The Iraqi economy: between the hammer of corruption and the anvil of demonstrations

The Iraqi economy: between the hammer of corruption and the anvil of demonstrations

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Size of economic losses due to demonstrations
Shatha Khalil *
Iraq relies in the preparation of the general budget on (about 95-98%) of its public revenues, on oil revenues, especially after the delayed productivity of the industrial, commercial and agricultural sectors, and the destruction of thousands of enterprises and factories because of the occupation, wars and internal conflicts where its dependence on its oil revenues has become almost entirely.
Iraq’s oil resources account for more than 89% of its budget and account for 99% of its exports. Basra is Iraq’s main oil production center. It produces about 95% of the country’s total exports. It is the only maritime port of Iraq, and from its ports , all quantities of crud oil are shipped to world markets , where the port of Umm Qasr, the largest port in Iraq, has been closed or forced to stop by the protesters, as confirmed by Iraqi Oil Minister “Jabbar al-Aluaibi” when he said that the demonstrators tried to storm one of the oil sites in West Qurna-2 Field, and set fire to some of the external gate buildings , resulting in initial losses estimated as follows:
1. The Russian company “Lukoil” stopped working in the field of West Qurna II, which means that the government according to the contract and the round of licenses, must pay the value of “one barrel” for each “five barrels” produced in this field noting that this field produces “200” thousand barrels per day.
2. The share of the Russian company based on the former paragraph “1”, is about one fifth of the daily production, which is equivalent to the language of the numbers “40” thousand barrels per day, and if this amount multiply at an approximate price of “70” dollars per barrel, the total amount produced will amount to about $ 2.8 million per day , the Iraqi government must pay it as daily obligatory compensation to the Russian company Lukoil due to the stop of its daily work due to the demonstrations. In other words, the company’s wages are paid for the duration of the contract with the government whether its work was stopped for security reasons or for other reasons, it is the responsibility of Iraqi government.
3. The West Qurna II field contains three exploration towers and two drilling towers noting that the cost of renting the three exploratory towers is 90,000 dollars per day, while the cost of renting the two drilling towers is estimated at 100,000 dollars per day, as a result, the daily losses of Iraq amount to about $ 3 million a day as specific losses from the West Qurna II field exclusively.
4. In addition to the above, it should be noted that five other wells have been stopped in addition to the wells that are mentioned above , they are scheduled to return to work within two weeks and after maintenance, with a daily production capacity of 25000 barrels per day, the share of Russian company (5000) five thousand barrels per day, or about (350000) dollars per day, adding to the losses referred to above, additional financial losses incurred by Iraq every day, and beyond these accounts, add additional amounts borne by Iraq for the work of periodic maintenance and emergency and other expenses.
5. It is worth to be noted there are a number of international oil companies contracting with Iraq will enter into a new round of coming licenses in nearby fields, which will raise their penal conditions accordingly, strengthen their position to protect their profits, and will require the provision of private security companies whose wages are calculated by hourly system paid by the Iraqi government, especially after the deterioration of security in Iraq.
6. Oil companies such as British Petroleum, American Oxen Mobil, Italian Eni and Petrojina of china entered the dangerous red zone and began to migrate their major experts to Kuwait, Dubai and Doha which will in turn affect largely the Iraqi production temporarily in other fields.
7.In addition to the above indicators of the economic losses of Iraq, the closure of Safwan border crossing with Kuwait comes , which is the third border port closed following the impact of demonstrations in the provinces of southern and central Iraq, after the closure of the port of Umm Qasr, and the port of Shalamjah, which is located east of Basra, It is located about 30 kilometers from the center of Basra where hundreds of truckloads of goods and commodities have stopped entering Basra every day, as well as Iranian visitors visiting the holy shrines in Iraq. This means stopping the financial revenues of about 1,000 Iranian trucks passing through it every day.
8. The stop or prevent the passage of trucks from the Iraqi border crossings, will significantly affect the movement of trade in Iraqi ports on the one hand, and will push traders to transfer their goods to other ports on the other hand, and this will affect in its turn on the economic side of the city of Basra in particular, and Iraq in general , and economic expers including Hamam al-Shamma see that “The closure of ports, border crossings and airports will paralyze the country’s economic movement in general, especially the oil wells, which will stop production that needs several months before it recovers to resume its activities,” describing this wave as damaging to the Iraqi economy “Adding that the closure of the border crossings will warn of the scarcity of goods with a large rise in prices in areas that are witnessing a wave of demonstrations.
9. The Iraqi economy is likely to face a catastrophic crisis if oil production in southern ports stops, especially as the budget depends entirely on the oil revenues, which Basra makes up the largest part of it.
10. The closure or suspension of the economic transactions of the port of Umm Qasr means depriving the Iraqi economy of 25 billion dinars per month at least . Reports indicate that the annual financial revenues of the northern port of Umm Qasr alone for the past year (2017) were more than (170) billion dinars, as well as depriving a lot of labor from the sources of monthly income, which will cause heavy economic losses to Iraq.
11. This is what was confirmed by the economist , professor “Mohammed Abdul Rahman” when he pointed out that the popular protests that pervaded the southern and central provinces of Iraq may reach the limit of cutting of oil export adding that the unemployment rate in Iraq according to inaccurate statistics exceeded (30%), He explained that the operation of industrial sectors and tourism in an orderly manner, will reduce the unemployment rate among the youth in the country, and concerning the impact of popular protests on the oil sector and export, “Abdul Rahman,” said that the current demonstrations send letters to the government and may reach to the cut of oil exports, warning of negative effects on the oil sector in Iraq.
12 – The procedures followed by most foreign companies operating in the oil sector in Iraq and the withdrawal of its employees and advisers due to tension in the areas of popular protests, will also negatively affect investment in the country, which exacerbates the economic losses suffered by Iraq.
13. Not far from Basra, specifically in Najaf, angry protesters stormed Najaf International Airport on the first day of this protest movement, which led to the suspension of air traffic, however , the Iraqi Ministry of Transport rushed to transfer aircraft from Najaf airport to Baghdad and began to transfer passengers by land as an emergency procedure to avoid financial losses but later on, Najaf Airport resumed its air flights after sending an unsatisfactory message to the world, prompting airlines of many countries to cancel their flights to Najaf due to the unstable security situation.
14. These demonstrations took place not only in these provinces , but it included the federal capital Baghdad , which witnessed demonstrations in the Tahrir Square and Shula district that its consequences to reach to the siege the oil Dora refinery according to eyewitnesses ,noting that demonstrators raised banners calling for improving services, electric power and accountability of public money thieves . .
15. In addition to the losses incurred by the Iraqi economy mentioned above, the suspension of Internet services added other losses. An Iraqi merchant, Ahmed Al-Aqabi, said that his loss due to the interruption of Internet service, the blocking of social networking sites and the cessation of Internet banking services amounted to a quarter of a million dollars. He pointed out that the disruption of Internet service has cost many traders, a lot of losses, as a result of the cessation of transactions with East Asian countries using the Internet and social networking sites, in the selection and import of goods, and the transfer of funds using Internet banking services, and he added that the continuous disruption of Internet service will cost the Iraqi economy many losses, in addition to the high prices of goods, stressing that traders have submitted a request to the Iraqi government to restore the Internet service, and return it naturally and urgently, as many of the business operations rely primarily on the Internet and communication sites.
16. Market Wings com. for digital marketing and social media consultancy, revealed that Iraq lost more than 40 million dollars a day as a result of the disruption of Internet service, technology that has become an important and essential part of life, and the urgent need for people in various sectors such as education, health, security and commerce , and the statements by Coast Tull and Pete Blux companies , which guessed the effects and opportunities, show that the closure of Internet lines and social media inflicts Iraq $ 40 million a day in financial losses.

Based on the above, the political observers in Iraq see that the main reason for these demonstrations lies in the accumulation of failure, and financial and administrative corruption, in which all the governments that came to power in Iraq since 2003 till now failed to address and reduce it.

Economic Studies Unit
Rawabet Center for Research and Strategic Studies