Steps Towards Economic Recovery in a Fragile Iraq?

Steps Towards Economic Recovery in a Fragile Iraq?

After two decades of war, Iraq continues to grapple with economic, political, security and environmental problems. The last legislative elections were held in October 2021 and saw the victory of the Sadrist Movement, led by Moqtada Al-Sadr. Since then, the many political groupings in the national parliament have repeatedly failed to elect the country’s president, a primarily symbolic position in this country governed by a parliamentary system. The presidential elections, which were to be held in February 2022, have been postponed indefinitely.

Despite the dire political situation, the Iraqi economy might be about to return to growth. The question deserves to be pondered as no fewer than 100,563,999 barrels of oil were exported in March 2022 for revenues worth USD 11.7 billion, a record high in 50 years. Oil exports account for some 90% of Iraqi state revenue and represent a major source of financing, especially as the country seeks to rebuild its infrastructure. Although the coronavirus crisis, during which oil prices dropped below zero, dealt a severe blow to Iraq’s finances, Russia's invasion of Ukraine has continued to reverse this trend, which had begun several months ago.

Iraq is the second largest oil producer within the Organisation of the Petroleum Exporting Countries (OPEC). However, the country imports much of its gas and electricity from abroad to meet its own energy needs, especially from Iran. Despite this, the Iraqi population experiences numerous daily power outages. Iraq has also been affected by the substantial increase in food prices worldwide, which has contributed a renewed momentum to public protests. 

Calling OPEC for Production Increases 

Despite the global impetus for energy diversification in the joint fight against climate change, oil and its derivatives remain a most important source of energy. In the wake of the Ukrainian crisis, which sparked fears of shortages worldwide, the international community repeatedly called on OPEC countries to consent to an increase in oil production. Last week, the OPEC countries reluctantly consented to a modest increase in production, far from the levels expected by Western countries.

The United States, in particular, had exhorted OPEC countries to agree to a larger increase in the hope of mitigating the effects of inflation, which have been aggravated by soaring energy prices. Inflation has caused concern among experts over a paralysis of the global economy, which could jeopardise the post-COVID economic recovery. 

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