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The policy of reducing oil production remains a pending issue between the Iraqi Oil Ministry and the Presidency of the Government, which seeks to reach an international exemption from this issue as it hurts Iraqi finances, especially due to the many challenges in the restoration of the emirate and rampant corruption.
Observers rank Iraq, which is OPEC’s second-largest producer, which had previously not fully complied with OPEC’s oil production cuts, as it has pumped more than the targets set for its production since it was first signed. Once the agreement in 2016 between OPEC and its Russian-led allies.
An OPEC source said: “Iraq believes that it was not treated properly in December 2016 when it was not excluded. With the economy still suffering due to low prices, this problem will continue to reappear. “
Iraq’s economy and oil sector have been depleted by years of wars, sanctions and clashes with Islamic militants following the US invasion, and Baghdad complains that it is struggling to revive the stagnant oil industry, while the rest of the members of OPEC benefit and strengthen their actions.
Logistics.
Baghdad also complains that it is struggling to reactivate the stagnant oil industry, at a time when the rest of the OPEC members are benefiting and strengthening their market shares.
Iraq depends on oil to finance 97 percent of its government budget. Finance Minister Ali Allawi told Parliament on Wednesday that reforming the Iraqi economy will take five years of work and that the government debt has ranged from 80 to 90 percent of the national product, while the external debt is of 133,000 million dollars.
Since last May, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as the OPEC Group, have implemented a record reduction of 7.9 million barrels per day, or equivalent to ten percent of world production, after the Corona virus crushed a third of world demand. As of August 1, the reduction was reduced to 7.7 million barrels per day through December.
Iraqi politicians criticize the agreement signed by the previous interim government, according to which Baghdad agrees to drastically reduce its production.
With oil prices currently trading at around $ 40 a barrel, sources in Iraq and OPEC told Reuters that opposition to the oil cuts is mounting behind closed doors, and that talks about reviving old calls to consider have reappeared. the size of the cutouts.
A senior Iraqi official familiar with the talks said there is a difference of views between the Oil Ministry and the Prime Minister’s Office on whether to comply fully with the cuts or request a waiver next year. Ministers to comply.
The official confirmed that the dispute now revolves around Iraq’s financial problems. In May and June, Iraq agreed to reduce its crude production by just over a million barrels per day, while facilitating that reduction to 849 thousand barrels per day from July until the end of the year.
But Iraq now wants to fully adhere to the agreed production targets and even make up for its previously surplus production in the May-July period by further reduction in the following months.
“There is strong opposition … to its continued involvement (by Iraq) in the supply cuts,” the OPEC source said, adding that there were informal talks about Baghdad’s need to request a waiver of the oil cuts. in 2021, but it was unclear whether Iraq would actually take that step or not.
In August, Iraq achieved the highest compliance rate in recent years, but said it could take two months to extend the compensation period.
Current Prime Minister Mustafa al-Kazemi took office in May, becoming the third head of an Iraqi government in a chaotic ten-week period that followed months-long bloody protests in the country, strained by decades of sanctions, war, corruption and economic challenges.
A spokesman for the Iraqi Oil Ministry confirmed last week that Baghdad remains fully committed to the deal to cut OPEC oil supplies, denying media reports that it is seeking a waiver from the reduction agreement during the first quarter of 2021.
And last June, Iraq said it had asked OPEC to take into account the economic situation of the members when sharing the burden of future cuts in oil production.
World Bank estimates indicate that Iraq’s economy will contract by 7.9 percent in 2020 in light of lower oil prices and the Corona virus, compared to growth of 4.4 percent in 2019.
