Is the Iraqi economy close to a new oil crisis, and is the Dutch disease afflicted?

BAGHDAD

- With more than 95% of its financial revenues, Iraq relies on selling crude oil in global markets to build the general budget annually, while enjoying other natural resources that suffice it from oil rents if plans are put in place and implemented with a national will.

Therefore, the Iraqi economy is directly affected by the repercussions of any global crisis;

As happened in the two crises of the global economy in 2008 and 2020, as the national economy suffered from a lack of cash to pay the salaries of public sector employees, meet social obligations, and pay the country's internal and external debts.

At the same time, Iraq's proven oil reserves amount to 153 billion barrels, while government expectations indicate the possibility of reaching 500 billion barrels in the coming years with new explorations.

While the volume of Iraq's oil production is currently more than 4 million barrels per day, according to the parameters of "OPEC +", and its export capacity is more than 3 million barrels per day.

The Caliph identified two directions for Iraq to avoid any shortage of oil supplies abroad (Al-Jazeera)

reduction decision

With the continuation of the Ukrainian crisis and the start of Western sanctions on Russia, especially in the field of energy and oil, Moscow recently decided to reduce the price of its oil sold to its allies India and China by 20% to be attractive to buyers.

The academic in the field of oil and gas, Dr. Bilal Al-Khalifa, talks about the importance of Iraq as the largest supplier of oil to India, at a rate of 1.3 million barrels per day, while the rate of China's daily import of Iraqi oil is one million barrels.

Al-Khalifa said - to Al-Jazeera Net - that China and India reduced oil imports from "OPEC Plus" and moved towards African and American markets to compensate for the shortfall, as a result of the increase in OPEC prices of more than one dollar compared to other markets.

Despite Russia's decision, until last March, Iraq occupied an advanced position;

It supplied India with more than a third of its crude oil needs, at 23%, followed by Saudi Arabia by 18% and the UAE by 11%, according to Khalifa, who also revealed that Iraq will supply China with about 384,000 barrels during 2021.

In order to avoid any shortage of Iraqi oil supplies to the Indian and Chinese markets, Khalifa suggests that Baghdad move in two directions, the first is to search for a new resource to fill the shortage of oil supply to India and China, and the second is to provide temptations and factors of attraction to India and China - such as dealing in the Indian rupee and the Chinese yuan - despite its dangers that bear political consequences.

Dadush warns of a severe financial deficit in Iraq, followed by high inflation due to Russia's reduction of its oil prices to India and China (Al-Jazeera)

severe disability

In parallel, experts warn of close damage to the Iraqi economy, as a result of Russian oil dealings with India and China.

The economic expert, Dr. Ali Daadoush - for Al Jazeera Net - diagnoses those damages, which are represented by a severe financial deficit in the public budget in an unprecedented manner that leads to an increase in inflation rates to a large extent, forcing the Iraqi state to pump more money into the economy to achieve a balance between revenues and public expenditures, Which creates money in society without a productive cover, which eventually leads to the devaluation of the national currency.

Dadush believes that the Ministry of Oil should direct India's share or half of the share (according to the absorption capacity of the refineries in Iraq) to oil refining because of its importance in reducing fuel imports from abroad and reducing fuel allocations in the budget, thus reducing the deficit in it.

Jihad: Iraq is open to all global oil markets and is committed to the limitations of OPEC Plus (Al-Jazeera)

The Iraqi Opening

In turn, the Iraqi Oil Ministry confirms its openness to all global oil markets and adopts solid and stable contexts in dealing with well-known companies, and it does not suffer from that problem at the present time.

And the ministry's spokesman, Assem Jihad - told Al-Jazeera Net - that Iraq is one of the main producers in "OPEC Plus" and is committed to the oil agreement to restrict production and to the organization's strategy, "noting that there is an increase in prices calculated within time periods, with careful monitoring of oil market developments, and dealing with Variables according to what leads to equilibrium.

Jihad pointed out that it is in the interest of all OPEC producers to abide by the agreement, in order to preserve the balance of global markets, especially as indicators indicate an increase in demand and a rise in prices.

Sumaisem believes that the Iraqi economy deserved, for a long time, to be treated from the Dutch disease (communication sites)

Dutch disease

Dutch disease is defined in economics as the apparent relationship between a boom in economic development due to an abundance of natural resources and a decline in the manufacturing sector.

This name came at the end of the fifties of the last century when the Dutch economy shifted from the balance between economic sectors - such as agriculture, industry and other vital sectors - to the rentier economy after the discovery of large quantities of gas and oil on the North Sea coast, which was a turning point in the Dutch economy, which flourished For only about 15 years, after which he suffered high unemployment and a financial deficit, as a result of the high costs of oil and gas production.

According to the economic expert, Dr. Salam Sumaisem, the Iraqi economy deserved - for a long time - to be treated from the Dutch disease, which has increased during the past twenty years.

To treat this disease, Sumaisem - in an interview with Al Jazeera Net - sees the necessity of structuring the Iraqi economy by relying on and strengthening other sectors that Iraq enjoys, as well as directing the current temporary oil surpluses to benefit from them in the investment aspect more than the operational within the general budget.

Sumaisem added that Iraq needs a serious economic renaissance backed by a real political will, in addition to activating laws to get rid of the Dutch disease, or else going towards the complete collapse of the economy.