Petro Dollars to Boost Agribusiness in Iraq

By Layth Mahdi, Agricultural Advisor. The opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq is predominantly an agricultural country. It has a great diversity of climate, soil types, and natural resources. In the 1950’s, Iraq was self-sufficient in agriculture and the number one exporter of dates in the world. The agricultural system started to collapse with the beginning of the war with Iran. The following years saw a subsequent downfall of the agriculture economy. Finally, with the lifting of agriculture subsidies in 2003, the system nearly collapsed.

The agricultural sector is second to oil for job opportunities in Iraq. However, the workforce consists of unskilled and uneducated people who have participated only marginally in the country’s economic growth. The current agricultural output is inadequate to provide a sufficient amount of food for its own population.

The Iraqi economy needs to accelerate investments and mobilize physical and human resources. A joint investment between Iraqis and US companies would promote economic growth in agriculture development. Some goals would include the establishment of certified seed companies, improved irrigation management, development of agrochemicals industries (fertilizer and pesticides), improved agricultural machineries, and other various agricultural necessities. Middle Eastern economies could also use the principles of cooperative ventures seen between Iraq and foreign investment.

Performance of GOI is weak due to lack of vision in economic sectors. The Iraqi public is unsatisfied with the 100-day promises. Prime Minister Nouri Al Maliki needs fresh faces and ideas to improve the economy. He needs to establish working groups to develop a real strategic plan for economic growth across Iraq.

Iraq's petroleum has traditionally provided about 95% of the total government revenue. Data from the Ministry of Finance shows that until the end of June 2011, Iraqi oil revenue reached up to 80 trillion dinar ($68 billion). By the end of this year, the Iraqi budget may reach more than $100 billion. The additional revenue is a result of increased oil demand and production. Even with this increased revenue, Iraq still struggles investing the countries income. For example, the growth of the agricultural gross domestic product declined from 7.5% in 2000 to less than 1% in 2010.

Agriculture has been neglected in Iraq. There are little funds allocated for agriculture development in the provinces. The small agricultural budget consists of federal employees and minor projects. Iraq’s oil revenue will continue to increase over time. The time is now to set the priorities for development outside of oil. Prime Minister Al Maliki must allocate funds for agricultural development. Money needs to be obligated for agricultural production, counter rising food security. This will creating employment for Iraqi citizens, reduce poverty and violence. Any type of national fund program from petro-dollars will greatly enhance all facets of the agricultural production in Iraq. It will allow an increase in sustained domestic and international investment.

One Response to Petro Dollars to Boost Agribusiness in Iraq

  1. Nalliah Thayabharan 9th September 2011 at 19:55 #

    At the end of World War II, an agreement was reached at the Bretton Woods Conference which pegged the value of gold at $35 per ounce and that became the international standard against which currency was measured. But in 1971, Richard Nixon took the dollar off the gold standard and ever since the dollar has been the most important global monetary instrument, and only the United States can produce them.
    The fear of the consequences of a weaker US dollar, particularly higher oil prices is seen as underlying and explaining many aspects of the US foreign policy, including the Iraq and Libyan War. The reality is that the value of the US dollar is determined by the fact that oil is sold in US dollars. If the denomination changes to another currency, such as the euro, many countries would sell dollars and cause the banks to shift their reserves, as they would no longer need US dollars to buy oil. This would thus weaken the US dollar relative to the euro. A leading motive of the US in the Iraq war -- perhaps the fundamental underlying motive, even more than the control of the oil itself -- is an attempt to preserve the US dollar as the leading oil trading currency. Since it is the USA that prints the petro-dollars, they control the flow of oil. Period. When oil is denominated in US dollars through US state action and the dollar is the only fiat currency for trading in oil, an argument can be made that the U.S. essentially owns the world's oil for free.
    First Iraq and then Libya decided to challenge the petrodollar system and stop selling all their oil for US dollars, shortly before each country was attacked.The cost of war is not nearly as big as it is made out to be. The cost of not going to war would be horrendous for the US unless there were another way of protecting the US dollar's world trade dominance.
    Guess how USA pays for the wars? By printing US dollars it is going to war to protect.
    After considerable delay, Iran opened an oil bourse which does not accept US dollars. Many people fear that the move will give added reason for the USA to overthrow the Iranian regime as a means to close the bourse and revert Iran's oil transaction currency to US dollars. In 2006 Venezuela indicated support of Iran's decision to offer global oil trade in euro.
    6 months before the US moved into Iraq to take down Saddam Hussein, Iraq had made the move to accept Euros instead of US dollars for oil, and this became a threat to the global dominance of the US dollar as the reserve currency, and its dominion as the petrodollar.
    Muammar Qaddafi made a similarly bold move: he initiated a movement to refuse the US dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Muammar Qaddafi suggested establishing a united African continent, with its 200 million people using this single currency. The initiative was viewed negatively by the USA and the European Union, with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Muammar Qaddafi continued his push for the creation of a united Africa.
    Muammar Gaddafi’s recent proposal to introduce a gold dinar for Africa revives the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad, as well as by some Islamist movements. The notion, which contravenes IMF rules and is designed to bypass them, has had trouble getting started. But today Iran, China, Russia, and India are stocking more and more gold rather than US dollars.
    If Muammar Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves, France, still the predominant economic power in most of its former Central African colonies, would be the chief loser. The plans to spark the Benghazi rebellion were initiated by French intelligence services in November 2010.
    - Nalliah Thayabharan