Top Energy Stories

INOC is back on the legislative agenda. Iraq's Cabinet has resolved to amend a 2018 law to re-constitute the Iraqi National Oil Company (INOC), which could redraw the lines of authority over the country's oil sector. The formation of INOC was stalled in January 2019, when the Federal Supreme Court struck down many key articles in the INOC law. Now, legal teams from the Council of Ministers and the Oil Ministry have drafted two different sets of amendments that could potentially bring the law in line with the court's ruling and enable INOC to move forward. Iraq Oil Report has obtained a copy of the proposed amendments, spoken to critics and proponents of the law, and surveyed a variety of MPs to assess the likelihood of legislative action. Read the full story here.

Oil exports have fallen to six-year lows as Iraq pursues OPEC compliance. Iraq's federal government and the semi-autonomous Kurdistan region sold a combined 3.016 million barrels per day (bpd) in August — down 5.5 percent from July. The drop suggests Iraq has made further cuts to production, in line with promises to OPEC. An agreement among OPEC and non-OPEC countries has helped support global oil prices, which in turn has helped Iraq's treasury: even though export volumes have decreased, higher oil prices pushed August revenues up to $3.517 billion. Read the full story here.

Do you love data? Iraq Oil Report tracks hundreds of data points on a monthly basis that give a detailed picture of the country's energy sector and economy — volumes and prices of different export streams and crude grades, field-by-field production, a breakdown of government expenditures, and more. For a free sample, click here.

Interview of the Week

Speaker of Parliament Muhammad al-Halbusi issued a dire warning about the corrosive effects of paramilitary groups that have recently been assassinating their critics with impunity. In an interview with UTV on Aug. 26, Halbusi said that such behavior could undermine the legitimacy of national elections expected next summer.

How can things be left like this? With everything you see — the assassination of activists, disappearances, weapons being moved around without approval from the commander in chief — if all this goes on during elections, how will the UN or the world recognize the elections, if the impact of armed groups is so obvious?

Coming from the highest-ranking Sunni politician in the country, Halbusi's warning suggests a large segment of Iraq's population is on the verge of losing further confidence in the electoral process. Halbusi said that Prime Minister Mustafa al-Kadhimi needs to speak "more frankly" about the problem of armed groups.

Halbusi also criticized the government’s economic policy:

The relevant ministries in this government have yet to present a clear economic vision. All their work is on looking for ways to get funds from oil revenues, how we can borrow from banks or from the CBI, just to get us through the month. Some of it is challenging, and some of it is simply unrealistic.... Someone explained it to me with a nice metaphor. We're still relying on the same group of people from the previous cabinets. The same team of advisors, or people who've presented economic visions, whether inside or outside Iraq. It's like someone who's trying to drive a car into a gate that's too small. He keeps driving it forward, crashing into the gate, backing up, and crashing into the gate again. It's time to look for another gate!

As the leader of the country's legislative branch, Halbusi oversaw the passage of the 2019 national budget law that raised spending to more unsustainable levels than ever before and helped drive the country into the current financial crisis, which Kadhimi's administration inherited.

National News

How can Iraq escape its financial crisis? "Iraqi policymakers need little help in diagnosing the flaws that underpin the economy," writes Ali al-Mawlawi, for the think tank IPSI. They have been equipped with smart plans by an army of multi-lateral organizations and consultants. "Where the real shortfall lies is in implementation," Mawlawi says. Policymakers have focused on what ought to happen without regard for "the underlying systems and structures that largely shape what is and isn't possible to undertake." If implemented, their policy prescriptions would lay the foundation for economic growth — but they would also defund the patronage structures from which political parties draw their power. Whereas Halbusi says the problem lies with an unchanging cast of government advisors, Mawlawi suggests the problem is a political class that will not sacrifice its own narrow interests for the good of Iraq. The solution is "focus and persistence," Mawlawi says. "Rather than maintaining the public’s focus on the dire state of the economy and reinforcing messages that demonstrate why cuts are essential, Kadhimi has sought to pursue an ambitious and broad array of issues.... By biting off more than it can chew, the government has left little political capital for dealing with the economic crisis."

French President Emmanuel Macron visited Baghdad on Wednesday. He met Prime Minister Mustafa al Kadhimi and President Barham Salih, and announced a widely publicized "sovereignty initiative" for Iraq, although as noted by AFP, few details on such plans were announced. Macron’s visit was brief, and did not include a trip to Erbil, the capital of the Kurdistan region. Instead, Kurdistan Regional Government (KRG) President Nechirvan Barzani came to Baghdad to meet Macron. Macron’s trip to Iraq, while short, pointed to strengthening French involvement in the Middle East. He used it to announce an invitation for Kadhimi to visit France next month, and came after Macron spent two days in the Lebanese capital Beirut, as well as a visit by France’s Armed Forces Minister, Florence Parly, to Baghdad last week. One focus of French diplomacy in Iraq is the reconstruction of Mosul, a senior federal Iraqi official told Iraq Oil Report. A longer trip by the French President to Iraq in 2021 will likely include a visit to the city.

Nechirvan Barzani was not in Baghdad just to meet Macron. The visit also included meetings with Kadhimi, Halbusi, Salih and Ammar al-Hakim, head of the Hikma political party. Federal Iraq and the KRG recently came to a temporary agreement on revenue-sharing, but they are still far from resolving long-standing disputes over borders and oil rights, which are likely to be points of friction when the government begins drafting a 2021 budget law. Just 48 hours after his Baghdad meetings, Barzani was in Ankara, meeting Turkish President Recep Tayyip Erdorgan and Turkish Foreign Minister Mevlut Cavusoglu. Turkey functions as the guarantor of Kurdistan's economic autonomy from Baghdad by allowing the KRG to export crude oil via the Turkish port of Ceyhan — Erbil's largest source of independent revenue. Turkey has also carried out a sustained ground and air campaign on Iraqi soil against militants from the Kurdistan Workers' Party (PKK), a U.S.-designated terrorist organization, despite objections that the unilateral military operations violate Iraqi sovereignty.

Baath Party archives were returned to Iraq this week. For the past 15 years, 6 million pages of documents from the Saddam Hussein regime have been stored at the Hoover Institution in the U.S. Before he became prime minister, Kadhimi was involved in sorting and preserving them. And as of Monday, according to Michael Gordon, writing for the Wall Street Journal, they were delivered by a U.S. military cargo plane to Baghdad. Details of the documents’ return, including their current location, remain secret, amid fears the shipment would be intercepted by Iranian-backed paramilitary groups or criminal entities seeking to use them to identify targets for retribution.

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