Energy and Economic News

Iraq is running out of money. With a burgeoning debt load, authorities are making a last-ditch attempt to finance the state’s payment obligations by passing the second emergency finance bill of the year. The proposed law is supposed to act as a stop-gap measure after the government withdrew the draft 2020 budget from Parliament. Without new legislation, the government cannot borrow to pay its bills. Federal public sector workers have only just started to receive their September paychecks, and further delays will likely spark greater outrage, especially as October marks the first anniversary of the outbreak of anti-government protests across southern Iraq and Baghdad. Funds for salaries for Kurdistan Regional Government (KRG) employees come from federal coffers, and without budget transfers, they are also going without pay. Read the full story on Iraq Oil Report.

How bad is it? When oil prices fell off a cliff early this year, Iraq's revenues did, too. The country depends on oil for more than 90 percent of the government's cash, and the large majority of its spending goes to public sector salaries and benefits — a financial obligation which cannot be quickly reduced without causing social unrest. Iraq Oil Report has previously explored the origins of Iraq's financial crisis in detail. And for details of Iraq's finances, check out the Iraq Oil and Financial Dataset.

Rockets that landed near Erbil airport last week were fired within range of several KRG oil projects. The rockets were launched from what used to be the KRG's Hamdaniya exploration block — in an area now controlled by a paramilitary group operating under the federal government's al-Hashid al-Shabi (Popular Mobilization) program — within 25 kilometers of Oryx Petroleum’s Banan production site, and a drilling site at the Bashiqa block, operated by Norways' DNO in partnership with ExxonMobil. The attack came just days after the U.S. government threatened to close its embassy in Baghdad due to months of increasing rocket fire and roadside bombings, while affirming it would maintain a diplomatic presence in Erbil. There is no indication that oil companies operating in the KRG are likely to become targets of Iranian proxy groups in Iraq, but the proximity of the Sept. 30 attack does highlight a potential risk. Militant groups operating in Basra have occasionally struck oil installations, including rocket attacks in April 2020 and June 2019. Read the full story on Iraq Oil Report.

Unaoil's former Iraq country manager is going to prison for bribery. A judge in London sentenced Basil al-Jarah to more than three years after he pled guilty to paying $17 million in bribes to Iraqi oil officials to help secure $1.7 billion worth of projects. The corruption first came to light through an investigation by The Age and Huffington Post, which included internal emails that identified Iraqi officials who were apparently receiving bribes, including former Deputy Prime Minister for Energy and Oil Minister Hussain al-Shahristani, former Oil Minister Abdul Karim Luaibi, and former South Oil Company Director General Dhia Jaffar. Those revelations prompted legal action in the UK, where the Serious Fraud Office (SFO) prosecuted executives from Unaoil and Petrofac. In Iraq, however, the same evidence has not led to any prosecutions.

Iraq has an opportunity to revamp its crude marketing strategy. Writing for Petroleum Economist, Ahmed Mehdi argues that the State Oil Marketing Organization (SOMO) could get more value for its oil by following the examples of Oman and UAE. Instead of selling so much "destination-restricted" crude, he suggests Iraq could charge buyers a premium for the right to resell cargoes. This strategy could potentially help SOMO take advantage of unusual and rapidly shifting market dynamics caused by the global pandemic.

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National News

When he died, Husham al-Hashimi was working on an expansive study of Iraq's militant groups, likely including those responsible for his murder. Now, his unpublished research is beginning to see the light of day. Writing for Newlines magazine, Hassan Hassan describes Hashimi's 100-page study of the commercial, political, military and social power that Iran-backed paramilitary groups control in Iraq. The study depicts the formation of “a new regime,” in which militias have gained control over much of the Iraqi economy and revenue streams, including airport customs, checkpoint revenues, construction projects, oil fields, cargo trucks, and tourism sites. According to Hassan, “it shows how the militias operate primarily as criminal rather than religious syndicates, draining the lifeblood of the Iraqi economy and undermining public institutions.”

"The most dangerous Iranian proxy in Iraq" is arguably Kataib Hezbollah, according to Hamdi Malik. The group is notorious for many reasons, including its alleged rocket attacks on the U.S. Embassy, which have caused a diplomatic rift between Washington and Baghdad. Writing for War on the Rocks, Malik explores how Kataib Hezbollah is trying to increase the popularity of its chosen interpretation of Shia Islam, the Wilayat al-Faqih — or, “guardianship of the Islamic jurist” system — which is shunned by many clerics in Iraq, including Ayatollah Ali al-Sistani. Malik also describes Kataib Hezbollah’s geographical spread, including its ties with Lebanese Hezbollah; its military operations; and its threats to Iraqi political leaders, who are now facing significant internal and external pressure to limit its influence and activities.

The pandemic will not stop the Arbaeen pilgrimage. Millions of Shia Muslims are headed to the shrine city of Karbala this week to commemorate Imam Husayn, whose death in 680 A.D. crystallized the schism between Sunni and Shia Islam. While pilgrims from Iran and other countries are largely absent this year due to pandemic-related entry restrictions, crowds have still gathered along routes to Karbala. Reporting for Reuters, Charlotte Bruneau and Maher Nazeh describe inconsistent health precautions among pilgrims, many of whom are not following recommendations to keep physical distance or wear masks. Health Minister Hassan al-Tamimi told Al-Mirbad this week that a spike in cases is now expected as a result. COVID-19 cases are rising rapidly in Iraq, with 3,000 to 4,000 new cases confirmed every day, and a total of 9,683 deaths. Doctors have described struggling to cope with violence from victims’ families, as well as insufficient equipment and supplies.

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