Economy of Iraq
Encyclopedia
Iraq
's economy is dominated by the petroleum
sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran
and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $80 billion
from the war. After the end of hostilities, in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities.
Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011 Baghdad probably will increase oil exports above the current level of 1900000 bbl (302,075.9 m³) per day as a result of new contracts with international oil companies, but is likely to fall short of the 2400000 barrels (381,569.5 m³) per day it is forecasting in its budget. Iraq's recent contracts with major oil companies have the potential to greatly expand oil revenues, but Iraq will need to upgrade its oil processing, pipeline, and export infrastructure to enable these deals to reach their potential.
An improved security environment and an initial wave of foreign investment are helping to spur economic activity, particularly in the energy, construction, and retail sectors. Broader economic improvement, long-term fiscal health, and sustained increases in the standard of living still depend on the government passing major policy reforms and on continued development of Iraq's massive oil reserves. Although foreign investors viewed Iraq with increasing interest in 2010, most are still hampered by difficulties in acquiring land for projects and by other regulatory impediments.
Inflation
has decreased consistently since 2006 as the security situation has improved. However, Iraqi leaders remain hard pressed to translate macroeconomic gains into improved lives for ordinary Iraqis. Unemployment remains a problem throughout the country. Reducing corruption and implementing reforms - such as bank restructuring and developing the private sector - would be important steps in this direction.
GDP of Iraq grew 56% in the '60s reaching a peak growth of 57% in the '70s. However, whilst the mid 1980s GDP per capita shrank by 23% amid the Iran-Iraq War
, GDP has now almost doubled since 2005.
in August 1990, subsequent international economic sanctions
, and damage from military action by an international coalition beginning in January 1991, drastically reduced economic activity. The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime have exacerbated shortages. The implementation of the UN
's Oil for Food program in December 1996 has helped improve economic conditions. For the first six six-month phases of the program, Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and other humanitarian goods. In December 1999, the UN Security Council authorized Iraq to export as much oil as required to meet humanitarian needs. Oil exports are now about three-quarters their prewar level. Per capita food imports have increased significantly, while medical supplies and health care services are steadily improving. Per capita output and living standards are still well below the prewar level, but any estimates have a wide range of error.
Iraq's economy is characterized by a heavy dependence on oil exports and an emphasis on development through central planning. Prior to the outbreak of the war with Iran in September 1980, Iraq's economic prospects were bright. Oil production had reached a level of 560,000 m³ (3.5 million barrels) per day, and oil revenues were 21 billion in 1979 and 27 G$ in 1980. At the outbreak of the war, Iraq had amassed an estimated 35 billion in foreign exchange reserves
.
The Iran–Iraq War depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with a foreign debt of more than $40 billion. After hostilities ceased, oil exports gradually increased with the construction of new pipelines and the restoration of damaged facilities.
The economic sanctions were fully lifted in 24 May 2003, shortly after Saddam Hussein was overthrown
. This resulted in economic growth of 53% topping the list of the world's fastest growing economy.
in August 1990, subsequent international economic sanctions
, and damage from the ensuing Gulf War
of 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the Ba'ath Party
government hurt the economy, implementation of the United Nations
' corruption-plagued oil-for-food program in December 1996 was to have improved conditions for the average Iraqi citizen.
In December 1999, the UN Security Council authorised Iraq to export under the program as much oil as required to meet humanitarian needs. Iraq changed its oil reserve currency
from the U.S. dollar
to the euro
in 2000. Oil exports were more than three-quarters of the pre-war level. However, 28% of Iraq's export revenues under the program were deducted to meet UN Compensation Fund and UN administrative expenses. The drop in GDP
in 2001 was largely the result of the global economic slowdown and lower oil prices. Following the 2003 invasion of Iraq
, the economy to a great extent shut down; attempts are underway to revive it from the damages of war and rampant crime.
Paul Bremer, chief executive of the Coalition Provisional Authority
, planned to restructure Iraq's state owned economy with free market
thinking. Order 39 laid out the framework for full privatization in Iraq, except for "primary extraction and initial processing" of oil, and permitted 100% foreign ownership of Iraqi assets. Paul Bremer also ordered a flat tax rate of 15% and allowed foreign corporations to repatriate all profits earned in Iraq. Opposition from senior Iraqi officials, together with the poor security situation, meant that Bremer's privatization plan was not implemented during his tenure, though his orders remain in place. In addition to approximately 200 other state owned businesses, privatization of the oil industry was scheduled to begin sometime in late 2005, though it is opposed by the Federation of Oil Unions in Iraq
.
Bremer's transitional government featured figures close to the George W. Bush administration
, such as grain-trading industry lobbyist Dan Amstutz
, who was put in charge of agricultural policy in Iraq.
One of the key economic challenges was Iraq's immense foreign debt, estimated at $125 billion. Although some of this debt was derived from normal export contracts that Iraq had failed to pay for, some was a result of military and financial support during Iraq's war with Iran.
The Jubilee Iraq campaign argued that much of these debts were odious
(illegitimate). However, as the concept of odious debt is not accepted, trying to deal with the debt on those terms would have embroiled Iraq in legal disputes for years. Iraq decided to deal with its debt more pragmatically and approached the Paris Club
of official creditors.
In a December 2006 Newsweek International article, a study by Global Insight
in London
was reported to show "that Civil war or not, Iraq has an economy, and—mother of all surprises—it's doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to [the report]. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all."
Between 100000 oilbbl/d and 300000 oilbbl/d of Iraq’s declared oil production over the past four years could have been siphoned off through corruption or smuggling, according to a US Study from May 12, 2007.
and the effects of the international sanctions of the 1990s. Since 2003, security problems have blocked efforts to establish new enterprises. The construction industry is an exception; in 2000 cement was the only major industrial product not based on hydrocarbons. The construction industry has profited from the need to rebuild after Iraq’s several wars. In the 1990s, the industry benefited from government funding of extensive infrastructure and housing projects and elaborate palace complexes.
The international Oil-for-Food program (1997–2003) further reduced farm production by supplying artificially priced foreign foodstuffs. The military action of 2003 did little damage to Iraqi agriculture; because of favorable weather conditions, in that year grain production was 22 percent higher than in 2002. Although growth continued in 2004, experts predicted that Iraq will be an importer of agricultural products for the foreseeable future. Long-term plans call for investment in agricultural machinery and materials and more prolific crop varieties—improvements that did not reach Iraq’s farmers under the Hussein regime. In 2004 the main agricultural crops were wheat, barley, corn, rice, vegetables, dates, and cotton, and the main livestock outputs were cattle and sheep.
The Agricultural Cooperative Bank
, capitalized at nearly 1 G$ - by 1984, targets its low-interest, low-collateral loans to private farmers for mechanization, poultry projects, and orchard development. Large modern cattle, dairy
, and poultry farms are under construction. Obstacles to agricultural development include labour shortages, inadequate management and maintenance, salinization, urban migration
, and dislocations resulting from previous land reform and collectivization programs.
Importation of foreign workers and increased entry of women into traditionally male labour roles have helped compensate for agricultural and industrial labour shortages exacerbated by the war. A disastrous attempt to drain the southern marshes and introduce irrigated farming to this region merely destroyed a natural food producing area, while concentration of salts and minerals in the soil due to the draining left the land unsuitable for agriculture.
In the Mada’in Qada region east of Baghdad
, hundreds of small farmers united to form the Green Mada’in Association for Agricultural Development
, an agricultural cooperative that provides its members with drip irrigation
and greenhouse
s as well as access to credit.
Despite its many rivers, Iraq’s fishing industry has remained relatively small and based largely on marine species in the Persian Gulf. In 2001 the catch was 22,800 tons.
Aside from hydrocarbons, Iraq’s mining industry has been confined to extraction of relatively small amounts of phosphates (at Akashat
), salt, and sulfur (near Mosul
). Since a productive period in the 1970s, the mining industry has been hampered by the Iran–Iraq War (1980–88), the sanctions of the 1990s, and the economic collapse of 2003.
, Basra
, and Daura. Sabotage and technical problems at the refineries forced Iraq to import fuels, liquid petroleum gas, and other refined products from nearby countries. In October 2004, for example, Iraq spent US$60 million for imported gasoline. In late 2004 and early 2005, regular sabotage of plants and pipelines reduced export and domestic distribution of oil, particularly to Baghdad. Nationwide fuel shortages and power outages resulted.
In 2004 plans called for increased domestic utilization of natural gas to replace oil and for use in the petrochemical industry. However, because most of Iraq’s gas output is associated with oil, output growth depends on developments in the oil industry.
As much as 90 percent of Iraq’s power generating and distribution systems were destroyed in the Persian Gulf War of 1991, and full recovery never occurred. In mid-2004, Iraq had an estimated 5,000 megawatts of power-generating capacity, compared with 7,500 megawatts of demand. At that time, the transmission system included 17,700 kilometers of line. In 2004 plans called for construction of two new power plants and restoration of existing plants and transmission lines to ease the blackouts and economic hardship caused by this shortfall, but sabotage and looting held capacity below 6,000 megawatts. In 2004 the World Bank estimated that US$12 billion would be needed for near-term restoration, and the Ministry of Electricity estimated that US$35 billion would be necessary to rebuild the system fully.
In 2007, hydrocarbon industries accounted for well over 70 per cent of the Iraqi economy and 95 per cent of the government's revenues. Diversification of the economy into non-hydrocarbon industries remain a long-term issue.
If all contracts awarded reach their stated target plateau production then this will increase Iraqi production from today's 2.5 mb/d by 9.4 mb/d to a total of 11.9 mb/d, comparable to current Saudi declared capacity of 12.5 mb/d.
Notes:
1. Field shares are as a % of the total. The Iraq state retains a 25% share in all fields for which Service Contracts have been awarded.
2. Production Increase Share is the millions bbls per day that will attract the Service Fee for the company.
3. Gross revenue at plateau is the total payment each company will receive upon reaching their declared target plateau production rate (in between 5 and 8 years depending on field), before deduction of any operating costs but in addition to recovery of all development costs as billions of US$ per annum. The total gross revenue for all companies, after recovery of capital costs, is at plateau production of an additional 9.4 mb/d, 4.34 bn US per annum at a $70 bbl oil price. The 2010 Iraq govt budget is $60 billion. $300 billion is approximately $10,000 per annum for each Iraqi citizen.
In summary the shares by region in the increased production are:
removed restrictions on international bank transactions and freed the Central Bank of Iraq
(CBI) from government control. In its first year of independent operation, the CBI received credit for limiting Iraq’s inflation. In 2004 three foreign banks received licenses to do business in Iraq.
ing retail trade in all types of commodities straddled the line between legitimate and illegitimate commerce, taking advantage of the lack of income tax and import controls.
, supporting the re-opening of one of the site's two museums.
In 1996 some 66.4 percent of the labor force worked in services, 17.5 percent in industry, and 16.1 percent in agriculture. 2004 estimates of Iraq’s unemployment ranged from 30 percent to 60 percent.
The CPA has referred to a 25% unemployment rate, the Iraqi Ministry of Planning mentioned a 30% unemployment rate, whereas the Iraqi Ministry of Social Affairs claims it to be 48%. Other sources are claiming a 20% unemployment rate and a probably 60% under-employment rate. The actual figure is problematic because of high participation in black-market activities and poor security conditions in many populous areas. In central Iraq, security concerns discouraged the hiring of new workers and the resumption of regular work schedules. At the same time, the return of Iraqis from other countries increased the number of job seekers. In late 2004, most legitimate jobs were in the government, the army, the oil industry, and security-related enterprises. Under Saddam Hussein Hussein, many of the highest-paid workers were employed by the greatly overstaffed government, whose overthrow disrupted the input of these people to the economy. In 2004 the U.S. Agency for International Development committed US$1 billion for a worker-training program. In early 2004, the minimum wage was US$72 per month.
Mean wages were $2.10 per man-hour in 2009.
From the 1990s until 2003, the international trade embargo restricted Iraq’s export activity almost exclusively to oil. In 2003 oil accounted for about US$7.4 billion of Iraq’s total US$7.6 billion of export value, and statistics for earlier years showed similar proportions. After the end of the trade embargo in 2003 expanded the range of exports, oil continued to occupy the dominant position: in 2004 Iraq’s export income doubled (to US$16.5 billion), but oil accounted for all but US$340 million (2 percent) of the total. In late 2004, sabotage significantly reduced oil output, and experts forecast that output, hence exports, would be below capacity in 2005 as well. In 2004 the chief export markets were the United States (which accounted for nearly half), Italy, France, Jordan, Canada, and the Netherlands. In 2004 the value of Iraq’s imports was US$21.7 billion, incurring a trade deficit of about US$5.2 billion. In 2003 the main sources of Iraq’s imports were Turkey, Jordan, Vietnam, the United States, Germany, and Britain. Because of Iraq’s inactive manufacturing sector, the range of imports was quite large, including food, fuels, medicines, and manufactured goods. By 2010, exports rose to US$50.8 billion and imports rose to US$45.2 billion. Chief 2009 export partners were: U.S., India, Italy, South Korea, Taiwan, China, Netherlands, and Japan. Chief 2009 import partners were: Turkey, Syria, U.S., China, Jordan, Italy, and Germany.
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
's economy is dominated by the petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $80 billion
1000000000 (number)
1,000,000,000 is the natural number following 999,999,999 and preceding 1,000,000,001.In scientific notation, it is written as 109....
from the war. After the end of hostilities, in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities.
Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011 Baghdad probably will increase oil exports above the current level of 1900000 bbl (302,075.9 m³) per day as a result of new contracts with international oil companies, but is likely to fall short of the 2400000 barrels (381,569.5 m³) per day it is forecasting in its budget. Iraq's recent contracts with major oil companies have the potential to greatly expand oil revenues, but Iraq will need to upgrade its oil processing, pipeline, and export infrastructure to enable these deals to reach their potential.
An improved security environment and an initial wave of foreign investment are helping to spur economic activity, particularly in the energy, construction, and retail sectors. Broader economic improvement, long-term fiscal health, and sustained increases in the standard of living still depend on the government passing major policy reforms and on continued development of Iraq's massive oil reserves. Although foreign investors viewed Iraq with increasing interest in 2010, most are still hampered by difficulties in acquiring land for projects and by other regulatory impediments.
Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
has decreased consistently since 2006 as the security situation has improved. However, Iraqi leaders remain hard pressed to translate macroeconomic gains into improved lives for ordinary Iraqis. Unemployment remains a problem throughout the country. Reducing corruption and implementing reforms - such as bank restructuring and developing the private sector - would be important steps in this direction.
GDP of Iraq grew 56% in the '60s reaching a peak growth of 57% in the '70s. However, whilst the mid 1980s GDP per capita shrank by 23% amid the Iran-Iraq War
Iran-Iraq War
The Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...
, GDP has now almost doubled since 2005.
Economic sanctions of the 1990s
Iraq's seizure of KuwaitKuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
in August 1990, subsequent international economic sanctions
Iraq sanctions
The Iraq sanctions were a near-total financial and trade embargo imposed by the United Nations Security Council on the nation of Iraq. They began August 6, 1990, four days after Iraq's invasion of Kuwait, stayed largely in force until May 2003 , and certain portions including reparations to Kuwait...
, and damage from military action by an international coalition beginning in January 1991, drastically reduced economic activity. The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime have exacerbated shortages. The implementation of the UN
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
's Oil for Food program in December 1996 has helped improve economic conditions. For the first six six-month phases of the program, Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and other humanitarian goods. In December 1999, the UN Security Council authorized Iraq to export as much oil as required to meet humanitarian needs. Oil exports are now about three-quarters their prewar level. Per capita food imports have increased significantly, while medical supplies and health care services are steadily improving. Per capita output and living standards are still well below the prewar level, but any estimates have a wide range of error.
Iraq's economy is characterized by a heavy dependence on oil exports and an emphasis on development through central planning. Prior to the outbreak of the war with Iran in September 1980, Iraq's economic prospects were bright. Oil production had reached a level of 560,000 m³ (3.5 million barrels) per day, and oil revenues were 21 billion in 1979 and 27 G$ in 1980. At the outbreak of the war, Iraq had amassed an estimated 35 billion in foreign exchange reserves
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
.
The Iran–Iraq War depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with a foreign debt of more than $40 billion. After hostilities ceased, oil exports gradually increased with the construction of new pipelines and the restoration of damaged facilities.
The economic sanctions were fully lifted in 24 May 2003, shortly after Saddam Hussein was overthrown
2003 invasion of Iraq
The 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
. This resulted in economic growth of 53% topping the list of the world's fastest growing economy.
Sanctions
Iraq's seizure of KuwaitKuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
in August 1990, subsequent international economic sanctions
Economic sanctions
Economic sanctions are domestic penalties applied by one country on another for a variety of reasons. Economic sanctions include, but are not limited to, tariffs, trade barriers, import duties, and import or export quotas...
, and damage from the ensuing Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
of 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the Ba'ath Party
Ba'athist Iraq
The History of Iraq , referred to as Ba'athist Iraq, covers the period of the Arab Socialist Ba'ath Party's rule over Iraq. Ba'athist rule in Iraq first occurred briefly in 1963 under Ahmed Hassan al-Bakr until overthrown that same year. Ba'athism was restored to power five years later after...
government hurt the economy, implementation of the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
' corruption-plagued oil-for-food program in December 1996 was to have improved conditions for the average Iraqi citizen.
In December 1999, the UN Security Council authorised Iraq to export under the program as much oil as required to meet humanitarian needs. Iraq changed its oil reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...
from the U.S. dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
to the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
in 2000. Oil exports were more than three-quarters of the pre-war level. However, 28% of Iraq's export revenues under the program were deducted to meet UN Compensation Fund and UN administrative expenses. The drop in GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
in 2001 was largely the result of the global economic slowdown and lower oil prices. Following the 2003 invasion of Iraq
2003 invasion of Iraq
The 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
, the economy to a great extent shut down; attempts are underway to revive it from the damages of war and rampant crime.
After the Fall of Saddam Hussein
Since the peak of 1980, the nominal GDP of Iraq steadily shrunk to $12.3 billion in 2000. However removal of sanctions, after the overthrow of Saddam, had immediate effect. The nominal GDP had reached $55.4 billion by 2007 due to increase in oil output as well as international prices. In 2006, the real GDP growth was estimated at almost 17 percent.Paul Bremer, chief executive of the Coalition Provisional Authority
Coalition Provisional Authority
The Coalition Provisional Authority was established as a transitional government following the invasion of Iraq by the United States and its allies, members of the Multi-National Force – Iraq which was formed to oust the government of Saddam Hussein in 2003...
, planned to restructure Iraq's state owned economy with free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
thinking. Order 39 laid out the framework for full privatization in Iraq, except for "primary extraction and initial processing" of oil, and permitted 100% foreign ownership of Iraqi assets. Paul Bremer also ordered a flat tax rate of 15% and allowed foreign corporations to repatriate all profits earned in Iraq. Opposition from senior Iraqi officials, together with the poor security situation, meant that Bremer's privatization plan was not implemented during his tenure, though his orders remain in place. In addition to approximately 200 other state owned businesses, privatization of the oil industry was scheduled to begin sometime in late 2005, though it is opposed by the Federation of Oil Unions in Iraq
Federation of Oil Unions in Iraq
Founded in October 2005 from unions that had begun organizing after the invasion, the Federation of Oil Unions of Iraq is the largest independent union consortium in Iraq, with tens of thousands of members...
.
George W. Bush administration
The presidency of George W. Bush began on January 20, 2001, when he was inaugurated as the 43rd President of the United States of America. The oldest son of former president George H. W. Bush, George W...
, such as grain-trading industry lobbyist Dan Amstutz
Dan Amstutz
Daniel G. Amstutz was a U.S. government official and grain-trading industry executive who played a prominent role during negotiation of the Uruguay Round of General Agreement on Tariffs and Trade rules on agriculture, and in the U.S. occupation of Iraq.- Early years :Amstutz was born November 8,...
, who was put in charge of agricultural policy in Iraq.
One of the key economic challenges was Iraq's immense foreign debt, estimated at $125 billion. Although some of this debt was derived from normal export contracts that Iraq had failed to pay for, some was a result of military and financial support during Iraq's war with Iran.
The Jubilee Iraq campaign argued that much of these debts were odious
Odious debt
In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred...
(illegitimate). However, as the concept of odious debt is not accepted, trying to deal with the debt on those terms would have embroiled Iraq in legal disputes for years. Iraq decided to deal with its debt more pragmatically and approached the Paris Club
Paris Club
The Paris Club is an informal group of financial officials from 19 of some of the world's biggest economies, which provides financial services such as war funding, debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors...
of official creditors.
In a December 2006 Newsweek International article, a study by Global Insight
Global Insight
Global Insight is the world's largest economics organization, serving over 3,800 clients in industry, finance and government worldwide, with revenues of over $95 million and employing more than 600 economists and other staff in 23 offices in 13 countries...
in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
was reported to show "that Civil war or not, Iraq has an economy, and—mother of all surprises—it's doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to [the report]. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all."
Between 100000 oilbbl/d and 300000 oilbbl/d of Iraq’s declared oil production over the past four years could have been siphoned off through corruption or smuggling, according to a US Study from May 12, 2007.
Industry
Traditionally, Iraq’s manufacturing activity has been closely connected to the oil industry. The major industries in that category have been petroleum refining and the manufacture of chemicals and fertilizers. Before 2003, diversification was hindered by limitations on privatizationPrivatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
and the effects of the international sanctions of the 1990s. Since 2003, security problems have blocked efforts to establish new enterprises. The construction industry is an exception; in 2000 cement was the only major industrial product not based on hydrocarbons. The construction industry has profited from the need to rebuild after Iraq’s several wars. In the 1990s, the industry benefited from government funding of extensive infrastructure and housing projects and elaborate palace complexes.
Agriculture
Historically, 50 to 60 percent of Iraq’s arable land has been under cultivation. Because of ethnic politics, valuable farmland in Kurdish territory has not contributed to the national economy, and inconsistent agricultural policies under Saddam Hussein discouraged domestic market production. Despite its abundant land and water resources, Iraq is a net food importer. Under the UN Oil for Food program, Iraq imported large quantities of grains, meat, poultry, and dairy products. The government abolished its farm collectivization program in 1981, allowing a greater role for private enterprise in agriculture.The international Oil-for-Food program (1997–2003) further reduced farm production by supplying artificially priced foreign foodstuffs. The military action of 2003 did little damage to Iraqi agriculture; because of favorable weather conditions, in that year grain production was 22 percent higher than in 2002. Although growth continued in 2004, experts predicted that Iraq will be an importer of agricultural products for the foreseeable future. Long-term plans call for investment in agricultural machinery and materials and more prolific crop varieties—improvements that did not reach Iraq’s farmers under the Hussein regime. In 2004 the main agricultural crops were wheat, barley, corn, rice, vegetables, dates, and cotton, and the main livestock outputs were cattle and sheep.
The Agricultural Cooperative Bank
Agricultural Cooperative Bank of Iraq
Agricultural Cooperative Bank of Iraq is an Iraqi bank based in Baghdad, Iraq. The banks main area of activity is to give loans for agricultural projects represented by farmers.-Official website:* http://www.agriculturalbank.gov.iq...
, capitalized at nearly 1 G$ - by 1984, targets its low-interest, low-collateral loans to private farmers for mechanization, poultry projects, and orchard development. Large modern cattle, dairy
Dairy farming
Dairy farming is a class of agricultural, or an animal husbandry, enterprise, for long-term production of milk, usually from dairy cows but also from goats and sheep, which may be either processed on-site or transported to a dairy factory for processing and eventual retail sale.Most dairy farms...
, and poultry farms are under construction. Obstacles to agricultural development include labour shortages, inadequate management and maintenance, salinization, urban migration
Urbanization
Urbanization, urbanisation or urban drift is the physical growth of urban areas as a result of global change. The United Nations projected that half of the world's population would live in urban areas at the end of 2008....
, and dislocations resulting from previous land reform and collectivization programs.
Importation of foreign workers and increased entry of women into traditionally male labour roles have helped compensate for agricultural and industrial labour shortages exacerbated by the war. A disastrous attempt to drain the southern marshes and introduce irrigated farming to this region merely destroyed a natural food producing area, while concentration of salts and minerals in the soil due to the draining left the land unsuitable for agriculture.
In the Mada’in Qada region east of Baghdad
Baghdad
Baghdad is the capital of Iraq, as well as the coterminous Baghdad Governorate. The population of Baghdad in 2011 is approximately 7,216,040...
, hundreds of small farmers united to form the Green Mada’in Association for Agricultural Development
Green Mada’in Association for Agricultural Development
The Green Mada’in Association for Agricultural Development is a not-for-profit agricultural cooperative in Iraq. The cooperative's membership includes over 800 small farmers, mostly situated in Mada’in Qada, a region east of Baghdad in Baghdad Governorate.GMAAD assists farmers in buying fertilizer...
, an agricultural cooperative that provides its members with drip irrigation
Drip irrigation
Drip irrigation, also known as trickle irrigation or microirrigation or localized irrigation , is an irrigation method which saves water and fertilizer by allowing water to drip slowly to the roots of plants, either onto the soil surface or directly onto the root zone, through a network of valves,...
and greenhouse
Greenhouse
A greenhouse is a building in which plants are grown. These structures range in size from small sheds to very large buildings...
s as well as access to credit.
Forestry, fishing, and mining
Throughout the twentieth century, human exploitation, shifting agriculture, forest fires, and uncontrolled grazing denuded large areas of Iraq’s natural forests, which in 2005 were almost exclusively confined to the northeastern highlands. Most of the trees found in that region are not suitable for lumbering. In 2002 a total of 112,000 cubic meters of wood were harvested, nearly half of which was used as fuel.Despite its many rivers, Iraq’s fishing industry has remained relatively small and based largely on marine species in the Persian Gulf. In 2001 the catch was 22,800 tons.
Aside from hydrocarbons, Iraq’s mining industry has been confined to extraction of relatively small amounts of phosphates (at Akashat
Akashat
Akashat is a small town in the northwest of Al Anbar province of Iraq, with a population of around 5,000. It was built as an industrial village in 1985, attached to the local phosphate quarry and administered by the ministry of industry. The Phosphate Plant in the town employs roughly 50-60...
), salt, and sulfur (near Mosul
Mosul
Mosul , is a city in northern Iraq and the capital of the Ninawa Governorate, some northwest of Baghdad. The original city stands on the west bank of the Tigris River, opposite the ancient Assyrian city of Nineveh on the east bank, but the metropolitan area has now grown to encompass substantial...
). Since a productive period in the 1970s, the mining industry has been hampered by the Iran–Iraq War (1980–88), the sanctions of the 1990s, and the economic collapse of 2003.
Energy
As one of the three most oil-rich countries in the world, Iraq has the resources for complete energy independence. By world standards, production costs for Iraqi oil are relatively low. However, three wars (Iraq-Iran War from 1980–1988, Gulf War 1991 and the Iraqi Invasion of 2003) in addition to the UN sanctions - which lasted for twelve years from 1991 to 2003, left the industry’s infrastructure in poor condition. The lifting of sanctions in 2003 allowed repairs to begin. However, since 2003 oil pipelines and installations have been sabotaged persistently. In 2004 Iraq had eight oil refineries, the largest of which were at BaijiBaiji, Iraq
Baiji is a city of about 200,000 inhabitants in northern Iraq some 130 miles north of Baghdad, on the main road to Mosul. It is a major industrial centre best known for its oil refinery, the biggest in Iraq and has a large power plant...
, Basra
Basra
Basra is the capital of Basra Governorate, in southern Iraq near Kuwait and Iran. It had an estimated population of two million as of 2009...
, and Daura. Sabotage and technical problems at the refineries forced Iraq to import fuels, liquid petroleum gas, and other refined products from nearby countries. In October 2004, for example, Iraq spent US$60 million for imported gasoline. In late 2004 and early 2005, regular sabotage of plants and pipelines reduced export and domestic distribution of oil, particularly to Baghdad. Nationwide fuel shortages and power outages resulted.
In 2004 plans called for increased domestic utilization of natural gas to replace oil and for use in the petrochemical industry. However, because most of Iraq’s gas output is associated with oil, output growth depends on developments in the oil industry.
As much as 90 percent of Iraq’s power generating and distribution systems were destroyed in the Persian Gulf War of 1991, and full recovery never occurred. In mid-2004, Iraq had an estimated 5,000 megawatts of power-generating capacity, compared with 7,500 megawatts of demand. At that time, the transmission system included 17,700 kilometers of line. In 2004 plans called for construction of two new power plants and restoration of existing plants and transmission lines to ease the blackouts and economic hardship caused by this shortfall, but sabotage and looting held capacity below 6,000 megawatts. In 2004 the World Bank estimated that US$12 billion would be needed for near-term restoration, and the Ministry of Electricity estimated that US$35 billion would be necessary to rebuild the system fully.
In 2007, hydrocarbon industries accounted for well over 70 per cent of the Iraqi economy and 95 per cent of the government's revenues. Diversification of the economy into non-hydrocarbon industries remain a long-term issue.
2009 Oil services contracts
Between June 2009 and February 2010 the Iraqi Oil Ministry tendered for the award of Service Contracts to develop Iraq's existing oil fields. The results of the tender, which was broadcast live on Iraqi television, are as follows for all major fields awarded but excluding the Kurdish controlled areas where Production Sharing Contracts have been awarded which are currently being disputed by the Baghdad government. All contracts are awaiting final ratification of the awards by the Iraqi government. Company shares are subject to change as a result of commercial negotiations between parties.If all contracts awarded reach their stated target plateau production then this will increase Iraqi production from today's 2.5 mb/d by 9.4 mb/d to a total of 11.9 mb/d, comparable to current Saudi declared capacity of 12.5 mb/d.
| Field | Company | Home country | Region | Company type | Share in field | Production increase share | Service fee per bbl | Gross revenue at plateau - US bn p.a. | References |
|---|---|---|---|---|---|---|---|---|---|
| Majoon | Shell | UK | UK | Public | 45% | 0.7875 | 1.39 | 0.4 | BBC |
| Petronas | Malaysia | Asia | State | 30% | 0.525 | 1.39 | 0.266 | Shell | |
| Halfaya | CNPC | China | Asia | State | 37.5% | 0.525 | 1.39 | 0.102 | Upstream |
| Petronas | Malaysia | Asia | State | 18.75% | 0.099 | 1.4 | 0.051 | Upstream | |
| Total | France | Europe | Public | 18.75% | 0.099 | 1.39 | 0.051 | ||
| Rumaila | BP | UK | UK | Public | 37.5% | 0.7125 | 2 | 0.520 | Business Week |
| CNPC | China | Asia | State | 37.5% | 0.7125 | 1.39 | 0.520 | ||
| Zubair | ENI | Italy | Europe | Public | 32.81% | 0.328 | 2 | 0.240 | Business Week |
| Occidental | US | US | Public | 23.44% | 0.2344 | 2 | 0.171 | Business Week | |
| KOGAS | Korea | Asia | State | 18.75% | 0.1875 | 2 | 0.137 | Business Week | |
| West Qurna 2 | Lukoil | Russia | Russia | State | 56.25% | 1.0125 | 1.15 | 0.425 | Business Week |
| Statoil | Norway | Europe | Public | 18.75% | 0.3375 | 1.15 | 0.142 | Statoil | |
| Badra Badra, Iraq Badra is a town in south eastern Iraq near the Iraqi-Iranian borders in Wasit Governorate. Its population is a mixture of Arabs, Arabized Kurds and Faili Kurds.... |
Gazprom | Russia | Russia | State | 30% | 0.051 | 5.5 | 0.102 | Business Week |
| Petronas | Malaysia | Asia | State | 15% | 0.0255 | 5.5 | 0.051 | Upstream | |
| KOGAS | Korea | Asia | State | 23% | 0.03825 | 5.5 | 0.077 | Upstream | |
| TPAO | Turkey | Asia | State | 8% | 0.01275 | 5.5 | 0.026 | ||
| West Qurna 1 | Exxon | US | US | Public | 60% | 1.2276 | 1.9 | 0.851 | Business Week |
| Shell | UK | UK | Public | 15% | 0.3069 | 1.9 | 0.213 | Alfred Donovan's blog (royaldutchshellplc.com Royaldutchshellplc.com royaldutchshellplc.com is a Royal Dutch Shell gripe site and blog operated by Alfred and John Donovan, who engaged in several marketing campaigns with Shell during the 1980s and early 1990s... ) |
Notes:
1. Field shares are as a % of the total. The Iraq state retains a 25% share in all fields for which Service Contracts have been awarded.
2. Production Increase Share is the millions bbls per day that will attract the Service Fee for the company.
3. Gross revenue at plateau is the total payment each company will receive upon reaching their declared target plateau production rate (in between 5 and 8 years depending on field), before deduction of any operating costs but in addition to recovery of all development costs as billions of US$ per annum. The total gross revenue for all companies, after recovery of capital costs, is at plateau production of an additional 9.4 mb/d, 4.34 bn US per annum at a $70 bbl oil price. The 2010 Iraq govt budget is $60 billion. $300 billion is approximately $10,000 per annum for each Iraqi citizen.
In summary the shares by region in the increased production are:
| Region | Production Share mb/d |
% of total |
|---|---|---|
| Iraq | 1.462 | 25% |
| Asia | 1.9 | 20% |
| UK | 1.81 | 19% |
| US | 1.462 | 16% |
| Russia | 1.064 | 11% |
| Europe (excl UK) | 0.865 | 9% |
Finance
Iraq’s financial services have been the subject of post-Hussein reforms. The 17 private banks established during the 1990s were limited to domestic transactions and attracted few private depositors. Those banks and two main state banks were badly damaged by the international embargo of the 1990s. To further privatize and expand the system, in 2003 the Coalition Provisional AuthorityCoalition Provisional Authority
The Coalition Provisional Authority was established as a transitional government following the invasion of Iraq by the United States and its allies, members of the Multi-National Force – Iraq which was formed to oust the government of Saddam Hussein in 2003...
removed restrictions on international bank transactions and freed the Central Bank of Iraq
Central Bank of Iraq
-History:The Central Bank of Iraq was established as Iraq's central bank by Central Bank of Iraq Law 2004 with authorised capital of 100 billion dinars. The current Governor of the Central Bank of Iraq is Sinan Al Shabibi.-Architecture:...
(CBI) from government control. In its first year of independent operation, the CBI received credit for limiting Iraq’s inflation. In 2004 three foreign banks received licenses to do business in Iraq.
Private security
Because of the danger posed by Iraq’s ongoing insurgency, the security industry has been a uniquely prosperous part of the services sector. Often run by former U.S. military personnel, in 2005 at least 26 companies offered personal and institutional protection, surveillance, and other forms of security.Retail
In the early post-Hussein period, a freewheelFreewheel
thumb|Freewheel mechanismIn mechanical or automotive engineering, a freewheel or overrunning clutch is a device in a transmission that disengages the driveshaft from the driven shaft when the driven shaft rotates faster than the driveshaft...
ing retail trade in all types of commodities straddled the line between legitimate and illegitimate commerce, taking advantage of the lack of income tax and import controls.
Tourism
The Iraq tourism industry, which in peaceful times has profited from Iraq’s many places of cultural interest (earning US$14 million in 2001), has been dormant since 2003. Despite conditions, in 2005 the Iraqi Tourism Board maintained a staff of 2,500 and 14 regional offices. Between 2009 and 2010, 165 tourists from 16 different countries entered Iraq to visit historic sites; as of January 2011, a U.S. State Department grant provided $2 million to help preserve BabylonBabylon
Babylon was an Akkadian city-state of ancient Mesopotamia, the remains of which are found in present-day Al Hillah, Babil Province, Iraq, about 85 kilometers south of Baghdad...
, supporting the re-opening of one of the site's two museums.
Telecommunications
During 2003-8, mobile phone subscriptions had expanded over hundredfold to 10 million nationwide, according to the Brookings Institute.Labor force
In 2002 Iraq’s labor force was estimated at 6.8 million people.In 1996 some 66.4 percent of the labor force worked in services, 17.5 percent in industry, and 16.1 percent in agriculture. 2004 estimates of Iraq’s unemployment ranged from 30 percent to 60 percent.
| Month | Unemployment Rate |
|---|---|
| 2003-5 May | N/A |
| 2003-6 June | 50-60% |
| 2003-7 July | N/A |
| 2003-8 August | 50-60% |
| 2003-9 September | N/A |
| 2003-10 October | 40-50% |
| 2003-11 November | N/A |
| 2003-12 December | 45-55% |
| 2004-01 to 05 (January - May) | 30-45% |
| 2004-06 to 11 (June - November) | 30-40% |
| 2004-12 December | 28-40% |
| 2005-01 to 10 (January - October) | 27-40% |
| 2005-11 to 12 (November - December) | 25-40% |
| 2006-01 to 12 (January - December) | 25-40% |
| 2007-01 to 12 (January - December) | 25-40% |
| 2008-01 to 12 (January - December) | 25-40% |
| 2009-01 (January) | 23-38% |
The CPA has referred to a 25% unemployment rate, the Iraqi Ministry of Planning mentioned a 30% unemployment rate, whereas the Iraqi Ministry of Social Affairs claims it to be 48%. Other sources are claiming a 20% unemployment rate and a probably 60% under-employment rate. The actual figure is problematic because of high participation in black-market activities and poor security conditions in many populous areas. In central Iraq, security concerns discouraged the hiring of new workers and the resumption of regular work schedules. At the same time, the return of Iraqis from other countries increased the number of job seekers. In late 2004, most legitimate jobs were in the government, the army, the oil industry, and security-related enterprises. Under Saddam Hussein Hussein, many of the highest-paid workers were employed by the greatly overstaffed government, whose overthrow disrupted the input of these people to the economy. In 2004 the U.S. Agency for International Development committed US$1 billion for a worker-training program. In early 2004, the minimum wage was US$72 per month.
Mean wages were $2.10 per man-hour in 2009.
External trade
External links
- Iraq Inter-Agency Information & Analysis Unit Reports, Maps and Assessments of Iraq from the UN Inter-Agency Information & Analysis Unit