Phillips says democracy is not only about voting but also constitutes the distribution of political power between the center and the regions. He believes federalism is the most promising approach for Iraq. If the Iraqis can build on their recent progress, he says, a deal might be in the offing that preserves Iraq as a unitary state, establishes a federal system of governance, and is administratively viable.
In the new Iraq, Phillips says, Iraqi states should control all affairs not explicitly assigned to the federal government.
"What's envisioned in the Council on Foreign Relations special report that I just authored is that the national government would have specific authorities -- essentially to manage the foreign affairs, to formulate fiscal policy, and to command the armed forces to protect Iraq and maintain national security," Phillips says.
Phillips suggests that two or three states, or federal units, be formed in Iraq from nine southern and central provinces where the population is mostly Shi'a Muslim. Another state could be crafted from four central and western provinces that are predominantly Sunni. One more state might be carved from the three mainly Kurdish provinces in northwestern Iraq. Baghdad would stand alone.
But Phillips says these federal units should be based on geographic and common interests criteria, not on ethnic divisions. He says the best way to protect minority rights will be for Iraq's new constitution to guarantee individual rights. He says the federal Iraqi state and local authorities should have the ability to adopt laws that conform to local customs.
The national government would retain responsibility for foreign trade, border control, customs and taxation, fiscal policy, the issuing of currency, and major infrastructure developments.
Ammar al-Shahbander is a regional expert with the Institute for War and Peace Reporting in London. He says Phillips' ideas might be well received in Iraq. He says federalism is becoming a burning issue in Iraq and that some developments are already taking place in this direction.
"Basra, Ammara, and Nassirya [in the south] and three western governorates have started the process of a call for an application for becoming federal regions," al-Shahbander says.
Al-Shahbander says these moves indicate a trend in the direction Phillips is suggesting.
Al-Shahbander says establishing federal regions would mean imposing formal borders on social, geographic, and psychological differences that are already present. He says any such restructuring is unlikely to happen until a permanent Iraqi government is elected next year.
The division of Iraq into several federal states has been suggested before, but the proposal has always raised questions about ethnic and sectarian separation. It has also left hanging the core issue of how Iraq's vast oil wealth would be distributed.
Phillips says the distribution of Iraq's oil revenues should be dealt with in a fair way.
"What I'm proposing is that the existing oil fields continue to operate but that their revenues would be sent to the national government, that a portion of those revenues be retained by the national government to pay for their basic operations," Phillips says. "And then based on some kind of population percentage, that the revenues would be returned to the federal Iraqi state."
He says Iraqis should understand that the oil belongs to them all. Such an approach, Phillips says, will signal to the Kurds that they will fairly share in the wealth of the Kirkuk fields.
Phillips says that implementing such a plan would require some tough sacrifices. Arab Shi'ites would have to forego demands for Islamic law as the only basis for legislation. Arab Sunnis must accept that they no longer control Iraq's institutions. Iraqi Kurds must forego their dream of independence and sole control of oil in Kirkuk. And Iraqi Turkomans and Assyrians must recognize that they reside in a federal Iraq where Arabs and Kurds constitute the majority.
Phillips' report is due to be translated into Arabic and distributed soon to members of the Iraqi government and National Assembly.