A Special Issue: Oil in Iraq

By Ahmed Mousa Jiyad. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The international Journal of Contemporary Iraqi Studies-IJCIS has just released it is special issue on “Oil in Iraq”.

Many prominent Iraqi and non-Iraqi scholars have contributed articles to this timely and important volume, which makes it an invaluable scholarly work to understanding the complexities of oil in Iraq.

The following is my introduction, as the guest editor of this special issue of IJCIS.

Three unprecedented and interrelated developments have taken place in the Iraqi petroleum sector since the 2003 invasion. Wide openness of all petroleum sub-sectors (upstream, midstream and downstream) for foreign investment; offering, through three bid rounds, the most prized oil and gas fields for an international auction resulting in contracting almost 60 per cent of the country’s proven petroleum reserves for at least 20–25 years; and finally, these contracts would expand oil production and export capacities by fivefold in less than seven years.

Such an opening could lend support to the notion that, ‘the invasion was all about oil’ and provoke legitimate questions on why a country, with incomplete sovereignty due to the presence of occupying forces and still under Chapter Seven of the UN Charter takes such unwarranted drastic actions; how it is going to manage such a massive undertaking; and what is it going to do with the influx of huge revenues, and mitigate the consequences.

Though many, and for variety of convincing reasons and powerful arguments, doubt very much the feasibility of attaining such production targets at such a fast pace under structural weaknesses and prevailing conditions in the country. However, even with half-success, this would, by all standards, be very significant indeed, and with far-reaching implications domestically, regionally and internationally.

Expanding production (and by logic, intentions and necessity) and export capacities would lead to a tremendous augmentation of the economic rent (or windfall) for the state due to expected higher oil prices, with or without the Peak Oil argument, in relation to the comparatively low production (or extraction) cost.

Domestically, such a huge influx of foreign exchange is bound to face three interrelated and theoretically enforcing hurdles: absorptive capacity limitations, Dutch disease and resource curse attacks. Each has its own dynamics and requires policy options to mitigate consequences. Thus, Iraq needs to devise sound development policy and modalities to mange effectively the plenty generated from its depleting natural resources.

In addition to the above macroeconomics structural difficulties, weak institutional capacities, ambiguous legal and constitutional frameworks, lack of suitable infrastructural facilities and fragmented political climate, all represent formidable domestic determinants.

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