Iraqi oil industry in crisis (Botched reconstruction)

Iraqi oil exports fell to their lowest level in two years in November 2005. Bad management of the reconstruction effort, widespread corruption among government figures, and sabotage by insurgents are the reasons for the decline. Experts say that the US strategy of military intervention in oil-rich regions can only diminish, rather than increase, the supply to world markets.

By Heiko Flottau in Cairo for ISN Security Watch (7/12/2005)

Two-and-a-half years after the US invasion of Iraq, the country's oil industry is still in disarray. An official of the Oil Ministry in Baghdad told ISN Security Watch, on condition of anonymity: “We do not know the exact quantity of oil we are exporting, we do not exactly know the prices we are selling it for, and we do not know where the oil revenue is going to.”

According to Baghdad press reports, export revenues are still not sufficient to cover the Iraqi state budget. The government is forced to take loans from international banks to cover its running expenses.

Although the US invested around US$1.3 billion in the rehabilitation of oil plants damaged by lack of maintenance during 13 years of UN sanctions, the daily output of approximately 1.3 million barrels remains far below Iraq’s pre-war production level of 2.5 million barrels.

The production goal for December 2004 of 3 million barrels per day, set by the US and the Iraqi government, cannot be reached in the near future, according to experts within the Iraqi Oil Ministry who talked to ISN Security Watch.

The Iraqi government looks set to lose US$8 billion a year in potential oil revenue, due to the poor current state of the oil industry.

Botched reconstruction

One of the reasons for the decline of the industry is a lack of progress in the reconstruction effort, due to serious managerial deficiencies.

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