As oil prices fall due to the economic consequences of the global Coronavirus outbreak, the negative impact on the Iraqi economy is being felt.
Global oil prices have been tumbling down in recent days as demand for oil has reduced dramatically due to the economic impact the Coronavirus is having on countries around the world. Iraq, which is heavily dependent on revenues from oil exports, has already begun to feel the effects of the global economic downturn.
“The collapse in oil prices, which took place in the past two days, represents a setback and catastrophe for the Iraqi economy. I think it will be a shock similar to that economic and security shock that Iraq suffered from 2014 to 2015”, commented Kowfand Shirwani, an academic referring to the economic shock experienced by Iraq during the ascendance of ISIS in the country.
Iraq’s Oil Minister, Thamer al-Ghadhban, mentioned that he is in contact with other OPEC (Organization of the Petroleum Exporting Countries) members to discuss ways to prevent the fall in oil prices. Those surveying oil prices at the Ministry of Oil have been commanded to evaluate prices on a daily, rather than monthly, basis.
The 2020 federal budget of Iraq, which is yet to be agreed upon, will face further challenges due to the heavy focus on the distribution of oil revenues to public services and investments, as well as to the allocation of oil revenues to the Kurdistan Region of Iraq.
As governments around the world begin to expend increased efforts to tackle the spread of the Coronavirus, businesses are also being more and more restricted in their operations, leading to a further decrease in demand for oil, causing a drop in prices.
Oil markets were particularly harmed as Saudi Arabia and Russia failed to come to terms regarding negotiations to cut global oil supplies to correspond with the reduction in demand and stabilise oil prices. Russia refused to agree on output cuts, and Saudi Arabia reacted by announcing that it would reduce its oil prices in order to stimulate demand.