Tuesday, October 20, 2009

Iraq’s Oil Exports Continue To Rise And Fall

The October 7, 2009 State Department Iraq Status Report, found that while Iraq’s oil production has continued to increase since the beginning of the year, its exports took a dip over the last two months. 2008 saw the highest average monthly oil production since the U.S. invasion. For that year, Iraq produced an average of 2.41 million barrels per day, and exported 1.84 million barrels. For the first nine months of 2009 Iraq has been pumping less, an average of 2.39 million barrels, but exporting more, 1.91 million barrels. The 2009 budget however called for 2 million barrels a day in foreign sales. That was achieved for only two months, July and August, constituting the most oil exported since 2003. Since that peak, exports have dipped while overall production has continued to rise. In July Iraq produced 2.48 million barrels and exported 2.08 million. The next month it produced the same amount, but exports dropped to 2.0 million barrels. Finally, in September production climbed again to 2.5 million barrels, but foreign sales dropped to 1.95 million barrels.

The results of this uneven output has been a financial pinch for the government. Iraq is currently running a $19 billion budget deficit. Since international oil prices have not recovered from the world recession that means Iraq will continue to have these problems next year as well. Baghdad is already in negotiations with the International Monetary Fund (IMF) for a $5 billion loan to help with its 2010 and 2011 budgets, but the Finance Minister said that it needs $7 billion. The IMF is also calling for cuts in spending. In a speech, Prime Minister Nouri al-Maliki said that the Fund wanted a slash in salaries, something Baghdad was not willing to do. The Iraqi government is the largest employer in Iraq, and Maliki claimed 74% of the budget goes to their wages. Elections are scheduled for January 2010, which is probably why the Prime Minister is weary of reducing pay.

Iraq’s oil industry is wracked by political divisions, lax maintenance, deteriorating infrastructure, and lacks foreign investment. Its production has continually fluctuated up and down as a result, and the government has never met its production goals. At the same time, the other parts of the country’s economy have declined since 2003, leaving Iraq more dependent upon oil than ever before. Until the country overcomes its internal divisions, this situation is unlikely to change, and only a full recovery in the international economy and a spurt in oil prices will provide Iraq any financial relief.

2009 Iraqi Oil Production/Exports in Millions of Barrels Per Day
Jan. 2.15/1.91
Feb. 2.32/1.77
Mar. 2.37/1.81
Apr. 2.37/1.83
May 2.41/1.9
Jun. 2.43/1.96
Jul. 2.48/2.08
Aug. 2.48/2.0
Sep. 2.50/1.94


Agence France Presse, “Iraq made ‘good progress’ in IMF loan talks: IMF,” 10/6/09

Associated Press, “Iraq predicts budget crunch for next year,” 9/29/09

Madhani, Aamer, “Iraq’s economy sputters as oil prices drop,” USA Today, 1/28/09

Reuters, “Iraq PM Says Cannot Cut Public Pay To Suit IMF,” 10/7/09

U.S. Department of State, “Iraq Status Report,” 10/7/09

Zawya, “Iraq Central Bank Opposes Issuing Treasury Bills To Finance Projects,” 9/27/09

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