How will Iraq be affected by the Russian-Saudi oil war?
Dr. Issam Al-Chalabi
the former Iraqi minister
March 09, 2020
Iraqi workers may be affected by the sharp drop in global oil prices, due to the impact of the Russian-Saudi oil war.
The former Iraqi oil minister and oil expert, Issam Chalabi, suggested that Iraq lost tens of billions of dollars due to the drop in oil prices due to the impact of the Russian-Saudi dispute and the failure of the Organization of Petroleum Exporting Countries (OPEC) and Russia to cut production.
Chalabi said, that Iraq had set the price of a barrel of oil at $ 56 per barrel for the current year 2020, but that “Iraqi oil will be within the levels of these days with limits not exceeding $ 25 per barrel”, which means “we are facing a significant decline in revenue Oil may reach tens of billions. “
And Russia’s breach of its agreement with “OPEC” to reduce oil production prompted a Saudi move and flooded the market, causing a sharp drop in prices and recording the largest daily decline in nearly three decades.
The meeting of the oil-exporting countries “OPEC” ended last week without reaching an agreement on the amount of production cut proposed by Saudi Arabia, which was up to one and a half million barrels per day of the organization’s production so that the spread of the virus does not undermine what was reached in 2017 To maintain stable prices in a market with surplus production, Russia refused.
Chalabi said that “the dispute prompted Saudi Arabia to take two main steps, the first of which is to increase rates that raise its current production by more than 9 million barrels per day to reach more than 10 million barrels and may reach 12 million barrels per day.”
He added that the second step taken by Saudi Arabia is to offer its oil in Asian markets at prices 6 to 8 dollars lower than the prices prevailing at the time.
He pointed out that these steps led to a decrease in prices in Asian markets, up to $ 31 per barrel for North Sea oil, “Brent”, and up to $ 27 for US oil, which led to a significant drop in oil revenues for member states, especially for Iraq, which has no room to compensate. These lost amounts. “
He explained, “If we remember that the average price of oil calculated in the budget of Iraq for the previous year, which extended its impact to the budget for the current year 2020, is $ 56 per barrel, then Iraqi oil will be within the rates of these days, with limits not exceeding $ 25 per barrel, which means a significant decrease Oil revenues could reach tens of billions. “
Chalabi warned that Iraq’s loss of tens of billions of dollars due to the loss of a large amount of oil revenues will greatly affect the provision of services, medicines and food, at a time when the country needs all the available funds to face the spread of the new Corona virus.
Chalabi said that “the impact will be significant on the operational budget, especially since there is not already an investment budget in Iraq, especially perhaps to provide salaries for the 7 million employees who receive monthly cash from the Iraqi government unless the state takes measures that are borrowing internally or externally.” , Noting that this solution also needs time to implement it.
Chalabi described the situation as “catastrophic” for Iraq, “especially as it is going through critical political conditions as a result of the political blocs calling for positions and not forming a government that meets the demands of the people,” noting that “the only solution is to radically change the political process in Iraq and seriously consider the Iraqi economy and change State administration style. “