Iraq: Selected Issues

Abstract

Iraq: Selected Issues

The Iraqi Oil Sector: Developments and Prospects After the Twin Shock1

A. Introduction

1. The Iraqi economy was affected by the two major challenges during 2014—ISIS insurgency and the fall in global oil prices. The ISIS insurgency put pressure on budget through increased military and humanitarian spending and threatened the security of oil facilities. The spillover from falling oil prices to the economy was strong as the structure of the economy is not diversified and oil is effectively Iraq’s only export. The impact of ISIS insurgency and weak global prices are fully unfolding in 2015. This paper will describe the Iraqi oil sector developments under the twin shock and discuss its impact on oil sector growth prospects in the short- and medium-term.

2. With the fifth-largest proved crude oil deposits, Iraq is a major oil producer and exporter of crude oil. Currently it produces about 4 percent of the global oil supply and is the second-biggest producer in OPEC after Saudi Arabia. Iraq possesses a huge potential for increasing its contribution to global oil supply due to a number of factors. First, with already vast proven reserves, most of Iraq remains greatly under-explored compared with other major oil producing countries. Second, the cost of oil production in Iraq is one of the lowest in the world due to relatively uncomplicated geology, multiple super giant oilfields and their onshore location, and close location to coastal ports (IEA, 2012).

3. Iraq’s oil resources are unequally spread geographically. The lion’s share of proven oil reserves—about 75 percent—is concentrated in the south, including in five super-giant fields (Rumaila, West Qurna, Zubair, Majnoon, and Nahr Umr) and this region contributes roughly the same share in Iraq’s oil exports. About 17 percent of the reserves are in the north. The rest of the reserves are in central (East Bagdad) and west Iraq.

Selected Countries: Proven Oil Reserves

(At end-2014)

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Source: BP Statistical Review of World Energy 2015.

B. Recent Developments

4. Iraq’s oil sector has performed well despite the security challenges that emerged after the onset of the ISIS insurgency in June 2014. The share of the oil sector in Iraq’s real GDP increased to an estimated 53 percent in 2014 from 50 percent a year earlier. Iraq produced 3.11 million barrels per day (mbpd) crude in 2014 compared to 2.98 mbpd in 2013. Oil exports also increased to 2.52 mbpd from 2.39 mbpd. These numbers, however, do not include oil production and exports by the Kurdistan Regional Government (KRG) for 2013 and most of 2014.2 The KRG crude oil production is estimated to have averaged 0.22 mbpd in 2013 (IEA, MTMR, 2014). For the second half of 2014, the KRG has reportedly produced 0.35 mbpd of crude oil. The KRG Ministry of Natural Resources has announced a target to achieve 1.0 mbpd oil production in 2015.

5. On average, Iraq earned $97 per barrel (pb) on oil exported in 2014. Iraq’s oil prices have been closely aligned to the Dubai Fateh benchmark. The monthly spread between the Iraqi oil and Dubai Fateh fluctuated within the years, but the monthly spread in 2013 and 2014 on average was –$2.5 pb and +$0.35, respectively. The rapid advance of ISIS in Northern Iraq affected the global oil market and Dubai prices in June 2014 increased by about $2.5 per barrel compared to May. However, prices reverted to the May level quickly, already in July, probably reflecting the decreasing risk of ISIS expansion towards the south, where Iraq’s main oil facilities are located. Despite increased volume of exported volume in 2014, export receipts fell by 7 percent compared to the previous year.

Oil Production and Exports, 2012–2015

(In million barrels per day)

article image
Source: Ministry of Oil of Iraq.

North Oil Company and Midland Oil Company.

South Oil Company and Maysan Oil Company.

For five months.

A01ufig2

Spread between Dubai and Iraqi Oil Prices 1/

(In U.S. dollars per barrel)

Citation: IMF Staff Country Reports 2015, 236; 10.5089/9781513521923.002.A001

Sources: Iraqi authorities; and IMF staff calculations.1/ Positive values indicate higher Iraqi oil prices than Dubai oil prices.
A01ufig3

Iraqi Oil Price vs. Dubai Fateh Price

(In U.S. dollars per barrel)

Citation: IMF Staff Country Reports 2015, 236; 10.5089/9781513521923.002.A001

6. Asia remained the leading destination of the Iraqi oil exports during 2013–14 and its share increased from 50 percent in 2012 to 65 percent in 2014. Two main factors contributed to this outcome. First, America’s shale oil boom lessened demand for OPEC oil, including from Iraq, in North America. Second, Iraq is reaping the benefit of its relative proximity to the Asian customers, such as China and India, which account for large part of global oil demand growth. Iraq established itself as an important source for China’s growing energy needs. China, the world’s top energy consumer, boosted its investments in Iraq’s oil sector in support of its energy security. Chinese state-owned companies have invested around US$10 billion in Iraq since 2003, accepting relatively lower profits to win contracts and secure supply of oil for its fast-growing energy needs. In January 2015, Iraq overtook Angola and Russia to become China’s second-largest oil supplier. While China is expected to remain an important importer of Iraqi oil in the medium term, the possible removal of international sanctions on Iran may increase the competition between Iraq and Iran in supplying oil to its Asian customers. Overall, these developments could reduce Iraq’s oil export receipts.

A01ufig4

Composition of Exports by Destination

(In million barrels per day)

Citation: IMF Staff Country Reports 2015, 236; 10.5089/9781513521923.002.A001

Sources: Iraqi authorities; and IMF staff calculations.

7. To maintain the quality of its flagship southern Basra Light blend and improve importers’ confidence, Iraq recently announced splitting its crude supply into light and heavy grades. Mixing of Basra Light with the growing supply of heavier oil from the south due to lack of centralized blending and storage facility deteriorated its quality. The Basra Light failed to meet specifications predetermined by buyers’ refineries.3 As a result, in early 2015 some companies declined to load cargoes with it, which had to be sold with about $3 pb discount. The Ministry of Oil (MOO) announced that starting from June two of the three export facilities in the south of Iraq would be allocated exclusively to Basra Heavy. Splitting of the crude grades is appropriate to prepare for the long-term as the larger part of the newer production increases is expected to be in heavy oil. It will also help avoid paying penalties to customers for delivering lower quality crude than contracted. However, it may take some time before Iraqi heavy establishes itself in the market as some Asian refiners do not have high capacity to refine heavy crude.

C. Impact of the Insurgency on Regional Oil Production and Exports

8. Against initial fears, the conflict with ISIS has not spread to the south so far, leaving oil sector activities in this area unaffected. ISIS has not been able to advance to the proximity of any of the large oilfields in southern Iraq (map). Southern fields pumped 2.72 mbpd oil in 2014 compared to 2.33 mbpd in 2013. Exports from this part of the country also increased by 0.33 mbpd for this period to reach 2.46 mbpd in 2014. An extension of the conflict to the south would have had serious consequences for Iraq and for the global oil markets. For this reason the Iraqi government posted around 100,000 policemen to defend its southern oil facilities. During a recent OPEC meeting the Iraqi oil minister announced that 27,000 more security personnel would be allocated, trained, and equipped to protect its oil and energy facilities from ISIS offensive.

9. Deteriorating security, however, took a toll on oil sector activities in northern and central Iraq, resulting in a complete halt of exports through the northern Kirkuk-Ceyhan pipeline since early 2014. In 2014 northern Iraq produced 0.40 mbpd oil, 40 percent less than in 2013. Exports fell much more. Due to the halt of exports through the damaged Kirkuk-Ceyhan pipeline, exports from the north were just 0.06 mbpd compared to 0.26 mbpd in 2013. Military attacks in these areas had been widespread already before the ISIS insurgency. The unprotected Iraqi western provinces have been affected since the start of the Syria conflict. The federally-controlled Kirkuk-Ceyhan pipeline—the principal export outlet for the Kirkuk oilfields—has been a target of various insurgent attacks since 2012. Its 0.90 mbpd export capacity before 2003 has been reduced to 0.50 mbpd and further to around 0.25 mbpd due to more than 50 attacks during 2013. It was ultimately shut down in early March 2014 as workers could not carry out repair works due to continued violence and repeated attacks. Furthermore, ISIS occupied most of the unexplored northern territories (with the exception of Kurdistan) and western parts of Iraq, posing a threat to the exploration activities of the international oil companies’ (IOCs) in this area. Some of the IOCs working in the surrounding areas abandoned or suspended their exploration projects, delaying future development of oilfields.

10. ISIS surrounded Iraq’s Baiji refinery shortly after the start of the insurgency and it has been out of commission since then. The Baiji refinery, located about 155 miles north of Baghdad, had been contributing more than a quarter (about 0.18 mbpd) of country’s entire refining capacity before the ISIS invasion. The Iraqi forces retook the refinery from ISIS militants in November, but later lost its control, regaining it again in April 2015 with the help of the U.S.-led coalition airstrikes. The battle caused a fire and severe damage to Baiji’s storage tanks. The fight for Baiji refinery continues.

11. The KRG Peshmerga forces moved into the previously federally controlled northern city of Kirkuk to fill a security vacuum after government troops fled the city due to rapid ISIS advancement. The status of ethnically diverse and oil-rich Kirkuk has been one of the thorniest topics between Baghdad and Erbil over Iraq’s disputed territories. According to the Article 140 of Iraq’s 2005 constitution, the legal status of the Kirkuk governorate should have been determined through the referendum by no later than December 31, 2007. However, the referendum never took place. The constitution also stipulated that a census had to be conducted before the referendum takes place. The KRG has effectively been controlling large parts of Kirkuk’s oilfields since mid-July. Oilfields around Kirkuk are estimated to hold about 10 billion barrels of oil. The oil produced from Kirkuk field is currently shipped through the KRG autonomous pipeline to the Turkish border in line with the Baghdad/Erbil agreement on oil-revenue sharing (see below).

12. According to some estimates, ISIS controlled only four oilfields in northern Iraq by end-2014 compared to seven fields in mid-2014. Total production capacity of these fields for this period is estimated to have fallen from about 0.08 mbpd to 0.02 mbpd. Allegedly ISIS has been using part of the produced oil for its own oil supply. Reportedly, it has created a sophisticated smuggling system to ship the rest of the produced oil on tanker trucks to small refineries in northern Iraq and sell at a major discount at the long-standing black export market via Turkey. It has also been reported that after the invasion ISIS got hold of about three million barrels of oil by draining pipelines, storage tanks, and pumping stations (IEA, OMR, October 2014). The revenues from smuggled oil are thereafter used by ISIS to pay for fighters and military commanders, and finance some public sector activities in captured territories.

D. The Oil Factor in Baghdad-Erbil Relations

13. Baghdad and Erbil have been in disagreement on the rights and modalities over the control and exploitation of oil reserves since the enactment of the 2005 constitution. Articles 111 and 112 of the constitution are supposed to define the control and distribution of natural resources, but they are not entirely clear and exhaustive, allowing different interpretations by each side.4 According to Baghdad, the federal government has the exclusive right to develop and export oil and sign contracts covering the Iraqi territory and the KRG is not allowed to adopt unilateral and permanent measures over the management of oil and gas fields. Erbil’s interpretation, however, is that it also is entitled to enter into contracts and export oil independently of Baghdad. A hydrocarbon law could settle the legal issues between the KRG and the federal government regarding ownership, development, sharing, and exporting of natural resources. The original hydrocarbon law, submitted to the parliament back in 2007, has not been approved due to disagreements among the various parliamentary factions. The current government, which is considered to be more inclusive in terms of sectarian representation compared to previous governments, has a better chance to accomplish this challenging task. In the absence of a national hydrocarbon law, the KRG passed its own hydrocarbon law in 2007. In April 2015 the KRG adopted the Oil and Gas Revenue Fund law which defines the principles of spending of oil revenues, including allocation to the future generation fund, and aims at improving transparency of spending.

14. The landlocked KRG has been striving to export oil independently in spite of Baghdad’s disapproval and in an attempt to achieve greater economic autonomy. Small scale independent oil exports to Turkey by trucks reportedly started at end-2012. In 2013 about 0.04 mbpd of the KRG production is estimated to have been sold to truckers at a discounted price and exported to Turkey. An estimated 0.18 mbpd was processed at local refineries and an increasing number of so-called “tea pot” refineries in the KRG and then also trucked to Turkey and Iran. In 2014 the KRG advanced work toward creating its independent network for oil exports. It upgraded existing pipelines on its territory, built a new pipeline connecting the region to Ceyhan terminal on Turkey’s Mediterranean coast, linked it to Kirkuk, and started to ship oil (an estimated 0.3 mbpd) in May bypassing federal government control. Truck shipments supplemented the KRG oil exports to Turkey through the export pipeline. Baghdad warned potential customers that any oil exported from Iraq outside the State Oil Marketing Organization (SOMO) would be illegal and a violation of country’s constitution. The federal government had been blocking the KRG cargoes through litigation, making it difficult for the KRG to find buyers and forcing it to sell crude at a considerable discount.

15. In February 2014 Baghdad suspended federal budget transfers to the KRG due to the standoff over revenue sharing and the legality of contracts signed by the KRG. Reflecting its share of the country’s population, the KRG had been receiving 17 percent of the federal budget revenue in exchange for an agreed level of oil production. The KRG managed to export around 0.19 mbpd oil between June and November 2014 and earned an amount equivalent to about one-third of the $8 billion in transfers suspended by the federal budget. The cut in federal transfers plunged the KRG into economic difficulties. It further strengthened the KRG’s incentive to carry on independent oil shipments.

16. Under the pressure of the ISIS insurgency and sharply falling oil prices, Baghdad and Erbil reached an oil revenue sharing agreement in December 2014. According to the deal, the KRG committed to export 0.55 mbpd oil on behalf of the federal government, including 0.30 mbpd from the Kirkuk field through the new KRG-Turkey pipeline, and 0.25 mbpd from the new fields of the core KRG territory. All exports have to be marketed by SOMO. In return, the federal government resumed fiscal transfers to the cash-constrained KRG. Kurdish exports through the northern corridor boosted Iraq’s overall production, exports, and more importantly, revenues for the federal government to battle ISIS. The financially stronger KRG also became better-positioned to continue fighting ISIS in the north. Apart from the positive financial impact, the agreement was a landmark achievement that demonstrated Erbil’s and Baghdad’s collaboration and commitment to fight ISIS.

17. While the agreement has been working relatively well, some problems have been reported in June. In particular, the KRG announced that it had to increase direct sales to repay the debt accumulated in 2014 because of in advance oil sales, but it still remained committed to the 2015 federal Budget Law.5 Adhering to the preliminary agreement on oil revenue sharing and ultimately reaching a long-standing solution will be beneficial for both Baghdad and Erbil.

E. Renegotiation of Contracts

18. Falling oil prices have triggered the renegotiation of existing oilfield development contracts by the federal government. Mirroring different interpretations of power distribution embedded in the 2005 constitution, the Iraqi federal government and the KRG have employed different contractual systems for upstream oil sector development.

19. Starting 2009 the federal government has been awarding so-called Technical Service Contracts (TSCs) to the IOCs. Under the Iraqi TSC, the IOCs don’t have a share in production; instead the government reimburses IOCs for the cost of oil production (including investment expenses) and pays a flat fee per-barrel (US$1–5, depending on contracts). While the TSCs gave relatively low profit margins to the IOCs, the guaranteed and quick cost recovery provided solid incentives for them to stay in business. The TSCs were lucrative for the government when oil prices were high, but they became less attractive with falling oil prices as revenues from oil exports plummeted and payment obligations to the IOCs remained high. To reduce the burden of the investment payments, the MOO has asked the IOCs working in the southern fields to cut down development plans and lower oilfields’ development budgets. Production peaks have been adjusted downwards in five out of twelve contracts and the decisions for the rest of the contracts are pending. The MOO has requested to renegotiate the contracts and proposed to link the flat per barrel fees to oil prices but lock the resultant fees into the pre-determined corridor. However, the companies have so far not accepted this proposal.

20. Aiming to attract further interest in its hydrocarbon sector and promote economic development, the KRG created a more open contractual system. In spite of Baghdad’s opposition, it has reportedly entered into dozens of Production Sharing Contracts (PSC) with a number of international companies, giving them an equity stake in discovered oilfields. Development of northern oilfields brought lucrative signing bonuses and revenues. Oil development projects also attracted foreign investments and created tertiary-sector employment. However, continued objections from the federal government and existing uncertainty over the constitutionality of oil deals with the KRG have slowed down development of the region’s oil and gas resources. Apart from questioning the legality of KRG’s awarded contracts, Baghdad has been asking for increased transparency and accountability of the KRG contracts.

F. Oil Sector Expansion Plans Under Revision

21. The Iraqi government set an ambitious target to increase oil production capacity to over 13 mbpd when it signed service contracts with major IOCs during 2009–10.6 While recognizing Iraq’s huge potential for oil production growth capacity, oil markets analysts were doubtful that this target could be met. In fact, production targets have been officially revised downwards substantially since then. The baseline scenario of Iraq’s 2013 National Energy Strategy targeted oil production to increase from 4.5 mbpd in 2014 to 9 mbpd by 2020 (IEA, OMR, May 2015). The government’s latest targets for oil production and oil export are 7 mbpd, and 6 mbpd, respectively, by 2020.

22. It is unlikely that the government will meet the production (3.8 mbpd) and export (3.3 mbpd) targets set in the approved 2015 budget. Based on average actual oil production (3.13 mbpd) and export (2.87 mbpd) for the first five months, production and exports for the remainder of the year should average 4.28 mbpd and 3.61 mbpd, respectively, to meet these targets. (In 2014 production averaged 3.11 mbpd and exports averaged 2.52 mbpd). Northern exports averaged 0.32 mbpd during the same period and they should average 0.71 mbpd for the remainder of the year to reach an average 0.55 mbpd in 2014 set in Baghdad/Erbil agreement. Achieving these levels will be extremely difficult, if not impossible, task despite continued growth in oil production and exports.

23. A number of factors will impact Iraq’s medium-term oil sector expansion plans.

  • Conflict with ISIS. While the government is slowly retaking ISIS-controlled territory, the fight against ISIS could be protracted. Fear of continuation or outbreak of new hostilities could suspend implementation of the next phases of some of the existing projects or deter IOCs from starting new projects.

  • Extended period of lower oil prices. Pressure from the sharp drop in oil prices was already felt in 2014. Because of lower-than budgeted oil prices the government has been delaying payments to the IOCs which reduced their profit margin. IOCs have also lowered their investment plans at the request of the MOO. Apart from the developments in Iraq, currently the IOCs are generally less inclined to invest in oil projects due to the weaker profitability prospects.

  • Limitations of Technical Service Contracts. IOCs will be assessing the profitability of further investments in Iraq versus investment opportunities in other locations, where their profit is not constrained by fee-per-barrel based TSCs.

  • Insufficient storage facilities. Up until February 2015, the Basra terminal had 9.5 million oil storage capacity, enough to store production of just seven days during bad weather when oil cannot be shipped. Three newly opened storage tanks increased the storage capacity to 10.5 million and completion of another 4–5 million barrels storages capacity is planned by end 2015. This should help deal with halting oil production caused by bad weather. New ramping stations are also necessary to increase export potential.

  • Insufficient pipeline capacity. Iraq’s southern export capacity increased with the addition of a three Single Point Moorings (offshore oil loading system) to export crude oil via the Gulf. However, these are not enough to keep up with increasing southern export capacities. Iraq’s plan to ramp up production and diversify oil export routes through a 1 mbpd, 1,050 mile long pipeline from its southern oilfields to the Jordanian port of Aqaba will most likely be delayed because of security concerns and lack of financial resources.

  • Water and gas injection. Iraq has to reduce gas flaring and develop new gas fields to meet its oil production targets. Injection of gas or water is necessary to increase oil recovery rates. About 10 to 12 bbl/d seawater is needed to maintain oil reservoir pressure and keep up production from its fields in the south. The start of the Common Seawater Supply Project (CSSP), which should provide treated seawater from the Gulf to oilfields in southern Iraq through pipelines, has been postponed several times. In February 2015 it was announced that the American company Parsons has been awarded a front-end engineering design deal for CSSP.

  • Cumbersome bureaucratic procedures. Many IOCs voiced concerns over the inefficient and slow procedures for approval of field development plans and signing off on contracts to advance projects. Focusing on the fight with ISIS could delay the approval of new oil plans. Procedures for visa issuance for expatriate workers and customs clearing of equipment have also been criticized. The MOO acknowledged these shortcomings and in response prepared a decree on “Facilitation and Simplification of Procedures in Oil Projects Execution” that was approved by the cabinet in March 2015.

24. Market observers have been revising downward Iraq’s medium-term oil production forecast taking into account these factors.

  • The IEA reduced Iraq’s annual average estimated increase in sustainable oil production capacity forecast from 0.21 mbpd over the period of 2013–19 to 0.18 mbpd over 2014–20 (IEA, MTMR, 2014 and 2015). Iraq is still expected to account for the largest individual contribution (40 percent, or 1.07 mbpd) to OPEC’s crude oil production capacity growth over 2014-2020 (IEA, MTMR, 2015),7 albeit lower compared to 61 percent projected a year earlier.

  • BMI Research also forecasts that the current challenges will negatively impact longer-term investment in expansion of oil projects in Iraq. It revised down Iraq’s oil production forecast in 2015 from 3.7 to 3.5 mbpd. The main factors behind the downward revision were a lack of oil export growth from the southern fields and limited (0.100 mbpd) additional oil from the KRG during 2015. BMI projects 0.5 percent and 1.4 percent production increase in 2016 and 2017, respectively, mainly on account of the existing projects reaching their peak capacity.

Estimated Sustainable Crude Production Capacity: OPEC and Iraq 1/

(In million barrels per day)

article image
Source: IEA Medium-Term Market Report 2014 and 2015.

MTMR capacity estimates are based on a combination of new project start-ups, and assessed base load supply, net of mature field decline.

25. Fund staff has also revised Iraq’s oil production and exports forecast over the medium-term. Currently we project oil production to reach 4.7 mbpd in 2018 compared to 5.7 mbpd forecasted at the time of the 2013 Article IV consultation. Projection of exports for the same period has also been reduced to 3.84 mbpd from 4.75 mbpd.

A01ufig6

Iraq Oil Production

(In million barrels per day)

Citation: IMF Staff Country Reports 2015, 236; 10.5089/9781513521923.002.A001

Sources: Iraqi authorities; and IMF staff calculations.
A01ufig7

Iraq Oil Exports

(In million barrelsper day)

Citation: IMF Staff Country Reports 2015, 236; 10.5089/9781513521923.002.A001

References

  • BMI Research, (A Fitch Group Company), 2015, “Iraq: Industry Trend Analysis—Oil Production Growth to Struggle,” (April).

  • International Energy Agency (IEA), 2012, “Iraq Energy Outlook

  • International Energy Agency (IEA), 2014a, Medium-Term Market Report (MTMR), “Market Analysis and Forecasts to 2019

  • International Energy Agency (IEA), 2014b, Oil Market Report.

  • International Energy Agency (IEA), 2015a, Medium-Term Market Report (MTMR), “Market Analysis and Forecasts to 2020

  • International Energy Agency (IEA), 2015b, Oil Market Report (OMR)

  • Kurdistan Regional Government, 2015, Monthly Export Report

1

Prepared by Koba Gvenetadze.

2

The Baghdad-Erbil agreement regarding the oil revenue sharing started to be implemented in December 2014.

3

The American Petroleum Institute (API) gravity of Basra Light crude has recently fluctuated between 28.1 and 32.2 degrees. In contrast, the API gravity of the Basra Heavy blend is about 23.6 degrees. The API gravity is an inverse measure of petroleum liquid’s density relative to that of water. The higher the API gravity, the lighter is the crude, requiring less processing. Crude with gravity below 27 degrees is considered to be heavy.

4

Article 111: Oil and gas are owned by all the people of Iraq in all the regions and governorates. Article 112: First: The federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions which were unjustly deprived of them by the former regime, and the regions that were damaged afterwards in a way that ensures balanced development in different areas of the country, and this shall be regulated by a law. Second: The federal government, with the producing regional and governorate governments, shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encouraging investment. Source: http://www.iraqinationality.gov.iq/attach/iraqi_constitution.pdf

5

Monthly Export Report, June 2015, Kurdistan Regional Government.

6

IEA 2012 report on Iraq assumed oil production of 4.2 mbpd by 2015, 6.1 mbpd by 2020, and 8.3 mbpd by 2035 as a Central Scenario.

7

The forecast assumes that international sanctions on Iran remain through the forecast period.

References

  • Arab Future Energy Index (AFEX), 2015, Regional Center for Renewable Energy and Energy Efficiency (RCREEE).

  • International Monetary Fund, 2014, “Subsidy Reform in the Middle East and North Africa: Recent Progress and Challenges Ahead,” (Washington: IMF, Middle East and Central Asia Department).

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    • Export Citation
  • International Monetary Fund, 2015a, “Fiscal Monitor: Now is the Time—Fiscal Policies for Sustainable Growth,” (Washington: IMF, Fiscal Affairs Department).

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    • Export Citation
  • International Monetary Fund, 2015b, “Saudi Arabia: Tackling Emerging Economic Challenges to Sustain Growth,” (Washington: IMF, Middle East and Central Asia Department)

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    • Export Citation
  • USAID, 2006, “Iraq in Perspective—An Analysis of What Does and What Does Not work in a Transitional State: How to Make Subsidy Reform Work in a Transitional State.

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    • Export Citation
  • United Nations, 2014, “Food and Agriculture Organization (FAO), Food and Agriculture Policy Decisions: Trends, Emerging Issues and Policy Alignments since the 2007/08 Food Security Crisis.

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  • World Bank, COSIT, and KRSO, 2007, Household Socio-Economic Survey, Iraq.

  • World Bank, COSIT, and KRSO, 2011, Iraq: Rationalization of the Universal Public Distribution System. Concept Note

  • World Bank, COSIT, and KRSO, 2014, “Republic of Iraq: Public Expenditure Review—Toward More Efficient Spending For Better Service Delivery.

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1

Prepared by Amgad Hegazy.

2

See analysis below for food and electricity, and MCD subsidy study for fuels (based on the price-gap approach). The full cost of fuel subsidies along the entire chain for the sector—apart from the direct product subsidy—is more difficult to measure given lack of accurate information on a product by product basis.

3

The conflict with ISIS is affecting the PDS by limiting coverage in the conflict-affected areas and restricting the variety of food stuffs provided under the scheme. The description of the PDS in this section is mostly based on the pre-conflict set-up.

4

Iraq’s social safety nets also include assistance to widows and martyrs, and agricultural subsidies.

5

The estimate does not include some costs for which adequate information was not available, such as investment for the expansion of the existing grid, construction of new electricity lines, infrastructure, etc.

6

Simulations prepared by the World Bank confirm that the impact on the lowest consumption segments would be minimal, even though data availability may affect these results.

Iraq: Selected Issues
Author: International Monetary Fund. Middle East and Central Asia Dept.