In his speech at the United Nations General Assembly (UNGA) on Friday, Iraq’s Prime Minister Ali al-Zaidi spoke about the challenges his country has faced amid the ongoing war between the United States and Iran. The closure of the Strait of Hormuz has cut off Iraq’s sea-based trade, including oil exports – a lifeline for the country. Iraq has been unable to export about 90 percent of its oil via the Gulf and has lost $60bn in oil revenues since the war began.
It is evident that the financial crisis caused by lost oil receipts has presented the Iraqi government with a mountain of challenges. Oil revenues make up about 90 percent of Iraq’s federal budget and the decline in exports has impacted the government’s ability to pay salaries and prompted protests in Baghdad. The Iraqi government is looking at a range of austerity measures to deal with the deficit, but they are unpopular with the population.
Al-Zaidi suggested that boosting oil production in the coming years and diversifying export routes could increase government revenues. That could be achieved by developing existing export channels, such as the Iraq–Turkiye Pipeline (ITP), or establishing new ones with Jordan and Syria. But none of the proposals provide a quick solution to Iraq’s economic woes, with the Strait of Hormuz – for long the main gateway for Iraqi oil to the rest of the world – remaining effectively closed for the foreseeable future.
Iraqi political and security analyst Sarmad Al-Bayati told Al Jazeera that the lack of quick solutions for Iraq’s oil export conundrum is a major problem for the country. Ali Nazar, the head of Iraqi Oil Marketing Organisation (SOMO), told a recent session in the Iraqi parliament that Iraq’s oil export capacity was 4.2 million barrels in September, but actual average exports were much lower at 2.5 million barrels. Before the crisis in the Strait of Hormuz, Iraq was exporting 3.5 million barrels per day.
SOMO is offering discounts of $26.5 for each barrel for medium oil and about $28 for heavy oil, he added. Despite that, the company is struggling to find buyers due to continued attacks on vessels transiting the strait. It is extremely difficult.
It requires high-level coordination with shipping companies,” Nazar said. Kuwait and Qatar have offered larger discounts, reaching up to $35 per barrel.” Iraqi oil ministry spokesman Salim al-Rikabi said that 70 million barrels of oil were exported from Iraq in August, with revenues of around $4.5bn. An oil ministry source told Al Jazeera that this was only oil exported from Iraq’s southern oil fields that went through Hormuz.
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