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CNBC Transcript: Interview with Haider Al-Abadi, Prime Minister of Iraq

Following are excerpts from the transcript of a CNBC interview by Hadley Gamble and Haider Al-Abadi, Prime Minister of Iraq.

HG: Welcome back to CNBC, I'm now joined by His Excellency, the Prime Minister of Iraq. Your Excellency, why are you here in Davos today? Because years of corruption and conflict and now this low price environment for oil are really having an impact on your funds and your ability to fight the Islamic State. How much money are you looking for, and what's it going to take to defeat ISIS?

HAA: Well, at the moment, we are achieving victory over ISIS. We have liberated large areas of Iraq from ISIS control. ISIS are on the run now, and they have been defeated in many areas. We have planned for this year, 2016, to get ISIS out of Iraq. We are working now, we are sending more troops up north to liberate it from Daesh and I think that is the last stronghold of Daesh. It's-, clearly Daesh is running out of steam, we understood in the last week or two they have slashed the salaries they're paying to their terrorists, which means we are winning and we are stopping the funding for them. Unfortunately, Daesh has been receiving some funds from somewhere, not everybody is working hard to stop their smuggling and funding, but I think we are achieving it, but what has hit us last year, or in the past year and this year, is this huge drop of oil prices. We have to sustain this war with Daesh, we have to sustain our economy. Iraq was dependent on oil for many years, but now we have introduced, my government has introduced reforms now in the economy and we are very much successful. We have slashed government spending by a large margin, of course in relationship to that, of course corruption will be slashed, that's why I think that many corrupt people now are hitting back, but they are not successful so far, I hope they will not be successful. I think I have three wars at the moment. One with Daesh, one with corrupt people, and the third one with the economy, and we are working very hard on this.

HG: Talk to me a little bit about what you're hoping to hear from other leaders, and in fact the investment community here at the World Economic Forum? Because essentially what you have are major international corporations still doing business in Iraq. Can you assure them that their people are going to be kept safe by your government, and also are we going to see the privatisation of assets like we've seen with Saudi Aramco, for example?

HAA: Well yes, I think we have 16 governments out of 18 are very safe, and there are many multinational companies who are working, of course many IOCs, multinational companies are working in Iraq, and they are very safe and business is booming. I can give this guarantee they can work safely in Iraq and Iraq is a very good opportunity for them. Yes, there are challenges, I understand, but I think we are meeting these challenges. I think Iraq has got a lot of potentials that have been untapped so far, they can be tapped, Iraqi society I think is very, very, robust, they stood up to terrorism and to harshness and I think we can well move forward. So my message is very clear, we have been talking with the IOCs to have, like, a balance between protection and prices of oil, and how much a barrel of oil is costing. So far I think it's costing a lot, and this is unsustainable, the current prices of a barrel of oil.

HG: Can you give me a figure then in terms of what it's going to take, in terms of the monetary commitments that you need to defeat Daesh?

HAA: Well, it's tough this year. I think it has been very tough last year. If you remember, last year, our budget was, the price of oil was about $57 per barrel. We ended up receiving $45 per barrel, and that was very harsh for us. This year, we had placed the oil price at $45 per barrel, but now we are selling it for about $23, $24 per barrel. That's very harsh for us, but I think with reforms, we've slashed government spending by quite a large scale and we are winning. We haven't seen a public backlash, in actual fact the public is very understanding, but I think there is quite a challenge ahead because I have to use many of my resources to fight Daesh. The military must be enabled to fight Daesh, and of course they need resources, ammunition, armourment, equipment, and I think this has to be sustainable, and that's why we are here. We are talking with the World Bank, with IMF, with many multinational companies who are willing, I've seen a lot of willingness on their part to help, and I was very much encouraged by them asking for a meeting with us, which I think is a very encouraging sign.

HG: Tell me a little bit about that, because we have seen, of course, progress of the Iraqi special forces in Ramadi of course, and you also have to commit, I think, to the broader picture here, which is what do you really want, not just from the international community, but from the United States in particular. Do want weapons? Do you want loans? I mean, what is it exactly that you need from the President?

HAA: I think it was in the past three, which is training, weapons, air support, and now there is a fourth one, which is economic support. We don't want-, to be honest with you, we don't need cash as a thing, but we need facilities, more facilities, and Iraq has got a huge potential. Iraq is not going to become corrupt-, or bankrupt, sorry. Iraq is an oil producer, it's got a lot of potentials, and we're much, much better off in the future than we are at the moment. So I think that's what we are looking for at the moment. We are receiving some support, but still we are expecting other support, and I hope, I mean, through our contacts here and in other places, we hope we are going to get that.

HG: Talk to me a little bit about the regional context here. Because at the moment we have Iran and Saudi Arabia, your neighbours, not speaking. They're both involved in this Vienna Process in Syria, for example. Where do you see the future of that country going, and does Bashar Assad have a role to play there, and also in terms of fighting the Islamic State, isn't it a problem if Saudi and Iran aren't on the same page?

HAA: Well, we have a fundamental interest in seeing peace in Syria for a simple reason. Because Daesh is running across Syria and Iraq, and if this year we're going to push Daesh out of Nineveh and Mosul, now what's going to happen in Syria and how are we going to control the border when our next neighbour will be Daesh on the other side of the border? I think these are many questions which we have to answer, not only us but the international community, so we look very favourably for the political solutions in Syria, we hope everybody will take part. Of course this escalation between Iran and Saudi Arabia is not helpful at all, because it's polarising the whole area between sectarianism and other regional conflict, which really doesn't help now when we're fighting this enemy, Daesh. Daesh, I have to alarm everybody, is very dangerous.

Although it is on the defeat at the moment, but they have a huge capability of recruiting young people, and so I think there is no country in the world who doesn't have their citizens fighting either in Syria or Iraq. This is a very dangerous organisation, they shouldn't be given a chance now when they are defeated, or they are going to be defeated, and I think one element is political solution in Syria. I hope everybody will work on that, there is now a process, I think it is slow, in my opinion, it has to be more courageous to be pushed forward, it must be implemented otherwise the Syrian people have, I think, paid a heavy price. There are about 10 to 11 million people either internal refugees, or refugees outside Syria, the whole Syrian economy has been damaged, the infrastructure, I think it's not serving anybody. Now the situation in Syria is a breeding ground for terrorism for the whole world. We have seen what happened in Istanbul, in Paris, in Jakarta. This is a very formidable and dangerous organisation, terrorist organisation, Daesh is, so our resources must be there. If we join forces then we can direct our resources towards fighting Daesh and eliminating Daesh from Syria.

HG: The barrier to that, at least within the context of Syria, is going to be whether Basahar Assad stays or goes. What's your take on what needs to happen to move this process?

HAA: Well this is the decision by the Syrian people, of course. I think any transition of power must be gradual, must be calculated. We don't want to see what happened in Iraq in 2003, where all the military was dissolved and everything was dissolved, and you ended up with a weaker state, and it took us quite a long time to restore order in the country, and still we are suffering from that. I think in Syria, the institution of the government must stay. The army and other institutions. So I think the question is how will you do that? How will you change the regime in a sense by making it more acceptable to others, more accommodating to others, and at the same time keeping the institutions in place, or the useful institutions.

HG: Talk to me a bit, then about the roles that the Kurds have to play, not just in Iraq, but also in the fight against the Islamic State. There is a history there of disagreements, at least when it comes to energy and resources, but we understand of course that now Kurdish fighters have been seen operating in other areas. What role do they have to play in fighting Daesh going forward?

HAA: Now we are working together, especially with the Kurds inside Iraq. I think we are now working with Kurds inside Syria, as well, but there is a problem in Turkey. Turkey consider-, their major problem is the Kurds are among the Daesh, that's a problem for us. Now they're fighting the PKK and other Kurdish elements in Turkey and they're extending their fight towards Iraq, and of course they want to extend it towards Syria, and I think this is to us is an alarm. I think Turkey is looking to go back to the Ottoman Empire thing, I don't think there's a place in the region for that. We have to keep a very good relationship with our neighbour, Turkey, we've been working very hard to keep that good relationship, and with the Prime Minister of Iraq, I'm very keen to improve our good relationship, which we have done, but of course the extension of the crossing of Turkish military units into Iraq is not helpful at all. I cannot see any role for them to fight inside Mosul because they are not doing that. If they want to fight Daesh, Daesh is there on their border with Syria. They can fight Daesh there. I don't think it is helpful that-, if Turkey has an interest on Iraqi territory, that's not helpful for us, not helpful for them. I think they have to shift their priority from considering the Kurds as their problem to Daesh as their major problem. I think that their bombing of some targets inside turkey by Daesh, that's an alarm to them, they must take it seriously.

HG: Given what we've seen coming from Turkey over the last couple of years, the evolution of their fight against the Islamic State, do you think they're doing enough to take out ISIS?

HAA: I hope they do, but don't forget Daesh, ISIS, have a relationship, some of their leaders, with the Turkish establishment in the past. We have some proof and they know it. I think smuggling of Daesh, was only done through Turkey . I think that ought to be stopped. The Turks are telling us otherwise, they're eager to fight Daesh, but I'm telling them frankly, I'm not seeing evidence of that. I hope to see more evidence of that.

HG: Your Excellency, the Prime Minister of Iraq, thank you so much for joining us at CNBC.

HAA: Thank you.