Iraq's Foreign Minister Fuad Hussein stated that if oil exports are not reopened, the country could face a financial disaster. Hussein emphasized that the halt in oil flow, which provides about 90% of state revenues, has put severe pressure on Iraq's economy.
The country's crisis deepened following the war with Iran and the closure of the Strait of Hormuz. The largely closed strait restricted crude oil shipments not only from Iraq but also from Saudi Arabia, the United Arab Emirates, and Kuwait, driving global oil prices higher.
Production Plummeted
According to the Iraqi Ministry of Oil, the country's production fell from an average of 4.3 million barrels per day in May to about 1.4 million barrels. Limited flows of approximately 200,000 barrels per day were maintained through the northern Turkish port of Ceyhan; previously, this amount was around 3.5 million barrels.
Oil Minister Basim Mohammed said last month that Iraq exported 10 million barrels through the Strait of Hormuz in April, compared to about 93 million barrels monthly before the war. This illustrates the scale of the export pipeline contraction.
Revenue Loss Strains Budget
Fuad Hussein explained that with exports nearly halted in recent months, Baghdad has relied on reserves and short-term advances from state banks to pay salaries. The minister said, "We are relying on available reserves for salary payments, but we have no income."
Hussein also noted that the Central Bank has printed trillions of dinars to cover expenses. However, he stressed that printing money is not a solution, as it increases inflation and weakens purchasing power. "Printing money does not solve the problem; it is dangerous," he said.
The minister pointed out rising inflation and that previously prices and purchasing power were in a better position, but now purchasing power will weaken. The Central Bank did not respond to requests for comment.
Alternative Routes and Kirkuk-Baghdad Pipeline
The Baghdad administration is trying to increase exports to between 500,000 and 700,000 barrels per day through alternative routes. Hussein said the government wants to activate different channels to achieve this goal.
Last week, Prime Minister Ali al-Zaidi asked oil companies operating in the Kurdistan Region to restart production and continue shipments through the Iraq-Turkey pipeline. Some oil and gas companies in the region had to halt production following drone attacks attributed to Iran-backed militias.
In a meeting with Kurdistan Regional Government officials and international oil company executives, al-Zaidi emphasized the importance of joint work, suitable operating conditions, and meeting the basic needs that support companies' operations. A statement from his office said he was briefed on plans to resume work and activities in Iraqi Kurdistan as soon as possible after the conflict.
The statement noted that Iraq suffered significant losses due to the disruption of oil shipments through the Strait of Hormuz and that obstacles to increasing production must be overcome to reduce these losses.
Warning of Economic Contraction
Iraq's economic squeeze is not limited to the war with Iran. Baghdad also faces pressure from Washington to disarm militias close to Iran, complicating long-awaited structural reforms.
The International Monetary Fund forecasted in its April regional outlook report that Iraq's economy will contract by 6.8% this year. This estimate was lowered by more than 10 points compared to last October and represents the sharpest decline expected among oil-exporting countries directly affected in the region.
Iraq's oil revenue has sharply declined since the war began on February 28. According to official Iraqi sources, monthly revenue was about $6.8 billion in February, dropping to $1.96 billion in March and $1.1 billion in April. May data has not yet been released.
With limited domestic financing options, Hussein said Iraq needs to establish closer contacts with Gulf countries and the West in its search for support. The minister stated, "We need to open up to Gulf countries and Western nations to see if we can receive assistance."
