The sudden decline in world petroleum prices is proving a
daunting challenge for Iraq. The country was never able to pass the 2014 budget
due to the political maneuverings of Prime Minister Nouri al-Maliki before the
national elections and then due to all the time it took to put together Premier
Haider Abadi’s new government. Now with oil prices collapsing Baghdad has
decided to draw up a new draft budget leading to another delay.
Iraq is one of the most oil dependent countries in the
world, so when prices recently collapsed the country was put into a bind. In
October for example, the Oil Ministry exported an average of 2.432
million barrels a day, which was just around the yearly average of 2.472
million, but down from September’s 2.542. The problem was prices dropped from
$102.27 per barrel in July to $97.44 in August, $90.76 in September and then
$81.12 in October. That meant in that last month the nation earned $6.12
billion, the lowest since February 2011’s $6.064 billion. It also brought down
2014’s average to $98.13 per barrel the first time it has been below $100 for
several years.
Iraq Oil Exports And Profits 2011-2014
Month
|
Avg.
Exports
(Mil/
Bar/
Day)
|
Avg. Price Per Barrel
|
Revenue (Bill)
|
Jan. 11
|
2.16
|
$90.78
|
$6.082
|
Feb.
|
2.20
|
$98.44
|
$6.064
|
Mar.
|
2.15
|
$107.13
|
$7.167
|
Apr.
|
2.14
|
$114.26
|
$7.342
|
May
|
2.22
|
$108
|
$7.47
|
Jun.
|
2.27
|
$105.17
|
$7.173
|
Jul.
|
2.16
|
$108.79
|
$7.311
|
Aug.
|
2.18
|
$104.91
|
$7.124
|
Sep.
|
2.10
|
$104.89
|
$6.619
|
Oct.
|
2.08
|
$104.04
|
$6.742
|
Nov.
|
2.13
|
$106.59
|
$6.833
|
Dec.
|
2.14
|
$106.18
|
$7.061
|
2011 Avg.
|
2.16
|
$105.00
|
$6.913
|
Jan. 12
|
2.10
|
$109.08
|
$7.123
|
Feb.
|
2.01
|
$112.92
|
$6.595
|
Mar.
|
2.31
|
$117.99
|
$8.472
|
Apr.
|
2.50
|
$116.79
|
$8.795
|
May
|
2.45
|
$103.03
|
$8
|
Jun.
|
2.40
|
$90.09
|
$6.453
|
Jul.
|
2.51
|
$97.14
|
$7.577
|
Aug.
|
2.56
|
$106.22
|
$8.445
|
Sep.
|
2.59
|
$107.59
|
$8.371
|
Oct.
|
2.62
|
$105.51
|
$8.578
|
Nov.
|
2.62
|
$104.32
|
$8.200
|
Dec.
|
2.34
|
$103.72
|
$7.551
|
2012
Avg.
|
2.41
|
$106.20
|
$7.846
|
Jan. 13
|
2.35
|
$104.92
|
$7.672
|
Feb.
|
2.53
|
$107.66
|
$7.644
|
Mar.
|
2.41
|
$103.76
|
$7.772
|
Apr.
|
2.62
|
$98.70
|
$7.764
|
May
|
2.48
|
$97.23
|
$7.477
|
Jun.
|
2.32
|
$97.40
|
$6.799
|
Jul.
|
2.32
|
$101.00
|
$7.272
|
Aug.
|
2.57
|
$104.45
|
$8.356
|
Sep.
|
2.07
|
$104.87
|
$6.511
|
Oct.
|
2.25
|
$102.57
|
$7.160
|
Nov.
|
2.381
|
$102.57
|
$7.324
|
Dec.
|
2.341
|
$102.89
|
$7.470
|
2013 Avg.
|
2.386
|
$102.33
|
$7.435
|
Jan. 14
|
2.228
|
$102.37
|
$7.074
|
Feb
|
2.799
|
$102.05
|
$8.001
|
Mar
|
2.396
|
$101.03
|
$7.507
|
Apr
|
2.509
|
$100.69
|
$7.582
|
May
|
2.582
|
$100.69
|
$8.077
|
Jun
|
2.423
|
$102.96
|
$7.470
|
Jul
|
2.442
|
$102.27
|
$7.742
|
Aug
|
2.375
|
$97.44
|
$7.172
|
Sep
|
2.542
|
$90.76
|
$6.916
|
Oct
|
2.432
|
$81.12
|
$6.120
|
2014 Avg.
|
2.472
|
$98.13
|
$7.373
|
This has thrown the whole budget drafting process into
chaos. To begin with the government was facing a huge deficit
that could be as high as $65 billion. That meant the cabinet and parliament had
to drastically cut spending, which had ballooned in recent years, as well as
find an appropriate oil price to base the 2015 budget upon. The latter has been
drastically revised in just the last few days. On November
27 Oil Minister Adel Abdul Mahdi said that the government would use $80 per
barrel. Two days later the cabinet was thinking of anywhere from $64-$70 a barrel, while Finance Minister
Hoshyar Zebari said that the total budget would be around $100
billion. Finally, on November
30 Premier Abadi let it be known that with falling oil prices the cabinet
would have to draw up an entire new draft budget. The entire process has been
plagued by problems from the beginning. Maliki stopped the 2014 budget from
being passed so that he could use it against his opponents in that year’s
election. Then it took several months for the new government to be formed. It
quickly became apparent that the 2014 budget had to be scrapped and attention
paid to 2015 instead. Things didn’t go any smoother however as parliament
continually said they would bring a draft bill to the table, only to postpone
it to another time. Then oil prices collapsed, and things had to start all over
again.
The last several years Iraq has benefited from high
petroleum prices, but that has now come to an end. Oil production has climbed slowly,
and has even gone up this year despite the loss of the Kirkuk pipeline to the
insurgency, while prices stayed above $100 per barrel for three years. As a
result, Baghdad has passed larger and larger budgets each year. Now it has to
deal with austerity as Maliki used up much of the country’s
reserves to deal with the security crisis and oil prices are collapsing. That
has thrown the entire drafting process out of whack resulting in delay after
delay after delay. It’s unclear when a budget will actually be presented to
parliament. That actually makes the current situation in line with previous
budgets that have regularly been passed late. The questions now are when it
becomes a reality will it be based upon realistic predictions about the
country’s revenue or will it lead to a huge new deficit as many predict. If
handled incorrectly this could create to a brand new foreign debt, which was
largely taken care of after 2003.
SOURCES
Al Mada, “The new budget: 35.7 trillion for the army .. not
all functions appreciated Minister,” 11/29/14
Ministry of Oil, “Iraq Crude Oil Exports – October 2014,”
10/25/14
New
Sabah, “$ 6 billion in oil revenues last October,” 11/2/14
Radio Free Europe/Radio Liberty, “Iraqi PM Says Low Oil
Prices Ruined 2015 Budget,” 11/30/14
Al Rayy, “Cabinet re-pricing of oil in the budget to $ 64 or
less to cover the deficit,” 11/29/14
Reuters, “UPDATE 1-Iraq expects 2015 budget based on $80 per
barrel oil price – minister,” 11/27/14
Shafaq News, “Parliament agrees to cancel 2014 budget and
transfers employment grades and salar scale for 2015,” 11/5/14
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