Iraq’s Economy Could Collapse During Iran War

  

Iraq is the most oil dependent country in the world. It’s entire economy is now under threat due to the war with Iran.

 

Reuters reported that Iraq cut its petroleum production by around 1.5 million barrels a day. In January the country was pumping 4.52 million barrels a day. This was due to the fact that the Strait of Hormuz has been closed because of the conflict with Iran. The vast majority of Iraq’s exports travel through that route.

 

Kurdistan has not only shut down its exports but all its production as well.

 

Worse is that if the war lasts much longer the same thing could happen in the rest of the country. Iraq has limited storage facilities and they are already filling up. Without an export route it would have to halt its foreign sales as well and focus solely upon production for domestic needs.

 

This could not come at a worse time for Baghdad. Oil prices had already been stagnant and below the level necessary for the government to balance its budget.

 

In February that meant the state could not pay all its workers and benefits. Welfare payments were halted and workers in Diwaniya, Diyala, Babil and Basra were either not paid or received a cut. This resulted in protests and strikes.

 

Handing out government jobs is the main way the ruling elite maintain their support. That means each year they add thousands of new positions simply to run their patronage networks not because they are needed. That is the main problem with the country’s budget. It expands every year while revenues go up and down with international oil prices.

 

If exports stop the government won’t be able to meet its obligations. That is the nightmare scenario for the political parties as demonstrations will quickly spread throughout the country. There will be no way Baghdad can meet their demands and the state will resort to violence once again to suppress them.

 

In war news Iraq continues to be a battlefield. On March 2 a drone was shot down near Mosul dam while members of the pro-Iran Resistance attempted to storm the U.S. Embassy within the Green Zone. They were turned back with tear gas.

 

On March 3 the U.S. and Israel struck Kataib Hezbollah’s base in Babil’s Jurf al-Sakhr for the fourth time. Kataib Hezbollah has been the main target so far in Iraq because it is one of the most militant members of the Resistance and claimed attacks upon Americans, Kurds and Israel over the last several years.

 

At the same time smaller Hashd groups associated with the larger Resistance forces have also been included. The Ali Brigade’s headquarters in Qayara and the Shabak 30^th Hashd Brigade in Bartella both in Ninewa were struck.

 

Iran and the Resistance continue to carry operations as well. A hotel in Irbil that houses US forces was attacked. Two drones crashed targeting a communications tower on Mount Korek in Irbil. The Iranian Kurdistan Democratic Party was hit in Kurdistan. This is the fourth Iranian opposition party that has been included in the war. A drone or missile was shot down over Balad Airbase in Salahaddin. There are no Coalition troops there showing that Iran or its allies are going after the Iraqi forces now. A drone was shot down over Abu Ghraib prison in Baghdad. Air defenses turned back a drone at Camp Victoria at Baghdad airport.

 

The ruling Coordination Framework has been talking to Resistance leaders to try to stop them from getting involved in the war but that failed. A Shafaq News story said that several Hashd leaders told the Framework they will continue to go after the U.S. and Israel both inside and outside Iraq. This was exactly what Prime Minister Mohammed Sudani was fearing that his country would be dragged into a regional conflict where he has no control over the situation.

 

SOURCES

 

Agence France Presse, "Air strike hits Iraq base housing pro-Iran group: faction source,” 3/3/26

 

Bas News, “Baghdad Tensions Rise as ‘Resistance Front’ Supporters Target US Embassy,” 3/2/26

- “Drone Strikes Hit Kurdish Camp in Kurdistan: Official,” 3/3/26

 

Iraq Oil Report, “January oil production inches higher despite Rumaila dip,” 2/18/26

 

Kurdistan 24, "Oil Exports from Kurdistan Region Halted Amid Security Concerns,” 3/3/26

 

Al Mada, “Strike at Majnoon oil field over delayed wages,” 2/23/26

 

NINA, “Joint Operations Command: A Drone Shot Down Near Mosul Dam,” 3/2/26

- “Kurdish sources: Explosions heard at US base in Erbil,” 3/3/26

- “SMC: A drone, attempted to approach the perimeter of Abu Ghraib prison, dealt with,” 3/3/26

- “Two drones target a communications tower on Mount Korea in Erbil,” 3/3/26

 

Rasheed, Ahmed and Mohammed, Aref, “Iraq reduces oil output, more cuts to come if Hormuz disruptions persist, Iraqi oil officials say,” Reuters, 3/3/26

 

Salem, Amr, “Iranian-backed militia attack hotel in northern Iraq,” Iraqi News, 3/3/26

 

Shafaq News, “A fire broke out at a Popular Mobilization Forces headquarters south of Mosul, with an airstrike suspected,” 3/3/26

- “For the second day in a row, a drone that approached Victoria base at Baghdad airport was turned away,” 3/3/26

- “Iran-aligned Iraqi factions refuse to halt attacks on US, Israeli interests,” 3/3/26

- “The “Islamic Resistance” claims responsibility for 27 air attacks targeting US bases in Iraq and the region,” 3/3/26

- “A new attack targets Balad Air Base in Salah al-Din,” 3/3/26

- “New details emerge about the Jurf al-Sakhr strike: 6 US airstrikes targeted Kataib Hezbollah” 3/3/26

- “Nineveh: New bombing targets Popular Mobilization Forces in Bartella,” 3/3/26