Top Energy News

Military conflict is escalating near oil fields in Iraq's semi-autonomous Kurdistan region. Multiple security officials in the Kurdistan Regional Government (KRG) said that on Wednesday an IED planted by the Kurdistan Workers’ Party (PKK) killed at least one Peshmerga, and ensuing shooting injured several others. The PKK denied this version of events, which took place near two oil fields in Dohuk province that produce 15 percent of the oil under KRG control. Read the full story on Iraq Oil Report.

Pipeline exports to Turkey are at risk. The IED and shooting incident in Dohuk came less than a week after an explosion on the Turkish side of the Iraq-Turkey Pipeline that has also been blamed on the PKK. The explosion shut down oil flows from fields controlled by both the federal Iraqi government and the KRG for around 12 hours, delaying the pumping of more than $6 million worth of crude. The PKK has not claimed responsibility for any deliberate sabotage of the export pipeline since 2015. The rising tensions between the KRG's ruling party and the guerrilla group make such attacks more likely, and highlight a resurgent risk to the oil sector. Read the full story on Iraqi Oil Report.

Iraq's nationwide oil exports rebounded in October to their highest level since May. The country sold an average 3.277 million barrels per day (bpd), up from 3.049 million bpd the previous month. The increase came as no surprise, after the Oil Ministry ordered a mid-October production hike totaling more than 250,000 bpd across at least eight southern fields. The added output meant that despite a drop in global prices, overall monthly revenues were up to $3.431 billion. For more details, read the full story on Iraqi Oil Report.

Iraq's Financial Crisis

The slight increase in oil revenues is not nearly enough for the Iraqi state to cover its operating expenses. Iraq is still vastly short on cash to pay public sector salaries, pensions and benefits — government employees have yet to be paid for October — and oil prices are unlikely to rise substantially in the foreseeable future. Writing for the Carnegie Endowment’s Sada Journal, Kirk Sowell summarizes the severity of Iraq’s fiscal crisis, and the steps that Prime Minister Mustafa al-Kadhimi and Finance Minister Ali Allawi have taken since May in response. He argues that fiscal reform is not optional; Iraq's only choice is whether to embrace it proactively. "The austerity that Parliament has resisted will be inevitable if oil prices do not rise dramatically in the months to come," Sowell writes. "A key priority from an international point of view is that the IMF, as a condition for its loans, impose upon Iraq the reforms for which Allawi has been advocating and which Parliament has so rejected. It does not seem likely that reform will come to Iraq by any other means." Ahmed Tabaqchali, writing for the Atlantic Council, sounds a slightly more optimistic note. The crisis is so undeniably bad, he says, that even feckless MPs cannot ignore it. "The real obstacle to reform—now, as in the past—is the lack of political will to act on reform or, more accurately, the strong political will to preserve the status quo," Tabaqchali writes. "However, the severity of the current crises has closed the door on the half-hearted ad hoc measures of the past, leaving no option other than structural reforms."

Iraq has fallen into a financial crisis largely because it has failed to grow a private sector. One key obstacle has been pressure from political and security actors on investors, according to Salam Zidane, writing for Al-Monitor. In sectors ranging from oil to real estate, investors face both blackmail from militant groups and pressure from tribal and political actors to make concessions to them or offer employment opportunities to constituents. Zidane quotes Mohammad Rahim al-Rabihi, a board member of the Iraqi Extractive Industries Transparency Initiative, who says that investors and foreign companies operating in the country have been facing an increasing number of attempts at extortion. “Some tribes have been claiming that they own lands abandoned for dozens of years, alleging that these properties belonged to their parents and ancestors, to receive financial compensation from oil or investment companies,” al-Rabihi said. The National Investment Commission, now headed by the recently appointed Suha Najjar, has identified more than 100 investment opportunities worth $75 billion, but Iraq remains low on the World Bank’s “Ease of Doing Business” index — 172 out of 190 countries.

Iraq needs an action plan, not just a diagnosis of its economic and financial illnesses. Writing for the Middle East Institute, Ruba Husari argues that the worrying observations made in the government’s economic reform white paper, published last month, are not sufficient to solve the deep-seated barriers to reform, and need to be accompanied by concrete plans for achieving change. Like Sowell, she points to outside actors like the IMF as one of Iraq’s only paths out of financial collapse – despite the country having reneged on a previous IMF arrangement forged during its last financial crisis. "The global economy and the oil markets are unlikely to recover to pre-pandemic levels in 2021, creating an opportunity for international institutions to revisit their leverage with Iraq on more sustainable terms,” writes Husari. Restructuring the economy is necessary in the long term. The population is expected to grow by 25 percent by 2030, to 50.2 million, bringing five million more people into the labour force. "There is simply no way that the public sector can absorb those numbers," Husari warns.

National News

Remnants of the self-proclaimed Islamic State (IS) militant group continue to wage an insurgency in northern Iraq. In one of the most high-profile and gruesome incidents, militants beheaded a sheikh from the Bani Kaab in the Muqdadiyah area of Diyala province, according to Shelley Kittelson, reporting for Al-Monitor. The victim's body was then "rigged with explosives that then killed those who had come to retrieve him." Such attacks are still common. Kittelson lists six in the last 10 days of October in Diyala alone, with IS militants either claiming or suspected of responsibility for all of them. Iraqi forces have conducted scores of operations against insurgent cells, but long-standing territorial disputes make it difficult for political and military leaders of factionalized security forces to agree on a coherent plan for establishing a deterrent security presence. Without that, insurgents still enjoy safe havens and significant freedom of movement, three years after Iraq claimed victory in the war against the IS group.

Sunni members of Parliament are mounting an effort to remove Speaker of Parliament Mohammed al-Halbusi. In remarks published in Baghdad’s Al-Aalem newspaper, MP Muhammad al-Khaledi said, “Parliament has utterly failed in performing its legislative and oversight functions.... Parliament has failed to hold even a single corrupt official to account. And on the legislative side, it has failed by approving laws filled with mistakes that are approved only through bargains and arrangements.... The shortcomings are entirely the fault of the speaker, Muhammad al-Halbusi.” Khaledi claimed the effort has won tacit backing from Kurdish leaders. The speakership of Parliament is the highest office reserved for a Sunni in Iraq’s informal power-sharing arrangements. A struggle among Sunni MPs over the post could result in erratic behavior by the Parliament when it comes to the budget, electoral reforms, and efforts by pro-Iran MPs to pressure Kadhimi to secure the withdrawal of U.S. military forces.

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