5 May 2020, 12:00 pm GMT-6
With the U.S.’s patience wearing thin on its dealings with neighbouring Iran, endemic corruption still prevalent in both the south of the country and in the northern semi-autonomous region of Kurdistan, and enduring political chaos with frequently-changing prime ministers popping up whilst the real power remains with firebrand cleric Moqtada al-Sadr, the last thing Iraq needed was Saudi’s oil price war. Even before Saudi Arabia embarked yet again on exactly the same oil price strategy that nearly bankrupted it and all of its neighbours the last time it tried and failed to destroy the U.S. shale oil industry in 2014 to 2016, Iraq was trying to minimise outgoing payments to the international oil companies (IOCs) that operate its fields and to come to some accommodation the government of Kurdistan (the KRG) on co-ordinating oil exports and sales revenues. All of this now hangs on a thread, and Russia and China are just waiting for it all to collapse so that they can continue to accelerate their drive to further dominate Iraq’s oil (and gas) sectors.
At the beginning of this month, Iraq’s economic parliamentary committee suggested that IOCs be paid with crude oil rather than cash or cash-equivalents as a means to reduce near-term state expenditure. It also proposed delaying payments of foreign debt (including reparations to Kuwait), introducing salary cuts of 60 per cent for various state sector employees, and reducing all non-essential spending. Despite pumping at least 4.65 million barrels per day (bpd) of oil in February – above its OPEC+ quota of 4.46 million bpd – and exporting around 3.4 million bpd of crude that month, and almost the same in March, Iraq’s oil-related revenues had fallen by nearly 50 per cent at that point. This is in line with the collapse in oil prices and the fact that about 90 per cent of Iraq’s government revenues still come from oil, hence the requests to the IOCs.
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