi society and the degradation of the infrastructure, and the degradation of the economy generally.

So the middle class was not there when the -- when the American army entered Baghdad on April 9th, and soon thereafter we showed up.  This middle class, upon which a lot of political capital had been invested, just didn't exist.  That's why, on the first time there was an electoral contest, where people could, to some extent, voluntarily and willingly exercise their choices -- vote for their choices, the liberal center just vanished and got paltry votes.  And even that small number of votes dwindled even further with time.

And during -- throughout the CPA period, the operating premise was that there was a middle class to which the CPA was addressing themselves to, and that there was a middle class which there was going to respond to all of these.  Removal of all restrictions, removal of enhancing personal feelings, enhancing the, you know, all the rights that one would expect of a liberal democracy -- had no resonance inside the country because it didn't affect the vast majority of people who were on a different tangent.

And as it dawned upon the CPA that -- and it was really quite a willful ignoring of realities that Iraq.  Iraqi society had been greatly impoverished, and were it not for oil, frankly, Iraq would be one of the poorest countries in the world right now.  So until this middle class reconstitutes itself, through stability, through economic development, I think the political landscape will be dominated by different, different elements -- excluding Kurdistan, I might add.

Q Excluding Kurdistan -- which is essentially its own country.

ALLAWI:  Well it has a different style of politics.  It's not -- it's not the secular liberal democracy that people may think it is, but it has -- it's a different style of politics.

ARRAF:  We have a question in the front row, Roland Paul.

QUESTIONER:  Thank you.  I'm Roland Paul.  I'm a lawyer.

Dr. Allawi, you mentioned in your remarks that the U.S. forces serve -- I think the way you phrased it -- a "proxy security" for the Sunnis, as well as other things.  Do you think it would be better policy if the United States was more militarily aggressive against the Sunni -- by which, I mean as a route against the Sunni insurgents, but more aggressive in that regard or not?  And maybe, as a subtext, you could say something about the feasibility of going against the neighborhoods where the bombs are made.

ALLAWI:  Well, from a military point of view, I think you really cannot -- cannot contain this insurgency with the current level of troops that you have, or with the additional forces that may come from reinvigorated Iraqi military.  I think this insurgency is really -- it has very little relationship or likeness to other types of insurgencies.  And this is, you know, the usual maxim the generals fight the last war.  I think we have now the makings of a new kind of war, which is -- doesn't have frontlines, doesn't have fixed political identities; it has dispersed leadership; it's connected with neighboring countries; and it has vague boundaries to what is tolerable and intolerable -- and resort to extreme levels of terror and violence, which I don't think is being seen to this extent elsewhere.

I don't think this can be defeated by conventional methods.  Now going after neighborhood car bombs -- I think they're doing that with some success, but it doesn't seem stop the flow of suicide bombers.

ARRAF:  There's been such a dramatic increase in suicide bombers.  On that subject, Iraqis -- which still, I have to say, surprises, shocks, horrifies me, are you surprised that, all of a sudden, they stopped being foreign fighters, as we were told, and Iraqis started blowing themselves up?

ALLAWI:  Actually, I'm not surprised because I had gone through the Lebanese civil war where there was also a denial that, you know, we can do these things to each other, therefore, foreigners are to blame and these blame Syria and Israel and so on.  I think the same kind of mind-set applied to Iraq until very recently.  That Iraqis don't kill each other -- that's not true.  I mean, Iraqis don't -- don't go around killing themselves -- that apparently is also not true.  Because although they don't -- they may account for perhaps half of the suicide bombers now, three or four years ago, they accounted for next to nothing.

So people change, and I think their responses change.  And Iraqi society has changed very, very drastically.  It's to do, I think, with the spread of jihadi (serafism ?) in the Sunni Arab community in Iraq.  The Sunni Arab community was, from a doctrinal point of view, in the past had reached a kind of accommodation over centuries.  And the battle is not really between the Sunnis and the Shi'ite, as far as I'm concerned, it's within the Sunni world itself, because they have allowed this moderate, what is known as madhhabi-based Sunnism -- based on the four schools of -- to be overwhelmed by this (serafism ?) jihadi strain.

In Iraq this was not very evident until the 1990s, but now I think it's become the dominant discourse in the world of Sunni Islam.  And that, as you all know, celebrates suicide bombing and martyrdom and all of that.

So the way -- the way for the Sunni Arab community in Iraq, forward, in my mind, is to turn against these people and to reaffirm the traditional roots of their own religious identity, which also includes shrine visits and the Sufi sects.  These are all very critical elements of moderate Sunnism that were overwhelmed in the last 10 years.

ARRAF:  Stephen, let me ask you an unanswerable question perhaps, if I could.  How do you stop the spread of suicide bombs -- it seems almost impossible?

SIMON:  There is no answer to that question.

ARRAF:  Do you want to try -- because it is the question, really, in Baghdad neighborhoods.

SIMON:  Yeah, seriously, suicide bombing is a worldwide trend.  It really took off most recently in Sri Lanka, not in the Arab world or among Muslims for that matter.  There is an ethos of self sacrifice that underlies the phenomenon -- it's this self sacrificial ethos is not unknown to us here in this country.  Soldiers get congressional medals of honor for throwing themselves on grenades to save their colleagues, their comrades in battle, or for suicidal attacks against enemy machine gun nests.  I mean, this is -- this is a way of serving a broader community that's valued across cultures.

It's also true that these things, these phenomena, take on a kind of fad value.  They take on a cult value, and right now it has taken on such a value in some communities in the Muslim world.  So, you know, I don't -- I don't see this as something that never ends because when the underlying conflict ends, then, you know, suicide bombers will stop yanking the lanyards on their vests and blowing themselves up.

But when you consider that it is relatively effective -- not as effective, by the way, on an individual basis as conventional modes of terrorism, but still -- you know, you get a nice kill ratio.  You also have weapons that can be recalled, that can be rapidly mobilized, that are easy to hide, that are easy to deploy -- I mean, it's a great thing if you are in what you consider to be an asymmetrical situation; that is to -- that is, one in which your enemy has overwhelming conventional military power and you're forced to rely on these alternative means of warfare.  So -- you know, the short answer is yeah, it'll go away when the underlying grievances go away.

ARRAF:  Thank you.

In the back -- I'm sorry, in the middle?

Q: Frances FitzGerald.

How does the conflict end within Iraq, or does it?  Or -- and what is the effect of having or not having a successful congress of the neighbors?

ARRAF:  Dr. Allawi?

ALLAWI:  Without that, I think we'll have a sectarian -- crystallization of the sectarian government.  The so-called 80-20 solution will become real, and that is 80 percent of Iraqis are Shi'ites and Kurds.  They are the majority.  The 20 percent can like it or lump it.  This is the bottom line of what is happening now -- is that if the central state is (fencing ?) without taking into account the regional implications in that and the domestic implications, then we'll have a crystallization of sectarian and ethnic sentiments in Iraq that will be expressed politically, either through control of the central state or some other kind of formula by the Shi'a majority.  And by that, I mean we'll have a mirror image of the old state.  The commanding heights of the army, the military state-owned enterprises, the oil industry, banks and so on will be dominated by one group, this time the majority rather than a minority.  But the problems will remain if you work on the assumption that the minority will not take it lying down and would not -- and in neighboring countries would not allow this to happen or will allow this to happen.

My own contention is that they will not allow this to happen, frankly.  Not in the short term. It will take another 10 or 15 year before a Shi'a-dominated state with the Kurdish region attached to it begins to exert its finality, as it were, on the Middle East political map.  These 15 years -- or 10 to 15 years in my reckoning is a waste.  It's also a waste from both a Shi'a point of view as well as from an Islamic point of view because there has to be at some point the start of reconciliation between the major communities in Islam, and it might as well take place in Iraq, where the first greatest option is taking place.  So I think it's an alternative that I find less appealing -- far less appealing than one which tries to create a new sense of citizenship based not on ignoring sectarian differences, but transcending them and creating some kind of new expression of this particular identity.  So it doesn't affect the notion of citizenship and license.

ARRAF:  (Cross talk.)

SIMON:  If I could just elaborate on this point.  I think Dr. Allawi's been quite eloquent on this, as on other things.  I would just want to (embroider ?) what he said by noting that civil wars generally take a long time to work themselves out.  There have been close to 200 civil wars since the Second World War.  We have an impression that they were all a -- kind of a post-Cold War phenomenon, but in fact they're not.  And what's typically happened is that they last for 10 years.  Very few last for less than seven years.  Very few of the sample since World War II have ended by virtue of as power sharing arrangement.  They tend to be extremely unstable.  About 50 percent ended with the central government as the victor, and about 40 percent ended with the rebels having achieved their goals.  So one way or another, looked at from a comparative perspective, we can expect the war in Iraq to go on for quite a while.

ARRAF:  All right.

(Mr. Sarrazin ?)

QUESTIONER:  Rita Hauser.

Steven, given that last answer, the president has intimated at least five times by my count that the decision to get out will be left to the next president.  Assume you're the advisor to the president-elect.  How would you get out?  Right away, all at once, string it out -- what would be your solution and what would be the consequences of your solution?

SIMON:  Well, after advising that he resign and we all leave politics -- (laughter) -- I would -- look, I'd say that the United States would have withdraw very expeditiously, but in a systematic and orderly way.  I mean the American people have already spoken.  The kitchen is closed.  There's not going to be anything more for Iraq -- anything significant beyond what is there now, which we all acknowledge to be unsustainable in part because casualty tolerance right now is at a very, very fragile point.  So -- you know, this being the case, you would have to be on your way out because if you leave when you're forced out, you pay an even higher price for whatever gains you would have won in the interim, possibly a much higher price.

So this means that a withdrawal has to be phased to some extent, it has to be negotiated carefully with the Iraqi government.  There needs to be some negotiated international framework, particularly of neighbors, to assist in the stabilization of the country to the extent possible as U.S. forces withdraw.  There needs to be careful and probably painful calculations as to what forces remain behind for what purpose.  Do you defend the airport?  Do you defend the access routes from the airport to the Green Zone?  Do you defend the Green Zone? What sort of presence do you have in the countryside?  What have the Iraqis and the United States agreed upon in terms of the basing structure in that country.  Right now, you know, the dreams are quite large on the U.S. side of a basing structure in Iraq.  The Iraqis probably are not as enthusiastic, and the Iranians certainly aren't very enthusiastic.  And neither is Congress, for that matter, which has frozen, as far as I'm aware, the military construction funds needed to complete the work on some of these large bases.

So -- you know, these things will need to be puzzled through, and they will have to be handled with a great deal of care and delicacy.  It's going to be a very difficult and fraught process.  As the U.S. withdraws, Iraqis that have been working with the U.S. will be reconsidering where their loyalties should lie.  Who will be their next benefactor?  How do they protect their interests?  How does that dynamic affect the safety and feasibility of the U.S. drawdown?  What are the logistical factors involved?  You know, if at the time we have 150,000 troops and mountains of material, there are issues of shipping and port capacity that will need to be taken into consideration because all this stuff needs to come out by road through Kuwait.  What are we going to leave behind?  At what point will it look as though you are being routed if you leave too much behind?  What is it safe to leave behind?

Do you want the Iraqi army to have access to heavy weapons and armor that will enable it to carry out a program of genocide that it is, as of now, incapable and also not intending to carry out at this point?  So, it will be a very delicate and demanding process and a very dangerous one and complicated as well for the president at home, because he will be fighting a rear-guard action not only on an all (azimuth ?) basis in Iraq but also in Washington itself.  Because the burgeoning debate at that point over who lost Iraq -- it will not just be burgeoning, it will be raging, and it will complicate the calculations that the president must make in drawing down U.S. forces.

So, you know, the short answer to your question is the next president will be faced with a terrible, preoccupying burden that might well destroy that presidency.

ARRAF:  If we could bring the mike -- thank you.  (Laughter.)

SIMON:  On the other hand --

ARRAF:  On the other hand -- (laughter) -- I'm sorry.  Mr. Sorenson had a question up near the front, and the microphone's just coming now.

QUESTIONER:  Thanks.  This is a very enlightening discussion for which I'm grateful to all of the speakers.  But it strikes me as odd that a new democracy, established by the United States supposedly as a model for the region and especially one concerned about the dwindling middle class, would exclude half its citizens.  After I spoke at a college recently, one student from Iraq came up to me, and she was quite desperate and asked me the question.  She said that, for all his evils, Saddam was secular, and women had rights.  Now, she said, the Americans have installed the Shi'a, and we have no rights.  What can we do about it?  How would either of you answer her question?

ALLAWI:  Well, I think this question is not necessarily true in all of its dimensions.  Women's rights during the years of Saddam were not what they were made out to be.  Iraq was not sort of a women's lib paradise -- (laughter) -- especially in the 1990s when the country was seriously re-tribalized and tribal law came to play a very important part in personal legislation.  At the same time, Saddam launched something called the faith campaign which encouraged the return to religious roots, as it were, of Iraqi society.  And women, which were hitherto by and large, unveiled began to don the veil in a very -- or the hijab -- in a very extensive way.  So, when the regime was overthrown, Iraq was very much on the way to becoming re-tribalized where some of the rights associated with some of the few progressive, if you want to call them that, family laws of the late '50s had already been rescinded.

So, I think this lady who mentioned this was probably referring to -- she may have a visceral dislike of people wearing turbans in politics, but that doesn't necessarily translate into diminution of whatever limited rights exist for women before and I think afterwards.  The situation, at least we believe, has improved.  Iraq now mandates that 25 percent of parliament are women.  But women as a whole suffer considerably, but so does the rest of the Iraqi population.  I don't think there's a particularly anti-female bias in the political program of any of the parties, frankly.  And I think this is grossly overblown, the status of women.

Q    Okay, thank you.

ARRAF:  And I think we probably have time for just a couple more questions.  Way in the back.

QUESTIONER:  In your discussion of a withdrawal --

ARRAF:  Could you tell us who you are?

QUESTIONER:  Oh, I'm sorry.  Sahota, Rajinder, Allen & Overy.  In your discussion of a withdrawal from Iraq in case you are advising the next president, one of the things you didn't mention, and I'm just wondering if you would care to mention, whether or not you think reparations would have to be paid by the aggressor in this case?  So reparations from the U.S. government to the Iraqis for the crime of aggression.

ARRAF:  The question being whether they should be paid by the United States to Iraq?

QUESTIONER:  Yeah, whether it would be something that would be discussed or on the table.

ARRAF:  Anyone want to tackle that?

SIMON:  I still remember the little drawing in my sixth grade or fifth grade history textbook that showed a picture of a Hun with a spiked helmet handing a bag of gold to a Belgian peasant.  And underneath, it said, "We should remember that reparations are payments made to injured nations."  You just brought back those childhood memories, and I'm grateful to you.  (Laughter.)  But no, I don't think -- well, you know, to me this isn't a very pressing question.  I mean, it is true that the United States invaded Iraq to protect its own security interests.  If you remember, we will fight them over there so we don't have to fight them over here.  The president actually said that once in Baghdad.  I always wondered how the Iraqis felt about that.  (Laughter.)  I feel kind of queasy about it myself.  But in any case, we did go in there, and we completely -- that is, the United States -- destroyed very quickly whatever was left of Iraqi government capacity, which I think can be linked directly to the rise of the militias -- or certainly, you know, indirectly.  But I think I could make a good case for that.

Now, having acknowledged that, the United States has already spent -- and conceitedly misspent -- scores of billions of dollars in Iraq and, you know, has sacrificed the lives of a significantly bigger number of Americans than were killed in the World Trade Center.  And we continue -- the U.S. continues to lose three soldiers a day, and those are people who are killed.  They're not the 16 who were grievously wounded.

Weighed against these payments, as it were, I don't think that there would be too much enthusiasm in the United States for reparations.

ARRAF:  And we're almost out of time, so we'll give you the last word, Dr. Allawi.  If not money, what does the United States owe Iraq?

ALLAWI:  I think it owes the Iraqi people security and stability, and it owes the region also security and stability.  And frankly, the only power that can do that is the United States.  Any other country, I think, would have given up a long time ago.  This would have broken any other country, but certainly because of your scale and your resources that you're able to withstand these pressures.  So, I think the United States entered Iraq for good or bad reasons, wittingly or unwittingly, for whatever reason, the fact is that it led to the creation of revolutionary conditions inside Iraq, because that's what they are, and huge, huge, catastrophic changes in the power structure in the Middle East.  And for that, I think you should be involved in the refashioning, as it were, of this vase that has broken.  Maybe we can produce a better vase.

ARRAF:  That's a nice thought.  Thank you so much, Dr. Ali Allawi and Steven Simon, and thank you all for coming.

(Applause.)

(C) COPYRIGHT 2007, FEDERAL NEWS SERVICE, INC., 1000 VERMONT AVE.

NW; 5TH FLOOR; WASHINGTON, DC - 20005, USA.  ALL RIGHTS RESERVED.  ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED.

UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND FEDERAL NEWS SERVICE, INC. RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION.

FEDERAL NEWS SERVICE, INC. IS A PRIVATE FIRM AND IS NOT AFFILIATED WITH THE FEDERAL GOVERNMENT.  NO COPYRIGHT IS CLAIMED AS TO ANY PART OF THE ORIGINAL WORK PREPARED BY A UNITED STATES GOVERNMENT OFFICER OR EMPLOYEE AS PART OF THAT PERSON'S OFFICIAL DUTIES.

FOR INFORMATION ON SUBSCRIBING TO FNS, PLEASE CALL JACK GRAEME AT 202-347-1400.

THIS IS A RUSH TRANSCRIPT.

JANE ARRAF:  Hi.  I think we'll get started, if that's okay.

Thank you, everybody, for coming and welcome to today's Council on Foreign Relations meeting.  I'd like to remind you all that this meeting is indeed on-the-record.  Participants around the country and the world are participating in this meeting as well via live webcast on the council's website.  Please remember to turn off your cell phones, BlackBerrys and all wireless devices.

Now, we are extremely lucky to have with us this evening Dr. Ali Allawi, the former minister of finance, defense and trade and the author a compelling recent history of Iraq that has just been published; and the Council's Steven Simon, who has just come out with "After the Surge:  The Case for U.S. Military Disengagement in Iraq."  So we're going to have an interesting discussion on that aspect as well.

But first, I wanted to ask you, Dr. Allawi, one of the things that struck me is a "big picture" question about -- or understanding of the very nature of Iraq.  You describe the United States as superimposing an imagined country on the realities of religious and ethnic divisions.  How does the Iraq you know differ from that imagined country that U.S. troops went into four years ago?

ALI ALLAWI:  Well, I must say that we are also -- I mean, the Iraqi exile opposition community also had an imagined country in mind.  So it's not just the United States that failed in this assessment as to what was the type of country it was getting involved in.  But also, the Iraqi opposition -- especially those that have spent years in the West -- the country of memory that we had was that of, as it were, the urbanized, to some extent westernized, modernized middle classes.  And that world ended decades ago.

The Iraq that reemerged, as it were, in its true shape -- the Iraq where the main divisions of society had not yet resolved themselves between various sects and ethnicities and between urban and tribal values -- this Iraq reemerged with a vengeance in the last 20 years of the Ba'athist regime.  And that did not feature whatsoever in the planning regarding the war or in terms of what people expected as being the kind of society that they were going to be involved in.

ARRAF:  And that seems to translate now into the kind of government which you define as being essentially a government that has failed to have a national leader emerge.  In fact, the people in Iraq keep saying that they're looking for a strong man.  And the closest I can think of is your cousin, Iyad Allawi, the former prime minister:  a forceful personality, a secular Shi'a.  He is now making a bid to essentially topple the Shi'a government that's in place now.  What do you feel about that?

ALLAWI:  Well, good luck to him if he can manage it.  (Laughter.)  I find it extremely implausible.  I mean, with my great regard and respect for my cousin -- and he's also a formidable political leader -- he had a very great chance, frankly, during the interim government where not only were the entire state apparatus under his control, but he was also supported by a large number of Arab countries as well as by the United States and England -- the U.K.

And that chance did not translate into effective political majorities in parliament.  And that majority dwindled over time.  Now, parliamentary majorities are, by their very nature in Iraq, subject to -- they're quite brittle.  So he may be able to peel away certain segments of the ruling Shi'ite alliance, the UIA, and try to convince the Kurds to switch their allegiances, but the arithmetic is really against him.  And the fact is that you cannot change the power relations in Baghdad without looking at the parliamentary situation.  You can't do that by mobilizing, you know, Saudi Arabia and Egypt and Jordan and even the United States.  You have to take into account that we are now, for better or worse, a parliamentary democracy of sorts.  And the UIA and the Kurds have, I think, a strategic alliance that is possibly not breakable in the short term.

ARRAF:  Now, Iyad Allawi was someone backed by the U.S.  Steven, you seem to make the point that now we've gotten to the point where the U.S. doesn't actually have that much control anymore over what happens.  What leverage do we have any more?

STEVEN SIMON:  Well, you know, 150,000 troops buys you something.  You do get some leverage out of that.  We're still in a situation where, unlike the Iranian head of government, our own secretary of State has to arrive secretly and at midnight to avoid risks to her personal safety that suggests a certain lack of leverage over events in Iraq.

I think that the key point for me, embedded in your question, is what effect U.S. forces really have on the level of violence.  And this is very troubling when you consider that the latest surge is the fourth surge since our initial entry militarily into Iraq.  Up until this point they weren't called surges and they didn't have the same political valance as the latest surge does have, but they were surges nevertheless and we've been as high as 180,000 troops in Iraq.  And yet during this entire period, the level of violence has gone fairly consistently upward, regardless of the trend lines of the U.S. troop presence.

So this suggests that there is probably not a very robust correlation between the presence of U.S. forces and the level of internecine violence in Iraq.  And there are some who suspect, possibly with some justification, that the presence of U.S. forces is an incitement to violence -- at least in some instances and some places in Iraq -- rather than a suppressive factor.  The other thing I'd mention in this regard is that we know that U.S. forces, for all their valor and determination on the ground in Iraq, have not been able to operate very effectively in Iraqi context.  And this is due to a lot of factors, which I don't have to belabor here.  I think it's self-evidently very difficult for American troops to do this sort of thing.

The new American commander, David Petraeus -- who got his fourth star and is now out there -- has literally written the book on counterinsurgency and he's got some ideas that he'd like to see employed.  But ideas like those take a good deal of time to circulate among a very large force that's scattered in a country that is very different in its parts.  So it's unlikely that we're going to see in the meaningful future the U.S. Army and Marine Corps actually operating more effectively, knowledgeably and sensitively in Iraq.

ARRAF:  Dr. Allawi, you believe that if the U.S. troops left, that one of the key problems -- as I understand it -- would be that it would -- that the U.S. troops are essentially one of the only things holding Shi'as from taking over more Sunni territory.  In your mind, is that a compelling reason for them to stay?

ALLAWI:  Well, this is one reason, I think, is that the United States is not only acting as a kind of proxy defense for the Sunni-Arab community, it's also paradoxically acting as a support for certain factions inside the government that look to the United States to impose security, strengthen the central government and in the process allow them to strengthen their hands vis-a-vis rivals outside the government or who are partly inside the government.  By that I really mean the power struggle in the world of the Shi'a is not within secularist Shi'as and religious Shi'as.  It's within the Shi'a-Islamist movement -- in particular between the SCIRI group and the Sadrist and the Dawa Party is somewhere in between.

And here have the U.S. military strengthening the government to which -- which is anchored the UIA, which is in turn anchored along SCIRI.  And to some extent, I think, this will probably strengthen the hand of SCIRI, if they succeed in stabilizing Baghdad, which really means attacking and decimating, if possible, the Mahdi Army.  Of course, we have to take into account that there are counter responses are brewed right now with, I might add, Iran -- Iran's involvement.

And these people are not going to take this lying down.  So the U.S. military is not only involved or enmeshed in this civil war -- or civil conflict between Shi'as and Sunnis, it is also, perhaps unwittingly, playing a part in pushing the fortunes of one side versus the other.  And the responses to this are already being, as I said, worked on right now.  So it's not that clear as to what will be the outcome of a precipitous withdrawal.

ARRAF:  Let's talk Iran for a moment.  How much of a threat is Iran to Iraq?

ALLAWI:  I think Iran is a country which has very great interests in Iraq, probably more so than any other of its neighboring countries with the exception of Turkey, but Turkey's interests are limited to the Kurds.  Iran sees itself, in some ways, as a gainer or even a victor in the overthrow of Saddam and the imposition or installment of a majority Shi'a Islamist or Shi'a government or Islamist bent.  Nearly all the threads that connect the Shi'a Islamist groups to Iran, in greater or lesser extent, give it enormous leverage.  So I think Iran has a number of objectives in Iraq.  One of them is to make sure that this ascendancy is not dismantled, that you don't go back into a situation where we had distorted sectarian violence or where we had a kind of super-nationalist (Arabist ?) state.

Iran also doesn't want to, I think, bring this pot to the boil where it has to face head-on the United States in Iraq.  So there's this talk about them following a policy of managed chaos, which I think is partly true.  But they don't want to see the breakup of Iraq either.  I think their preferred end state is a central state that is dominated by the Shi'as and its parties, which coordinate at a very, very broad and distant level with Iran's main strategic thrust but have, obviously, their own Iraqi policy.  But this will be, I think, their desired end state.  The second outcome they would accept would be, if that is not possible, is some kind of super region in the south.  What they don't want to see, I think, is the breakup of Iraq as a state, as a unified, geopolitical entity.

So Iran has then, obviously, the relationships between Iran and the United States transfer also to the struggle inside Iraq.  But that's another dimension on the problem.

ARRAF:  Steven, with your long experience in national security, is Iranian influence in Iraq as much of a threat that Americans are told that it is?

SIMON:  Well, you know, we and the Iranians have a perverse and a tacit alliance in Iraq.  I mean, we're both supporting a Shi'a government.  The Iranians look back at the Iran-Iraq war which was so devastating for them, and they have concluded that it probably would not have happened if Sunnis had not been running that country.  So, to prevent the kind of strategic catastrophe visited on Iran by the Iran-Iraq war in the '80s, there is one priority, there can be only one priority, and that's that Sunnis don't run that country.  That's more or less the American position.

You know, when you conquer a country, if you're a colonial power or an occupying power, there's always the crucial question of, who do you recognize when you go in?  And that leads ineluctably to the question of whose side are you going to be on?  And in effect, as Dr. Allawi I think has said quite eloquently, the U.S. did choose sides, the same side, as it happens, that the Iranians chose.

So, this is why I say it's a perverse and tacit alliance, because we do regard the Iranians as a threat.  And Iranians, since, in my view, serial numbers on weapons don't lie, Iranians have been doing things that have led to the deaths of a fairly large number of American soldiers.  So they are a threat in that way.  In southern Iraq, you know, they've also been a profound commercial and financial influence which has had the effect of consolidating Iranian influence in that very large and very rich part of the country.  You know, the Iranians are the source of credit in Iraq.  They're the source of crucial commodities that are used by ordinary people.  This is, of course, in southern Iraq.  So you know, they do have a very strong influence.

Are they necessarily a threat to the U.S. position?  You know, in my view, not a threat that can't be managed into something more cooperative provided that other things don't get in the way.  For example, the dispute over Iran's nuclear program.  Presumably, if hostilities arose from the tensions existing over that program, they would erupt in a very forceful and probably bloody way in Iraq between Iranians proxies and the United States.

So, that's a kind of muddy answer to your question.  I guess I could have just said yes/no. (Laughter.)

ARRAF:  Excellent, that's helpful.  Thank you.

Dr. Allawi, you have suggested a solution to what you describe as -- was it incredible mess?  Was that the answer that you used?  A mess in any case.  A regional conference, an international conference that would both reassure Iran, Turkey and have constructive participation by Iraq's neighbors.  Can you tell us -- there have been other conferences like that.  Why would something like that work now when others haven't?

ALLAWI:  Well, I'd like to change the word conference to congress, and I'm thinking more in terms of 19th century congresses where there was an attempt to use the result of a catastrophic event for that particular region or a cataclysmic event.  I think what has happened now in Iraq is no less important, in terms of the balance of power, in terms of its effects on a large number of countries and peoples, as, for example, the creation of the state of Israel in '48 and even going back into time into the collapse of the Ottoman Empire.  The state system in the Middle East has been severely disrupted by the invasion and occupation of Iraq.  And the upending, as it were, of the power structures inside Iraq have had dramatic effect, not only (in country ?) but also to all the countries surrounding Iraq.  There are definite winners, and there are definite losers.  And it's not going to get -- (inaudible) -- of 100 years war.  These have to be contained in some kind of new, reconciled balance.

Now, whether this is premature or even idealistic to assume it's going to happen in the short term -- but if you are going to design a new system that takes into account the consequences of the Iraq war, and then I think you need to have some kind of really major congress that's backed by, obviously, the United States, where each party clearly articulates what it expects in terms of the new arrangements without necessarily trying to reverse them.  So, if you are a gainer, you should be prepared to give up part of your gain.  If you're a loser, you should acknowledge that there are certain losses but not catastrophic losses.

Rearranging, as it were, the table settings in the Middle East, as a result of the Iraq invasion, is really critical.  And for that, I think we need to know what the interest of the United States is in Iraq.  I mean, we talked about Iranian interests, and I think it, to some extent, is clear what they want.  There are five or six priorities that they are working on.  I really don't know what is the United States' interest in Iraq right now beyond the military aspect and beyond the presence of large numbers of troops that impinge on domestic American politics.  So, what does the United States want to see as an end state in Iraq?  And I think to say that we want to have a state that can or a government that can sustain and defend itself is, to some extent, you know, platitudinous really.

And we are now talking about a very, very major and significant change in the power relations in the Middle East, and it can't really be handled through a unilateral approach.  That's why I'd like to focus on the word "congress," rather than conference.  I mean, conferences can go on interminably, with no end result, and people just grandstand.  But if you go into it with a vision that you are trying to come up with -- it's a horrible word, but I'll use it -- with a new architecture of security, as a result of the Iraq invasion and as a result of the upending of the domestic power arrangements, I think you may end up with a reasonably good end state which would not please everyone, but would be sufficiently stable to allow Iraqis to resume a normal life, which is what people want, after all, in Iraq.

ARRAF:  That's a great question that you raised.  Stephen, at this point in time, four years on, what can the U.S. expect, do you think, as a best-case scenario from Iraq?

SIMON:  (Sighs.)  (Laughter.)

ARRAF:  Take your time.  You have 30 seconds.  (Laughter.)

SIMON:  Well -- (chuckles) -- in 25 words or less, I think there are, you know, two best cases for the United States, which doesn't necessarily translate into best cases for Iraqis.  Iraq's and America's interests are necessarily going to be diverging, and for a lot of reasons, I think it's over-determined.  But in any case, you know, for the United States there could be something along the lines of the power-sharing arrangement reached by exhausted parties, as Dr. Allawi I think alluded to in something -- a very interesting piece he wrote for The Independent, the London newspaper, back in January.  Or in the alternative, there could be a coup d'etat in Iraq that brings to power somebody that the United States may know about, or may never have heard of, who is capable of marshalling enough of the army's units to take over from a government that the new leadership would declare to have been completely incompetent and unable to control violence in a way that the army can -- something along the lines of what transpired in Turkey in 1980.

Now, Turkey and Iraq are vastly different countries, and I don't intend this to be a perfect analogy, by any means.  But in any case, a coup d'etat along those lines that actually succeeded in restoring order -- especially, thinking again of American interests, if that anonymous colonel who -- or brigadier -- who pulled together the forces for the coup was someone who was known to U.S. forces and had trained or worked with U.S. forces.  Well, that could conceivably redound to American interests and lead to a productive relationship down the road.

ARRAF:  Sounds like the makings of a good book or a movie or a -- (scattered laughter).

SIMON:  I'm going to talk to my agent -- (laughter) -- get out of here.

ARRAF:  I think we're going to open it up for questions now.  Just a couple of reminders.  We do invite members to join us with their questions.  Please limit yourself to one question only, and if you could keep it as concise as possible, that would be wonderful.  Please wait for the microphone when it comes around and speak directly into it, and if you could stand, state your name and affiliation, that would be marvelous.

Our first question we are taking from one of our web cast viewers, Robert Abboud, who is with A. Robert Abboud and Company in Fox River Grove, Illinois.  And he's actually asking about something that I'm sure is on a lot of people's minds.  It's the oil law.  His question is what is holding up passage of the oil law?  But more than that, Dr. Allawi, if you could give us your view, is this a law that should pass, and will it pass?

ALLAWI:  Whether it should pass or will pass, I really cannot at this point make up my mind, but it's a law that was not -- it was drafted by -- first of all, by consultants -- (chuckles) -- by Bearing Point.  And the Iraqi ministry of oil think it -- it was thought -- I mean, the speed with which it was written up has to do obviously with the markers that have been set for the Maliki regime in order to continue to receive U.S. support.

There are the -- two issues have not been adequately looked at in the law, and the first issue is actually who owns the oil, the oil fields, in those regions and those areas where oil has been discovered or may be discovered, but where production has not taken place.  And the Kurds are insisting that the constitution gives them the right to assign these oil fields to the regional authority and to undertake whatever they see fit within a term of a consensual agreement as to distribution of revenues between them and the center.

The other issue that has not been tackled is -- as they say, the devil is in the details -- is how is revenue going to be distributed between the regions?  Both of these issues have been left to an indeterminate future.  Now, an oil law without these two key problems resolved and clearly articulated will not result in the desired end, which is to bring large-scale foreign investment into the country.

The idea, or the belief, that foreign investment should be the motor for increasing oil production is also not necessarily accepted universally inside Iraq.  There are very large lobbies, including inside the oil ministry, that think that the capabilities of the Iraqi oil sector, Iraqi oil engineers and their ability in the past to run oil fields, could easily manage the development of explored oil fields that haven't yet been developed -- demarcated oil fields that have not yet been developed.  And frankly, revenue is not a problem right now, because the Iraqi budget is consistently underspent.  The budget that we -- that I was working on, left about an $8 billion underspent, underimplemented amount to the next year.  And the same amount is going to take place now.  So the oil industry in Iraq does not lack for resources.  I think it is not correct to say that it's a capital-starved industry and is waiting for foreign investment to pour in.

So we now have, I think, the beginnings of a long dispute as to whether the oil law works to the advantage of Iraq or not, and I'm afraid if it's passed the way it is, and if it's sort of run through as a result of pressure from the U.S. Embassy on the government and then the government pressuring the parliamentary blocs because they will see that may collapse, the government may collapse, then I think you would not get an oil law that will be -- will lead to the desired -- desired result.  So the public as a whole has been told that foreign -- foreign companies have the technology and have the capital wherewithals to develop the oil industry, but reality is that the capital is not really required for the discovered oil.  And it's very easy to bring them into production, from a technical and engineering point of view and to increase the actual oil production to maybe 3.5 (million), 4 million barrels.

At the same time, the Iraqi oil industry is a very, very -- it's like a sacred cow, and a lot of myths have evolved around it and a lot of reputations are made or unmade in terms of how you relate to it.  It's a very sensitive issue.  So I don't think it will have the desired effect.

ARRAF:  Thank you.

So we can start with questions.  And I'm sorry, it's a little blinding here, but I see -- (inaudible) -- raised your hand?

QUESTIONER:  Susan Woodward at Graduate Center of City University of New York.  Dr. Allawi, you said in your initial remarks that this idea of Iraq and urban -- I've forgotten the words -- I'm sorry -- urban, sophisticated -- has long gone 20 years ago.  Could you elaborate and tell us a little bit more about the political consequences of that now, including whatever people are calling the insurgency?

ALLAWI:  Well, I think the main political consequences is the weakness of the liberal, secular, nonsectarian center, which was based on an urban middle class.  And that urban middle class, in the last 20 years, has been decimated.

First of all, I mean, the Iran-Iraq war obviously was a great disruptive factor, but then the hyperinflation that took place in the 1990s, and the sanctions -- the sanctions had a terrible effect on Iraqi society.  And throughout the 1990s, both the United States and the Iraqi opposition, unfortunately, did not really pay much attention to the effects of the sanctions on change the structure of Iraqi society and the degradation of the infrastructure, and the degradation of the economy generally.

So the middle class was not there when the -- when the American army entered Baghdad on April 9th, and soon thereafter we showed up.  This middle class, upon which a lot of political capital had been invested, just didn't exist.  That's why, on the first time there was an electoral contest, where people could, to some extent, voluntarily and willingly exercise their choices -- vote for their choices, the liberal center just vanished and got paltry votes.  And even that small number of votes dwindled even further with time.

And during -- throughout the CPA period, the operating premise was that there was a middle class to which the CPA was addressing themselves to, and that there was a middle class which there was going to respond to all of these.  Removal of all restrictions, removal of enhancing personal feelings, enhancing the, you know, all the rights that one would expect of a liberal democracy -- had no resonance inside the country because it didn't affect the vast majority of people who were on a different tangent.

And as it dawned upon the CPA that -- and it was really quite a willful ignoring of realities that Iraq.  Iraqi society had been greatly impoverished, and were it not for oil, frankly, Iraq would be one of the poorest countries in the world right now.  So until this middle class reconstitutes itself, through stability, through economic development, I think the political landscape will be dominated by different, different elements -- excluding Kurdistan, I might add.

Q Excluding Kurdistan -- which is essentially its own country.

ALLAWI:  Well it has a different style of politics.  It's not -- it's not the secular liberal democracy that people may think it is, but it has -- it's a different style of politics.

ARRAF:  We have a question in the front row, Roland Paul.

QUESTIONER:  Thank you.  I'm Roland Paul.  I'm a lawyer.

Dr. Allawi, you mentioned in your remarks that the U.S. forces serve -- I think the way you phrased it -- a "proxy security" for the Sunnis, as well as other things.  Do you think it would be better policy if the United States was more militarily aggressive against the Sunni -- by which, I mean as a route against the Sunni insurgents, but more aggressive in that regard or not?  And maybe, as a subtext, you could say something about the feasibility of going against the neighborhoods where the bombs are made.

ALLAWI:  Well, from a military point of view, I think you really cannot -- cannot contain this insurgency with the current level of troops that you have, or with the additional forces that may come from reinvigorated Iraqi military.  I think this insurgency is really -- it has very little relationship or likeness to other types of insurgencies.  And this is, you know, the usual maxim the generals fight the last war.  I think we have now the makings of a new kind of war, which is -- doesn't have frontlines, doesn't have fixed political identities; it has dispersed leadership; it's connected with neighboring countries; and it has vague boundaries to what is tolerable and intolerable -- and resort to extreme levels of terror and violence, which I don't think is being seen to this extent elsewhere.

I don't think this can be defeated by conventional methods.  Now going after neighborhood car bombs -- I think they're doing that with some success, but it doesn't seem stop the flow of suicide bombers.

ARRAF:  There's been such a dramatic increase in suicide bombers.  On that subject, Iraqis -- which still, I have to say, surprises, shocks, horrifies me, are you surprised that, all of a sudden, they stopped being foreign fighters, as we were told, and Iraqis started blowing themselves up?

ALLAWI:  Actually, I'm not surprised because I had gone through the Lebanese civil war where there was also a denial that, you know, we can do these things to each other, therefore, foreigners are to blame and these blame Syria and Israel and so on.  I think the same kind of mind-set applied to Iraq until very recently.  That Iraqis don't kill each other -- that's not true.  I mean, Iraqis don't -- don't go around killing themselves -- that apparently is also not true.  Because although they don't -- they may account for perhaps half of the suicide bombers now, three or four years ago, they accounted for next to nothing.

So people change, and I think their responses change.  And Iraqi society has changed very, very drastically.  It's to do, I think, with the spread of jihadi (serafism ?) in the Sunni Arab community in Iraq.  The Sunni Arab community was, from a doctrinal point of view, in the past had reached a kind of accommodation over centuries.  And the battle is not really between the Sunnis and the Shi'ite, as far as I'm concerned, it's within the Sunni world itself, because they have allowed this moderate, what is known as madhhabi-based Sunnism -- based on the four schools of -- to be overwhelmed by this (serafism ?) jihadi strain.

In Iraq this was not very evident until the 1990s, but now I think it's become the dominant discourse in the world of Sunni Islam.  And that, as you all know, celebrates suicide bombing and martyrdom and all of that.

So the way -- the way for the Sunni Arab community in Iraq, forward, in my mind, is to turn against these people and to reaffirm the traditional roots of their own religious identity, which also includes shrine visits and the Sufi sects.  These are all very critical elements of moderate Sunnism that were overwhelmed in the last 10 years.

ARRAF:  Stephen, let me ask you an unanswerable question perhaps, if I could.  How do you stop the spread of suicide bombs -- it seems almost impossible?

SIMON:  There is no answer to that question.

ARRAF:  Do you want to try -- because it is the question, really, in Baghdad neighborhoods.

SIMON:  Yeah, seriously, suicide bombing is a worldwide trend.  It really took off most recently in Sri Lanka, not in the Arab world or among Muslims for that matter.  There is an ethos of self sacrifice that underlies the phenomenon -- it's this self sacrificial ethos is not unknown to us here in this country.  Soldiers get congressional medals of honor for throwing themselves on grenades to save their colleagues, their comrades in battle, or for suicidal attacks against enemy machine gun nests.  I mean, this is -- this is a way of serving a broader community that's valued across cultures.

It's also true that these things, these phenomena, take on a kind of fad value.  They take on a cult value, and right now it has taken on such a value in some communities in the Muslim world.  So, you know, I don't -- I don't see this as something that never ends because when the underlying conflict ends, then, you know, suicide bombers will stop yanking the lanyards on their vests and blowing themselves up.

But when you consider that it is relatively effective -- not as effective, by the way, on an individual basis as conventional modes of terrorism, but still -- you know, you get a nice kill ratio.  You also have weapons that can be recalled, that can be rapidly mobilized, that are easy to hide, that are easy to deploy -- I mean, it's a great thing if you are in what you consider to be an asymmetrical situation; that is to -- that is, one in which your enemy has overwhelming conventional military power and you're forced to rely on these alternative means of warfare.  So -- you know, the short answer is yeah, it'll go away when the underlying grievances go away.

ARRAF:  Thank you.

In the back -- I'm sorry, in the middle?

Q: Frances FitzGerald.

How does the conflict end within Iraq, or does it?  Or -- and what is the effect of having or not having a successful congress of the neighbors?

ARRAF:  Dr. Allawi?

ALLAWI:  Without that, I think we'll have a sectarian -- crystallization of the sectarian government.  The so-called 80-20 solution will become real, and that is 80 percent of Iraqis are Shi'ites and Kurds.  They are the majority.  The 20 percent can like it or lump it.  This is the bottom line of what is happening now -- is that if the central state is (fencing ?) without taking into account the regional implications in that and the domestic implications, then we'll have a crystallization of sectarian and ethnic sentiments in Iraq that will be expressed politically, either through control of the central state or some other kind of formula by the Shi'a majority.  And by that, I mean we'll have a mirror image of the old state.  The commanding heights of the army, the military state-owned enterprises, the oil industry, banks and so on will be dominated by one group, this time the majority rather than a minority.  But the problems will remain if you work on the assumption that the minority will not take it lying down and would not -- and in neighboring countries would not allow this to happen or will allow this to happen.

My own contention is that they will not allow this to happen, frankly.  Not in the short term. It will take another 10 or 15 year before a Shi'a-dominated state with the Kurdish region attached to it begins to exert its finality, as it were, on the Middle East political map.  These 15 years -- or 10 to 15 years in my reckoning is a waste.  It's also a waste from both a Shi'a point of view as well as from an Islamic point of view because there has to be at some point the start of reconciliation between the major communities in Islam, and it might as well take place in Iraq, where the first greatest option is taking place.  So I think it's an alternative that I find less appealing -- far less appealing than one which tries to create a new sense of citizenship based not on ignoring sectarian differences, but transcending them and creating some kind of new expression of this particular identity.  So it doesn't affect the notion of citizenship and license.

ARRAF:  (Cross talk.)

SIMON:  If I could just elaborate on this point.  I think Dr. Allawi's been quite eloquent on this, as on other things.  I would just want to (embroider ?) what he said by noting that civil wars generally take a long time to work themselves out.  There have been close to 200 civil wars since the Second World War.  We have an impression that they were all a -- kind of a post-Cold War phenomenon, but in fact they're not.  And what's typically happened is that they last for 10 years.  Very few last for less than seven years.  Very few of the sample since World War II have ended by virtue of as power sharing arrangement.  They tend to be extremely unstable.  About 50 percent ended with the central government as the victor, and about 40 percent ended with the rebels having achieved their goals.  So one way or another, looked at from a comparative perspective, we can expect the war in Iraq to go on for quite a while.

ARRAF:  All right.

(Mr. Sarrazin ?)

QUESTIONER:  Rita Hauser.

Steven, given that last answer, the president has intimated at least five times by my count that the decision to get out will be left to the next president.  Assume you're the advisor to the president-elect.  How would you get out?  Right away, all at once, string it out -- what would be your solution and what would be the consequences of your solution?

SIMON:  Well, after advising that he resign and we all leave politics -- (laughter) -- I would -- look, I'd say that the United States would have withdraw very expeditiously, but in a systematic and orderly way.  I mean the American people have already spoken.  The kitchen is closed.  There's not going to be anything more for Iraq -- anything significant beyond what is there now, which we all acknowledge to be unsustainable in part because casualty tolerance right now is at a very, very fragile point.  So -- you know, this being the case, you would have to be on your way out because if you leave when you're forced out, you pay an even higher price for whatever gains you would have won in the interim, possibly a much higher price.

So this means that a withdrawal has to be phased to some extent, it has to be negotiated carefully with the Iraqi government.  There needs to be some negotiated international framework, particularly of neighbors, to assist in the stabilization of the country to the extent possible as U.S. forces withdraw.  There needs to be careful and probably painful calculations as to what forces remain behind for what purpose.  Do you defend the airport?  Do you defend the access routes from the airport to the Green Zone?  Do you defend the Green Zone? What sort of presence do you have in the countryside?  What have the Iraqis and the United States agreed upon in terms of the basing structure in that country.  Right now, you know, the dreams are quite large on the U.S. side of a basing structure in Iraq.  The Iraqis probably are not as enthusiastic, and the Iranians certainly aren't very enthusiastic.  And neither is Congress, for that matter, which has frozen, as far as I'm aware, the military construction funds needed to complete the work on some of these large bases.

So -- you know, these things will need to be puzzled through, and they will have to be handled with a great deal of care and delicacy.  It's going to be a very difficult and fraught process.  As the U.S. withdraws, Iraqis that have been working with the U.S. will be reconsidering where their loyalties should lie.  Who will be their next benefactor?  How do they protect their interests?  How does that dynamic affect the safety and feasibility of the U.S. drawdown?  What are the logistical factors involved?  You know, if at the time we have 150,000 troops and mountains of material, there are issues of shipping and port capacity that will need to be taken into consideration because all this stuff needs to come out by road through Kuwait.  What are we going to leave behind?  At what point will it look as though you are being routed if you leave too much behind?  What is it safe to leave behind?

Do you want the Iraqi army to have access to heavy weapons and armor that will enable it to carry out a program of genocide that it is, as of now, incapable and also not intending to carry out at this point?  So, it will be a very delicate and demanding process and a very dangerous one and complicated as well for the president at home, because he will be fighting a rear-guard action not only on an all (azimuth ?) basis in Iraq but also in Washington itself.  Because the burgeoning debate at that point over who lost Iraq -- it will not just be burgeoning, it will be raging, and it will complicate the calculations that the president must make in drawing down U.S. forces.

So, you know, the short answer to your question is the next president will be faced with a terrible, preoccupying burden that might well destroy that presidency.

ARRAF:  If we could bring the mike -- thank you.  (Laughter.)

SIMON:  On the other hand --

ARRAF:  On the other hand -- (laughter) -- I'm sorry.  Mr. Sorenson had a question up near the front, and the microphone's just coming now.

QUESTIONER:  Thanks.  This is a very enlightening discussion for which I'm grateful to all of the speakers.  But it strikes me as odd that a new democracy, established by the United States supposedly as a model for the region and especially one concerned about the dwindling middle class, would exclude half its citizens.  After I spoke at a college recently, one student from Iraq came up to me, and she was quite desperate and asked me the question.  She said that, for all his evils, Saddam was secular, and women had rights.  Now, she said, the Americans have installed the Shi'a, and we have no rights.  What can we do about it?  How would either of you answer her question?

ALLAWI:  Well, I think this question is not necessarily true in all of its dimensions.  Women's rights during the years of Saddam were not what they were made out to be.  Iraq was not sort of a women's lib paradise -- (laughter) -- especially in the 1990s when the country was seriously re-tribalized and tribal law came to play a very important part in personal legislation.  At the same time, Saddam launched something called the faith campaign which encouraged the return to religious roots, as it were, of Iraqi society.  And women, which were hitherto by and large, unveiled began to don the veil in a very -- or the hijab -- in a very extensive way.  So, when the regime was overthrown, Iraq was very much on the way to becoming re-tribalized where some of the rights associated with some of the few progressive, if you want to call them that, family laws of the late '50s had already been rescinded.

So, I think this lady who mentioned this was probably referring to -- she may have a visceral dislike of people wearing turbans in politics, but that doesn't necessarily translate into diminution of whatever limited rights exist for women before and I think afterwards.  The situation, at least we believe, has improved.  Iraq now mandates that 25 percent of parliament are women.  But women as a whole suffer considerably, but so does the rest of the Iraqi population.  I don't think there's a particularly anti-female bias in the political program of any of the parties, frankly.  And I think this is grossly overblown, the status of women.

Q    Okay, thank you.

ARRAF:  And I think we probably have time for just a couple more questions.  Way in the back.

QUESTIONER:  In your discussion of a withdrawal --

ARRAF:  Could you tell us who you are?

QUESTIONER:  Oh, I'm sorry.  Sahota, Rajinder, Allen & Overy.  In your discussion of a withdrawal from Iraq in case you are advising the next president, one of the things you didn't mention, and I'm just wondering if you would care to mention, whether or not you think reparations would have to be paid by the aggressor in this case?  So reparations from the U.S. government to the Iraqis for the crime of aggression.

ARRAF:  The question being whether they should be paid by the United States to Iraq?

QUESTIONER:  Yeah, whether it would be something that would be discussed or on the table.

ARRAF:  Anyone want to tackle that?

SIMON:  I still remember the little drawing in my sixth grade or fifth grade history textbook that showed a picture of a Hun with a spiked helmet handing a bag of gold to a Belgian peasant.  And underneath, it said, "We should remember that reparations are payments made to injured nations."  You just brought back those childhood memories, and I'm grateful to you.  (Laughter.)  But no, I don't think -- well, you know, to me this isn't a very pressing question.  I mean, it is true that the United States invaded Iraq to protect its own security interests.  If you remember, we will fight them over there so we don't have to fight them over here.  The president actually said that once in Baghdad.  I always wondered how the Iraqis felt about that.  (Laughter.)  I feel kind of queasy about it myself.  But in any case, we did go in there, and we completely -- that is, the United States -- destroyed very quickly whatever was left of Iraqi government capacity, which I think can be linked directly to the rise of the militias -- or certainly, you know, indirectly.  But I think I could make a good case for that.

Now, having acknowledged that, the United States has already spent -- and conceitedly misspent -- scores of billions of dollars in Iraq and, you know, has sacrificed the lives of a significantly bigger number of Americans than were killed in the World Trade Center.  And we continue -- the U.S. continues to lose three soldiers a day, and those are people who are killed.  They're not the 16 who were grievously wounded.

Weighed against these payments, as it were, I don't think that there would be too much enthusiasm in the United States for reparations.

ARRAF:  And we're almost out of time, so we'll give you the last word, Dr. Allawi.  If not money, what does the United States owe Iraq?

ALLAWI:  I think it owes the Iraqi people security and stability, and it owes the region also security and stability.  And frankly, the only power that can do that is the United States.  Any other country, I think, would have given up a long time ago.  This would have broken any other country, but certainly because of your scale and your resources that you're able to withstand these pressures.  So, I think the United States entered Iraq for good or bad reasons, wittingly or unwittingly, for whatever reason, the fact is that it led to the creation of revolutionary conditions inside Iraq, because that's what they are, and huge, huge, catastrophic changes in the power structure in the Middle East.  And for that, I think you should be involved in the refashioning, as it were, of this vase that has broken.  Maybe we can produce a better vase.

ARRAF:  That's a nice thought.  Thank you so much, Dr. Ali Allawi and Steven Simon, and thank you all for coming.

(Applause.)

(C) COPYRIGHT 2007, FEDERAL NEWS SERVICE, INC., 1000 VERMONT AVE.

NW; 5TH FLOOR; WASHINGTON, DC - 20005, USA.  ALL RIGHTS RESERVED.  ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED.

UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND FEDERAL NEWS SERVICE, INC. RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION.

FEDERAL NEWS SERVICE, INC. IS A PRIVATE FIRM AND IS NOT AFFILIATED WITH THE FEDERAL GOVERNMENT.  NO COPYRIGHT IS CLAIMED AS TO ANY PART OF THE ORIGINAL WORK PREPARED BY A UNITED STATES GOVERNMENT OFFICER OR EMPLOYEE AS PART OF THAT PERSON'S OFFICIAL DUTIES.

FOR INFORMATION ON SUBSCRIBING TO FNS, PLEASE CALL JACK GRAEME AT 202-347-1400.

THIS IS A RUSH TRANSCRIPT.