Economical overview
Iraq has the world's fifth largest oil
resources. The country also has plenty of minerals and
fertile land. During the 1970s and 1980s large
investments were made in education and the future looked
quite bright, purely financially. Since then, the
economy and infrastructure have been wasted as a result
of the war against Iran 1980–1988, the Kuwait War
1990–1991, the subsequent UN sanctions, the US-led
invasion of 2003, and the subsequent fighting, not least
in connection with the Islamic State's (IS) ravages.
The Iraqi state was investing early in building
networks of railways and highways, not least for
military reasons. Ports are located in Umm Qasr and
Basra and oil terminals in al-Faw and al-Zubayr. River
traffic occurs between Baghdad and Basra. But the war
years have been hard at work on the infrastructure,
including oil facilities, electricity and water works.
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Countryaah.com:
Major imports by Iraq, covering a full list of top products imported by the country and trade value for each product category.
After the turbulent years of the jihadist IS conquest
of northern Iraq, and the battles to drive away IS, for
example, the million city of Mosul is in ruins. Other
concrete consequences of the war situation may also
extend far in the future. Long after IS's case, for
example, there have been reports of armed groups setting
up illegal roadblocks to raise "customs".
Even after the 2003 invasion, when the dictator
Saddam Hussein was overthrown, the economy needed to be
rebuilt from the ground up. The country was described as
a command economy with a failed agricultural sector and
bankrupt state governments. No significant investments
had been made since 1982 and the banking system was
ineffective. Iraq had a huge foreign debt, and Iran and
Kuwait demanded war damages. The education system has
also been damaged since then and Iraq is one of the few
countries where literacy has declined since the 1980s
(see Education).
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including IRQ which represents the country of Iraq.
The United States hoped after 2003 that Iraq could
develop a strong private sector, but the structural
problems and wars have put obstacles in the way. The US
and the UK primarily focused on getting oil production
started and repairing power stations, water pipes and
roads. Assistance was promised, and the UN released
Iraq's locked-in assets of several billion dollars.
However, the violence that developed in the years
following the invasion left much of the work in ruins.
The sabotage against oil pipelines and other plants and
the attacks on foreigners became so extensive that
several companies interrupted the reconstruction work.
Large amounts of aid disappeared through corruption,
waste and failed projects.
Large fluctuations in oil prices
To the need for reconstruction can be added swaying
oil prices. According to a 2010 International Monetary
Fund (IMF) report, Iraq was the most oil-dependent of
all countries in the Middle East and North Africa. The
dependency has not been broken since then, despite the
Iraqi government's stated plans to try to strengthen
other industries. The oil accounts for nearly two-thirds
of the country's gross domestic product (GDP) and over
90 percent of the state's revenue. This makes the Iraqi
economy extremely sensitive to price fluctuations in the
world market. During most of the 1990s, oil prices rose,
but when the sudden collapse of 2008 led to problems in
Iraq. The price soon climbed again, but in 2014 it
suddenly dropped sharply again, pushing Iraq's economy,
at the same time as the civil war (see Current policy).
The country tried to compensate for falling prices by
increasing its oil production and thus bringing in more
money even at lower prices, although this strategy
naturally contributed to a fall in prices (see Natural
Resources and Energy).
By 2020, oil-producing countries have seen concerns
about two different circumstances that have drastically
lowered oil prices. The Corona pandemic, which disrupted
industrial production in China ("the world's workshop"),
among other things, reduced global demand for oil. At
the same time, the two major producers Saudi Arabia and
Russia launched a price war to cut market share. Prices
fell to levels not seen since the first years after the
turn of the millennium. The price war does not only
threaten the extraction of oil shale in the US and
Canada, which takes place at higher costs than the Saudi
and Russian ones. Iraq, like most oil countries, had,
when the price war broke out, built its state budget at
much higher oil prices than those listed in 2020.
A large part of the state's expenditure is made up of
substantial subsidies on food, oil, gasoline and
electricity, but the money also goes to relatively high
salaries in the over-staffed state administration and in
the state-owned enterprises. Two-fifths of all Iraqis
work in the public sector, although this differs from
one area to another - half of Iraqis living in cities
but only a quarter in rural areas.
Corruption is also a major economic problem. Iraq is
one of the world's most corruption-prone countries. One
factor that is considered to contribute to corruption is
a quota system, which means that responsibility for
ministries and authorities is distributed among the
different ethnic groups. This creates the risk of posts
being manned by incompetent employees and citizens being
required to bribe to "lubricate the wheels". It can be
called clientelism when politicians or civil
servants offer service in exchange for political
support.
Tax revenues are small and recovery is ineffective.
Fuel subsidies, which meant that gasoline was extremely
cheap and therefore became a smuggling product, have
been cut down significantly, but increased prices and
constant interruptions in electricity and freshwater
systems, among other things, have instead led to popular
protests.
From the beginning of the 21st century, Iraq was able
to pay off large parts of its foreign debt, especially
as oil prices rose in the mid-1990s. Since then, they
have instead had to apply for new loans to cope with the
reconstruction. International donor conferences have
generated promises that are not always fulfilled.
Squeezed between Iran and the United States
The Shiite-led governments that have ruled the
country after Saddam Hussein have tried to balance the
power of major development interests. The economy is
heavily dependent on Iran, not least the import of
goods, while the United States is pushing Iraq to
distance itself from the regime in Tehran. The United
States has so far granted waivers to Iraq from the
sanctions Donald Trump's government reintroduced to
Iran, and Washington has labored with extensions of
various lengths: 120, 90, 45 or just 30 days at a time.
If Iraq were no longer exempted, its government has two
options: Either stop importing gas from Iran, which
would lead to increased electricity outages and wave of
protests, or continue imports, and then Iraq also faces
US sanctions.
The reports from Iraq indicate that Washington is
increasingly using economic pressure. Iraq's central
bank keeps its oil revenues at the US Federal Reserve
and flies dollars in cash every month to Iraq (according
to AFP News Agency between one and two billion) to make
payments on behalf of the state. That requires US
approval, but since Iraq's parliament voted for foreign
troops to leave the country, the United States has
threatened to terminate Iraq's account. In early 2020,
Iraqis complained that the current transfer was delayed.
Increased trade with China
Iraq has had observer status in the World Trade
Organization (WTO) since 2004, but does not yet meet the
conditions for membership. In 2017, the process of
gaining membership was resumed after nine years of
dormancy.
In 2006, the EU and Iraq began to negotiate a
cooperation and trade agreement, which was finally
signed in May 2012. The EU was previously Iraq's largest
trading partner, but the exchange with China has been
about European trade. Iraq's exports (in the case of
both China and the EU) are almost exclusively made up of
oil. India, South Korea and the US are also important
trading partners. Imports comprise the largest items of
machinery and vehicles, fuel, medicines, chemicals and
food.
Trade with Iran is important both because it has
major political significance (see Foreign Policy and
Defense) and because it includes important basic
commodities for Iraqis, primarily food and gas for
electricity generation. Pilgrimage to Shiite shrines in
Iraq also comes mainly from Iran.
Pilgrims come in large crowds despite the
circumstances. In 2018, an official in the Ministry of
Tourism stated that almost five million people visit
Iraq each year either for religious holidays or to see
historical monuments. At that time, there were 750
registered companies within the travel industry.
The Kurdish region has tried to attract tourists, not
least from the rest of the Middle East, but most who
visit Iraqi Kurdistan come from other parts of Iraq.
Traveling increased slightly when the Iraqi government
proclaimed victory against the Islamic State jihadist
movement in 2017, according to the Kurdistan Tourist
Board chief.
As a result of the war risks, the Swedish Ministry of
Foreign Affairs has previously refrained from travel,
especially to Baghdad and the nearby provinces. In light
of the spread of the coronavirus, the Ministry of
Foreign Affairs advises against unnecessary trips to all
countries.
FACTS - FINANCE
GDP per person
US $ 5,878 (2018)
Total GDP
US $ 225,914 million (2018)
GDP growth
0.6 percent (2018)
Agriculture's share of GDP
3.0 percent (2018)
Manufacturing industry's share of GDP
2.1 percent (2016)
The service sector's share of GDP
41.2 percent (2018)
Inflation
-0.3 percent (2019)
Government debt's share of GDP
49.3 percent (2018)
Currency
Iraqi Dinar
Merchandise exports
US $ 87,260 million (2018)
Imports
US $ 38,876 million (2018)
Current account
US $ 35 270 million (2018)
Commodity trade's share of GDP
61 percent (2018)
Main export goods
crude oil, oil products
Largest trading partner
China, EU, USA, India, Iran
Sources
2007
December
Iraq takes over Basra
Britain entrusts security responsibilities in Basra to Iraqi forces, thereby
setting the point for five years of British control over southern Iraq.
September
American security guards kill civilians
Criticism is being directed at the private American security company
Blackwater after security guards shot dead 17 civilians in Baghdad.
August
Bloody attacks on religious minority
At least 250 die when car bombs are detonated in two villages populated by
Yazidis. It is the deadliest attack since 2003.
April
Attacks kill almost 200
Nearly 200 die in blast attacks in Baghdad in a single day, despite US
efforts to increase security.
January
34,000 civilian deaths in 2006
According to the UN, 34,000 Iraqi civilians were killed in 2006. The figure
is three times higher than previous official estimates in Iraq.
US reinforces in Baghdad
US President George W Bush announces a new Iraq strategy, sending thousands
of new soldiers to increase security in Baghdad.
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