The astonishing ability of the militia forces of the Islamic State of Iraq and Syria (ISIS) to take over several Iraqi cities reveals more about the dismaying weakness and divisions within Iraq than it does about the military prowess of ISIS. Yet this is not some jihadi apocalypse. ISIS as a strategic military force in Iraq is not to be feared. What is to be feared is the ideological defection of large numbers of Sunnis who will no longer fight for the state they see as no longer theirs.

The reasons for Sunni alienation are well known. They were the supreme losers after the U.S. invaded Iraq in 2002, overthrew Saddam Hussein, destroyed the ruling Ba’th party–the bulwark of Sunni control–and dismantled the Iraqi military. The oppressed Shi’ite majority took over the state, determined never again to be relegated to political weakness. Sunni Iraqis spearheaded armed resistance against the decade-long U.S. occupation–along with some Shi’ite forces. In a country driven by fierce nationalist sentiments, even secular former Ba’thists made common cause with Sunni Islamists and jihadis to expel the U.S. occupiers. We are now reaping the whirlwind of destruction.

The Shi’ite Prime Minister Nouri al-Maliki could have built a new national consensus based around a broader “Iraqi nationalism,” but the newly ascendant Shi’a always feared the Sunnis would try to reverse the political equation and seize supreme power again. Saudi Arabia’s open contempt for new Shi’ite power in Baghdad reinforced Shi’ite fears, particularly when Riyadh went all out to back even the most radical Sunni forces to overthrow the (nominally Shi’ite) Asad regime in neighboring Syria.

In his own paranoia and penchant for Iraqi-style strongman rule, Maliki further alienated Sunnis by excluding them from positions of power in Baghdad. The new Iraqi army became essentially an instrument of Shi’ite power operating with a heavy hand in Sunni areas. Today the presence of Sunni jihadis enables Maliki to link all Sunni political activism with “terrorism.”

Most Iraqi Sunnis have little sympathy for the extremist ideology and tactics of the ISIS and its jihadi predecessors. But they also see it as a key instrument for restoration of Sunni power–if not to rule the country, at least to maintain a powerful traditional voice in governance. If the stunning rise of ISIS upsets Maliki and his government, all the better, say the Sunnis–perhaps Maliki will see reason and embrace a more inclusive government. In the meantime, ISIS operations establish the groundwork for greater Sunni regional sovereignty – in what is emerging as a likely three-way federalist structure of Sunni Arab, Shi’ite Arab and Kurdish regions–the only way Iraq can survive intact for the foreseeable future.

David Fuller's view

Western leaders with the responsibility of office are obviously very wary about re-entering Iraq with military forces once again.  Of course I am really talking about US President Barrick Obama and British Prime Minister David Cameron, because no other country would be likely to participate.  The various costs of US and potentially also UK military intervention, even if only very limited, are high.  They also linger indefinitely, in terms of resentment and terrorist reprisals. 

Since the Middle East is not a significant military threat to the West, as was incorrectly but widely feared in 2002 when Saddam Hussein was thought to have nuclear weapons, surely the best long-term solution is for the region to sort out its religious, ethnic and tribal differences.  That may be a long and messy process but the M/E region has the incentives and resources to resolve its own conflicts.

Nevertheless, given the current M/E chaos, the short-term risks of inaction are worryingly high, and not just for the West.  The world remains overly dependent on the region’s oil exports.  If the flow of oil from the M/E is further threatened, a spike in Brent Crude prices much above £120 would jeopardise global GDP growth in proportion to its severity and persistence. 

Everyone, including oil exporters, wants to increase their revenue.  M/E producers have an interest in sufficient political tension to keep the price relatively high, although not to the self-defeating point of global recession.  Moreover, Saudi Arabia almost certainly finances the nihilistic ISIS jihadis, which may have served their main purpose in Iraq for the time being. 

Reports say that ISIS has only between 8000 to 9000 troops in Iraq, although they are probably attracting more radicalised Sunnis from the M/E to Birmingham England.  This is not currently a force capable of taking Baghdad, a city of approximately 9 million people, defended by the best of Iraq’s army. 

However, the Shia versus Sunni fighting is brutal and likely to continue for a while.  This introduces a further element of unpredictability.  Here is a very recent report from The Washington Post: Fears of sectarian killings rise in Baghdad after Sunni Imam, two aides found dead.

As with the conflict between Russia and Ukraine, markets can quickly shrug off these events if they appear not to be worsening.  Monetary policy is the more important variable for most investors, and it remains mostly accommodative.  Nevertheless, the oil price risk has certainly increased and it remains a potential game changer.