Chairman Kerry, Senator Lugar, members of the committee, thank you very much for the opportunity to speak today about our opportunity in Iraq as we transition from a military- to civilian-led mission, and about our efforts to develop a strong, long-term relationship with Iraq.
This is the start of a 12-month period at the end of which all combat forces will be withdrawn.
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This is the start of a 12-month period at which all -- during which -- or at the end of which all combat forces will be withdrawn. We have huge interests in capitalizing on the opportunity in Iraq. Iraq is at the center of the Middle East, bordering key countries like Saudi Arabia, Iran and our NATO ally Turkey.
It is the -- it is the border between Kurdish lands and Arab lands. It is really where Sunni meet Shi'a. It is really a very central part of the Middle East and something -- and a country in which we should have enduring interests.
For the first time in decades, in fact, Iraq has a chance to become an engine for regional stability and regional economic growth rather than a source of regional tension and dispute. A convergence of events present(s) the will help foster security through active diplomacy to contain and begin to resolve internal disputes and to foster longer- term stability by showing the Iraqis how to build a market-oriented economy and a genuinely representative and accountable government. Over time, as our -- as we make progress on the economic and political goals, we will see a significant reduction in our civilian presence, both in the province(s) and at the embassy in Baghdad.
But for now, during this transition, we intend to actually strengthen our civilian presence as our military begins to ramp down. We need to show that we are taking over the -- some of the tasks that our military is -- has been engaged in. And that will mean -- and even strengthen civilian operation, after which we look to see the civilian effort begin also to ramp down.
Mr. Chairman, as -- Iraq has indeed suffered a series of attacks over the last weeks, including, actually, several on minority communities. Particularly horrifying were, indeed, the attacks on the Iraqi Foreign and Finance Ministries on August 19th. But, in fact, the reality is that Iraqi people have stood firm and rejected retribution, and that -- and so far, they have prevented the beginning of a new cycle of violence.
Doesn't mean that these attacks don't need to be taken seriously. They need to be taken with great seriousness. But we have found that the Iraqi people are reacting well to this. We have found that the Iraqi security forces are reacting well to this. And we believe that this is really quite a change from in the past.
There -- also, there's been some good news in Iraq as well. They've staged two rounds of successful elections: the provincial council elections in January, and elections in the Kurdistan Regional Government just a couple of months ago in July.
In both cases, the voting was free, fair and peaceful. Today, there are new provincial councils operating. And they know that the voters will have an opportunity to judge their performance.
Preparations have begun for national elections scheduled in January 2010. The council of representatives is working on an election law to govern the conduct of elections.
Iraq's high electoral commission has begun to register voters. And political parties are negotiating coalitions. We'll continue to work with the Iraqi leadership to ensure that this process is completed.
In the economic area, Iraq's economy remains very much a work in progress. It's beset by drought, inadequate reforms, falling oil prices earlier this year, which indeed hurt the budget. But as production and export levels have begun to increase and oil prices have recovered, in recent months, Iraq's budget has improved somewhat.
Nevertheless we have many near-term concerns about the fiscal stability. Iraq is going to have to work very closely on a standby agreement with the International Monetary Fund. And we're pleased that it is doing so. It also needs to undertake economic reforms, which will lay the groundwork for greater help from the World Trade Organization.
We can be helpful. But in the economy, the time has come really for Iraq to step up to the plate. There is no question that Iraq has the resources to be stable and successful. But it needs to better mobilize these resources, starting with oil.
The Iraqi people are blessed with enormous oil reserves; estimated to be the number-three country in the world. And on June 30th, the Iraqi ministry of oil held the first bid round in Iraq's history, with 32 international oil companies competing for six oilfields.
One field was awarded. It is a major field. And if it lives up to its expectations, it's possible that Iraq's oil exports could actually double from this one field alone.
Iraq needs to do more in this area. We need to work closely with the Iraqis, because we need to see increasingly Iraq paying for its own bills, as we ramp down our bilateral assistance.
Iraq needs to work on a more diversified economy. And we are very pleased that Prime Minister Maliki -- we have worked together on a U.S.-Iraq business and investment conference, to be held on October 20th here in Washington.
Two hundred representatives from Iraq will attend the conference. There will be a delegation of senior government officials. And we hope that this conference, together with the discussions with high- level Iraqi officials, at the dialogue of economic cooperation, will really act to spur investment in Iraq.
But beyond some of these economic issues, I want to stress that Iraq issues do not exist in a vacuum. A look at the map shows that Iraq is located in the center of a complex neighborhood.
Iran's influence is very much a reality in Iraq. We recognize that elements of Iran's influence, such as trade and religious tourism, can have a positive impact. But too often Iran has played a negative role, meddling in Iraq's internal interests and training violent militias.
With Syria, tensions persist between Baghdad and Damascus. Turkey has special interests in the north. Iraq's history with Kuwait is difficult. And the problems reach back beyond 1990.
Against this backdrop, there is a fundamental question. Is the Sunni Arab world prepared to make room for an Arab state that will be led, in all probability -- though not dominated but led -- by the Shi'a?
How Iraq deals with its neighbors will define what kind of region emerges in the coming year -- coming years. We need to help Iraq find solutions to some of these long-standing regional -- regional issues.
I think our diplomacy in Iraq, both internally in bilateral terms, but also multilaterally, will have a vital role to play. We've expanded our efforts to facilitate first containing, and then beginning to resolve, disputes in northern Iraq between Kurds and Arabs. I was just in Iraqi Kurdistan over the weekend, discussing how we can move forward on issues like developing vital oil sector in a way that benefits all Iraqis, and how to address -- how to begin to address the thorny dispute in Kirkuk.
We need to begin the process of getting various ethnic and sectarian communities engaged in settling their disputes. The U.N. has an important role here, and we want to work very closely with the -- with the U.N. Our diplomatic track is designed to fully complement our military efforts to foster cooperation between Kurdistan regional security forces -- that is, the peshmerga -- and those of the central government in Baghdad. And General Odierno has been very much engaged in this area.
I think helping -- we need to -- we need to understand that the decision, or the first milestone of the security agreement, that is, the removing U.S. cities from the -- or U.S. forces from the cities and villages in Iraq on June 30th -- turned out to be a very important day -- more important than many people thought, I think. Because for many Iraqi people, they looked to the question, would the U.S. fulfill its obligations under the security agreement? And I think the overwhelming majority of Iraqi citizens do believe we have done just that.
This decision -- or this date has turned out to be a very important date, because Iraqis now see that the U.S. can be trusted in the agreements we sign. And I think the Iraqis are now very interested in moving on to see if we can implement the Strategic Framework Agreement. The Strategic Framework Agreement, a sort of companion piece to the security agreement, lays out all the elements of a long-term relationship with Iraq. And this is the agreement that we very much want to -- want to follow, and to guide us in the years ahead.
To be sure, the transition to a civilian-led mission presents many challenges for us. We need first of all to make sure we have the funding to take up tasks that our military has been providing in the past. And the State Department has been working very hard to make sure that we have that funding.
There are elements of assistance that -- for example, police training that the military's been engaged in. These will be transferred to the State Department. And we are very much -- we are very much on these issues.
I think this Strategic Framework Agreement that we are pursuing was very much the focus of Prime Minister Maliki's visit to Washington in July. He and Secretary Clinton convened the second meeting of the Higher Coordinating Committee. We've established joint coordination committees in a number of areas, and we'll continue to be very much -- very much engaged on these issues.
Mr. Chairman, with those comments of our overall trends in Iraq, I stand ready to hear your questions.
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