Iraq

Economy

Main article: Economy of Iraq

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Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses from the war of at least US$100 billion. After hostilities ended in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. A combination of low oil prices, onerous repayment of the war debts (at around US$3 billion a year) and the costs of reconstruction resulted in a serious financial crisis which was the main short term motivation for the invasion of Kuwait.

Related Topics:
Oil - 1980s - Eight-year war - Iran - US$ - Billion

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Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the Ba`ath Party government have hurt the economy, implementation of the United Nations' oil-for-food program, started in December 1996, was to have improved conditions for the average Iraqi citizen. For the first six phases of the program (each phase lasting six months), Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and some infrastructure spare parts. Subsequent investigation of the program has revealed significant corruption, with highly-placed U.N. officials being bribed, Ba'ath Party officials receiving lucrative kickbacks, and much of the money from oil sales being redirected into weapons research and acquisition by the Iraqi military.

Related Topics:
Kuwait - 1990 - Sanctions - Military action - 1991 - United Nations - Oil-for-food - 1996

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In December 1999, the UN Security Council authorised Iraq to export under the program as much oil as required to meet humanitarian needs. Iraq changed its oil reserve currency from US dollar to euro in 2000. Oil exports were more than three-quarters of the pre-war level. However, 28% of Iraq's export revenues under the program were deducted to meet UN Compensation Fund and UN administrative expenses. The drop in GDP in 2001 was largely the result of the global economic slowdown and lower oil prices. Following the 2003 invasion of Iraq, the economy to a great extent shut down; attempts are underway to revive it from the damages of war and rampant crime.

Related Topics:
1999 - Security Council - Reserve currency - US dollar - Euro - 2000 - GDP - 2001 - 2003 invasion of Iraq

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During his year as the chief executive of Iraq, Ambassador Paul Bremer issued a series of orders designed to restructure Iraq's broadly socialist economy in line with neo-liberal thinking. Order 39 laid out the framework for the privatization of everything in Iraq aside from the "primary extraction and initial processing" of the oil reserves themselves, and permitted 100% foreign ownership of Iraqi assets. Other orders established a flat tax of 15% and permitted foreign corporations to repatriate 100% of profits earned in Iraq. Opposition from senior Iraqi officials, together with the poor security situation meant that Bremer's privatization plan was not implemented during his tenure, though his orders remain in place. Privatization of the oil industry, in addition to around 200 other state-owned businesses, is currently scheduled to begin sometime in late 2005. http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=3&article_id=15131

Related Topics:
Paul Bremer - Neo-liberal

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The second attempt to liberalize Iraq's economy is linked to the Iran-Iraq war debt. The creditors who financed the Iran-Iraq war had presented post-Saddam Iraq with a bill of nearly US$130 billion of debt and past-due-interest, which had not been serviced during the 13 years of sanctions. The Jubilee Iraq campaign argued that these debts were odious (or illegitimate) given that they came from loans to a dictator fighting a war which caused the Iraqi people a great deal of harm, and should therefore be written off unconditionally. The creditors, however, offered only a partial reduction and rescheduling of their claims in return for an Iraqi commitment to implement an International Monetary Fund economic program. This deal, with the Paris Club cartel of creditors including the U.S. and Britain, was signed on 20 November 2004. The following day the interim Iraqi National Assembly issued a strongly worded resolution rejecting the Paris Club's terms and declaring that the debt was odious.

Related Topics:
International Monetary Fund - Paris Club - 20 November - 2004

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