Iraq - Economy

Economy

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, repayment of war debts (estimated 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.

On November 20, 2004, the Paris Club of creditor nations agreed to write off 80% ($33 billion) of Iraq's $42 billion debt to Club members. Iraq's total external debt was around $120 billion at the time of the 2003 invasion, and had grown another $5 billion by 2004. The debt relief will be implemented in three stages: two of 30% each and one of 20%.

At the end of 2005, and in the first half of 2006, Iraq implemented a restructuring of about $20 billion of commercial debt claims on terms comparable to that of its November 2004 Paris Club agreement (i.e. with an 80% writeoff). Iraq offered to its larger claimants a U.S. dollar denominated bond maturing in 2028. Smaller commercial claimants received a cash settlement of comparable value.

Iraq has proven oil reserves of 143.1 billion barrels, the world's 2nd largest. Iraq's oil production is only about 2.9 million barrels per day, of which 1.6 – 1.7 million are exported. It intends to increase its production to 5 million barrels per day by 2014. On June 30 and December 11, 2009, the Iraqi ministry of oil awarded service contracts to international oil companies for some of Iraq's many oil fields. Oil fields contracted include the "super-giant" Majnoon Field, Halfaya Field, West Qurna Field and Rumaila Field. BP and China National Petroleum Corporation won a deal to develop Rumaila, the largest Iraqi oil field.

In February 2011, Citigroup included Iraq in a group of countries which it described as 'Global Growth Generators', that it argued will enjoy significant economic growth in the future.