Post Iran-Israel war: Iraqi economist warns of vulnerabilities

Shafaq News

14 hours ago

Shafaq News - Basra
Iraq's economy is increasingly exposed to external shocks and structural weaknesses following the Iran-Israel war, economist Nabil Al-Marsoumi warned on Saturday.
Al-Marsoumi, a professor of economics at Basra University, stated that insurance premiums on oil tankers from the Gulf to Asia surged by 60% during the 12-day war, while transport costs—particularly to China and India—increased by 195%. These shifts, he noted, highlight Iraq's vulnerability to geopolitical disruptions in energy supply chains.
He also warned that a prolonged conflict could have forced a closure of the Strait of Hormuz—a key route for most Iraqi oil exports. With the Ceyhan pipeline suspended since March 2023, Iraq would have been left without a viable export channel.
Kurdistan's Gambit
Al-Marsoumi assessed that halted oil flows from the Kurdistan Region, averaging around 400,000 barrels per day through the Ceyhan pipeline to Turkiye, represent a minor share of national revenue and can be compensated by output from central and southern fields.
However, he emphasized that the more urgent concern lies in the Region's salary crisis. 'There is no legal or fiscal basis for delaying public sector wages,' he said, calling for a revenue-sharing framework that routes all oil and gas income through the federal treasury to ensure timely disbursements.
Regarding the way the Kurdistan Regional Government (KRG) is reportedly to take to cover salaries, he explained that this would be by using internal revenues while reducing employee allowances by 30%—a temporary measure that, in his view, underscores the absence of a political settlement between Erbil and Baghdad.
Labor Imbalance
Turning to Iraq's energy sector contracts, Al-Marsoumi pointed to structural deficiencies in foreign labor agreements. Unlike Iran, which retains over 250 Russian experts at its Bushehr nuclear facility under binding terms, Iraq lacks enforceable retention clauses.
'More than 5,000 foreign nationals currently work in Iraq's energy sector, often receiving compensation far exceeding local staff despite limited involvement in daily operations,' he noted, adding that this disparity places unnecessary financial strain on national resources.
Al-Marsoumi described Iraq's business environment as fundamentally unattractive to foreign investors. He cited systemic corruption, armed group influence, weak infrastructure, legal complexity, and widespread rent-seeking as key deterrents.
He rejected government claims of attracting $90 billion in foreign investment as 'media posturing,' pointing out that Iraq's balance of payments shows no evidence of actual capital inflows.
Al-Marsoumi also criticized Iraq's continued dependence on imported gasoline and gas, calling it a policy contradiction for the world's second-largest oil producer. He contrasted this with Iran's heavily subsidized domestic fuel pricing.
'Iraq has made little tangible progress toward energy self-sufficiency. We need structural reform led by political leadership committed to economic diversification. Despite frequent public pledges to develop agriculture and industry, oil revenues continue to account for 91% of the federal budget.'
To reduce external vulnerabilities, he recommended activating alternative export corridors through Turkiye, Syria, and Jordan.
Price Volatility
Al-Marsoumi reported that oil prices declined to around $66 per barrel after the conflict, with May revenues barely covering public payrolls. He urged the government to curb spending and expand non-oil revenue streams.
He cited recent remarks by US President Donald Trump suggesting China could resume imports of Iranian oil—a signal, he argued, of possible sanctions relief that might allow Tehran to export up to 750,000 barrels per day.
Saudi Arabia also plans to increase output by 411,000 barrels per day in response to US calls for lower global oil prices, according to Al-Marsoumi, marking a shift from price stabilization to market share competition, which could push prices down toward $60 per barrel.