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NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 141
J M T-E
O, I:
A
is article provides evidence on the economic and social importance of the oil sector in
Iraq. Existing literature allows to understand the background, context and institutional
framework that regulate the oil sector, the main implications and limitations for its deve-
lopment, and the impacts of the current con ict on human development. By using a com-
parative analysis of di erent secondary sources and statistical databases, the results show
that Iraq has one of the largest oil reserves in the world; and the challenges that Iraq faces
in order to overcome mismanagement of the sector, the underdevelopment of the infrast-
ructure, the gap in the human development and the internal war.
. I
Iraq´s possess an important wealth of crude oil, and natural gas, nevertheless, the development
of this sector seems uncertain. Di erent sources show how this country has one of the largest
reserves worldwide, the experts argue, that a democratic and real management of the advantages
of this sector may provide high level of welfare and thus, human development, by mean of a
participative, democratic and transparent system of production. Nevertheless, this wealth has
not been exploited and distributed according to these principles (Tsui, 2011). Surrounded by the
international and domestic interests, this strategic sector of Iraq´s economy has been extremely
a ected by subsequent devastating wars, and a er decades of a state control (by a military regime
and dictatorship).
e real capacity and bene ts of the oil elds has been underestimated and moderately de-
veloped. Nowadays, Iraq faces several options on how to exploit this strategic sector in order to
bring welfare for its population and develop for the county. With one of the largest crude oil re-
serves, Iraq can lead the world oil market a er 2020, but it depends of the capacity of the country
to overcome the instability emerged a er the regime and three wars developed between 1979
and 2003 (Maugeri, 2012). e oil production in Iraq has been managed under the framework of
1 PhD Student, International Relations Multidisciplinary Doctoral School, Corvinus University
2 is article of re ection is an outcome derived from the research activities developed by the author as
Ph.D Student in Corvinus University of Budapest and as part of his research activities as member of the
research group Finanzas y Política Económica, C category of Colciencias.
Acknowledgements: e institute for World Economy of the Corvinus University of Budapest and the
Catholic University of Colombia, provided ethics approval for this research as a student of the PhD Inter-
national Relations Multidisciplinary Doctoral School, on 15 september 2015. Remaining errors are respon-
sibility of the author.
Notes on contributor: Joan Miguel Tejedor-Estupiñan is a senior research associate and lecturer at the
Faculty of Economics, Catholic University of Colombia. Professor Tejedor is a scholar of economic history
and international relations. His research focuses on topics related to world economy, development, human
rights and democratization.
KÖZ-GAZDASÁG 2018/3142
the Production-Sharing Contracts (PSC). A erwards in 2009, the Iraqi government and several
multinational companies signed the re-development contracts, which allows the exploitation of
11 of the country’s oil elds. In addition, the development of Iraqi oil potential is directly a ected
by the political instability, the lack of bargaining power by the government, and the di culties
in the infrastructure development.
is article is based in the latest data and researches on the subject of the development of oil
sector in Iraq, and presents an approximation to the impacts in the human development. e
analysis and information presented may be useful for those researchers interested in the assess-
ment of economic and social impacts of oil production in Iraq and the implications of the inter-
nal con ict. e rst part of this paper, provides a brief review about the history of oil in Iraq.
e second part, describes some indicators about the oil potential and production of oil in Iraq.
e third part focuses on the obstacles and alternatives to the realization of Iraq’s oil potential.
Finally, some conclusions are proposed.
. A I
e oil in Iran was discovered in 1908. en, in 1909 the Anglo-Persian Oil Company (later
becoming British Petroleum-BP) was born. In 1911, the Turkish Petroleum Company (TPC)
was founded (later becoming the Iraq Petroleum Company-IPC), prompting arise of the foreign
involvement (British and German) in the extraction of Middle Eastern oil. In the twentieth cen-
tury, the national interests of Middle Eastern governments were closely linked to the interests
of foreign oil companies (FOCs). Until the Middle Eastern oil nationalization movement of the
1970’s, oil resources in Iraq were dominated by oil companies from the West. Since then, the
access to the reserves of the Persian Gulf region has been limited (Behn, 2007).
A er 1950’s until today, the production of oil in Iraq has been developed in the middle of
tensions generated, by both, the interests of the modern Middle Eastern states, and, the interests
of the FOCs. e end of the British control on Iraq was marked by the coup of 1958. In 1961, the
new government of General Qassim passed Iraq’s rst national petroleum law (Public Law 80),
by means of which the expropriation of all oil eld concessions held by the IPC, except those
oil elds that were in production in that time. e National Petroleum Law also created the
Iraq National Oil Company (INOC). Later on, the law 97 was introduced in 1967, allowing to
the Iraqi government the control on Iraq’s oil by the INOC. en, with the Public Law 123, the
INOC started to be controlled by the Iraqi government. In 1968, the Baath Party came to power
and started to control Iraq’s territory and government until the War of 2003. In 1972, Saddam
Hussein as Assistant General Secretary of the Baath Party, nationalized the remaining of the
IPCs assets, completing the nationalization process of oil in Iraq (Behn, 2007).
In 1979, Saddam Hussein’s coming to power, in an environment of war, strife, isolation, and
sanctions, this evident con ict limited his country’s ability to extract and sell its most impor-
tant commodity. Despite its enormous oil endowment, Iraq has never been able to move its
production above 3.5 million barrels per day (bbl/d). e experts hold Iraq has the potential to
be pumping over ten million bbl/d, if the country overcomes the instability environment. Saudi
Arabia, the largest oil-exporting country in the world, producing nearly 11 million bbl/d. Iran
comes in the second place of proven reserves with a current production of approximately 4.2
million bbl/d (Behn, 2007).
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 143
A er the invasion in March 19 of 2003, the production of oil in Iraq has been decreasing. While
the Ministry of Oil (MOO) has continued to function, the INOC has ceased its operations. e cur-
rent con ict between the military forces of Iraq with its allies US army and the rebels has severely
damaged the oil infrastructure in Iraq. In this context, rehabilitation programs were introduced by
the US and have awarded billions of dollars in foreign contracts. Pipelines were under the protec-
tion of occupation forces, because they were targets of sabotage by the rebels (Center on Global
Energy Policy, 2014). As a result of the pressure of the international community, in October of 2011,
the President Barack Obama announced the withdrawal of all US troops located in Iraq since 2003.
Apart from Western FOCs, before to the Iraq War of 2003, Saddam Hussein made an attempt
to increase the production by o ering development contracts to a select group of Russian, Chi-
nese and Indian oil companies. Nevertheless, the UN sanctions prevented these contracts from
being signed. e history of oil sector in the Middle East shows the importance of national oil
sovereignty, the rise of the national oil companies, the historical instability of the region due to
war and in uence of the foreign companies’ power, and the pursuit of oil control by the West
companies. e current tension can be expressed, on one hand, it is the ever-increasing need for
crude oil by the oil-consuming world, and on the other hand, is the resistance by the people of
Iraq to relinquish their right to control their most valuable commodity (Behn, 2007).
Oil deposits in Iraq are near the surface and easily accessible, therefore, oil is extremely cheap
to extract, and its development and production costs are among the lowest in the Middle East.
Crude oil costs about one dollar a barrel to produce. Nevertheless, Iraq oil remains relatively
undeveloped. Only 17 of the 80 discovered oil elds in Iraq have been developed, and just about
2,300 wells have been drilled (Behn, 2007). In the last two decades, Iraq has been ranked as the
fourth largest oil reserves in the world behind Venezuela, Saudi Arabia and Iran. Iraq possesses
at least 115 billion barrels of proven oil reserves, which represent 10 % of the world’s proven oil
reserves. Oil is Iraq’s most important asset and constitutes 70 % of its GDP, and 95 % of the Iraqi
government’s annual revenue (Behn, 2007).
. M
e method applied in this paper is a comparative analysis of di erent secondary sources, statis-
tical databases and development indicators, such as: e economic sector contribution in Iraq´s
GDP, the contribution of oil revenues to the public budget, the Iraq´s proven, semi-proven &
recoverable reserves, the existed re neries and its capacities, among others development indi-
cators, that allows to understand the complex context of the exploitation of the most important
commodity of Iraq´s economy and the impact on the human development of Iraq`s people.
e main data was collected mainly from the World Bank, Central Statistical Organization
IRAQ, British Petroleum Statistical Review of World Energy, the Iraq Prime Minister Advisory
Commission. Some secondary sources like books, articles and reports on the economy, society
and the issue of oil wealth in Iraq, also were analyzed.
. T O I E D I
Between 2008 and 2016, the Iraq GDP annual growth rate passed from 6.6 % to 11%, it is remar-
kable that in 2014 felt till -2.4 %, during the period of rising of the Islamic State and consequently
KÖZ-GAZDASÁG 2018/3144
the increasing of the con ict and violence in Iraq. Nevertheless, Oil represent the most impor-
tant sector in the Iraq´s economy. It is also important to underline the share of this important
sector in the national incom
e.
Figure 1. Iraq GDP annual growth rate.
Source: World Bank
e Iraqi oil sector activities in general can be divided to the following: Exploration, drilling,
extraction, transportation, re ning, local distribution and exportation. e share of crude oil as
a percentage of the gross domestic product is very signi cant, it was over 50% before the crisis of
2008 and 45% till 2014, were the contribution fall to a 33.1%, (See Table 1).
Year s
Activities
2013 2014 2015
Crude Oil activity 45.7 45.0 33.1
Agriculture activity 4.8 4.9 4.6
Industry activity 2.3 1.9 3.1
Private Sector activity 38.4 36.6 -
Table 1. Economic sector contribution in GDP of Iraq for the period 2013-2015.
Source: Central Statistical Organization IRAQ (2015).
e contribution of oil revenues accounted in the period 2005-2012 was in average more
than 90% of the total public budget sources (See Table 2). As the main income of the Iraqi go-
vernment is originated by the crude oil activity, it shows that this income may be a ected by
the uctuations in the global oil prices. e dependence from the oil sector may produce future
instability on Iraq’s economy.
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 145
Year Oil Revenues %
2005 96.6
2006 92.0
2007 93.0
2008 90.5
2009 85.4
2010 90.8
2011 88.8
2012 92.2
2013* 43.5
2014 43.5
2015 32.8
2016 42.1
Table 2. Contribution of oil revenues to nance the public budget in Iraq for the period 2005-2012
Source: World Bank, (2014).
* e data for 2013-2016 presents Revenues minus production cost of oil, percent of GDP.
e average production in 2008 was 2.4 million barrels per a day, but the specialist assumes
it must be 6 million barrels or more (Musa, 2011). e table 3, shows the compared reserves and
production for few crude oil producing countries in 2015, were the share of crude oil production
of the total proven reserves of Iraq is 8.4%, the lowest compared to some oil-producing countri-
es. Iraq may have an important global performance and potential oil production growth by 2020.
Country Reserves
( ousand million
barrels)
e Production
( ousand barrels
per day)
Share of
Total (%)
Venezuela 300.9 2626 17.7
Saudi Arabia 266.6 12014 15.7
Iran 157.8 3920 9.3
Iraq 143.1 4031 8.4
UAE 97.8 3902 5.8
Libya 48.4 432 2.8
Nigeria 37.1 2352 2.2
Table 3. Proportion of crude oil production of the total proven reserves for few oil-producing c
ountries in 2015.
Source: British Petroleum, (2016).
According to the 2016 BP Statistical Review of World Energy, Iraq’s proven oil reserves at the
end of 2012 were 143.1 bb, positioning the country at the fourth place internationally, the experts
thinks the country’s true potential is still underestimated, partly because the current assessment
is based on a recovery rate much less than 20% and probably lower than 15% of its oil-in-place
KÖZ-GAZDASÁG 2018/3146
(OIP). In addition, there are deep oil-bearing formations without exploring, especially in the
western desert, which could boost reserves by as much as 186 bb. Iraq’s proven and probable
reserves are estimated at 315 bb with some experts believing that Iraq actually holds more than
400 bb of reserves (See Table 4). ey are concentrated in the southern oil elds of Majnoon, Bin
Umar, West Qurna, Rumaila and Halfaya. Moreover, only 70% of Iraq’s territory has so far been
explored for oil (Mamdouh Salameh, 2013).
Proven reserves
Probable reserves
Possible recoverable reserves
150.00
165.00
70.00
Total
% of Iraqi territory explored for oil
385.00
70
Table 4. Iraq´s proven, semi-proven & recoverable reserves (bb).
Source: Mamdouh Salameh, (2004).
Among the super-giants, Iraq’s developed and discovered oil elds, the largest eld in pro-
duction is West Qurna with 43 bb of proven reserves. e second largest is Rumaila with proven
reserves of 17 bb. Majnoon is third with reserves of 12 bb. e untapped East Baghdad oil eld
has proven reserves of 8 bb, while Kirkuk in the north has 9 bb (See Table 5). ere are also
more than 60 discovered but undeveloped oil elds in Iraq containing at least 75 bb of reserves.
Almost 75% of Iraq’s total reserves are located in the south of the country, approximately 17%
are in the Kirkuk area while the rest 8% is situated in central Iraq. ese data do not include
Iraqi Kurdistan, the region’s authorities have estimated its reserves at about 40 bb (Mamdouh
Salameh, 2013).
Oil elds Region Proven Reserves
(bb)
West Qurna South 43
Rumalia South 17
Majnoon South 12
Zubair South 8
Nahr Umr South 6
East Bagdad Central 8
Kirkuk North 9
Total 92
Table 5. Iraq´s Supergiant Oil elds.
Source: Center on Global Energy Policy, (2014).
According Musa, the prices of oil products (gasoline, kerosene, gas, oil, etc.,) are still not
actual prices, but administrative and relatively xed prices which do not re ect the economic
value of the resource (crude oil). It shows the need to adopt an international oil prices in the
calculation of local oil re ned products, which makes them to change according to the changes
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 147
of international crude oil prices. e low and insu cient production capacity of the Iraqi oil
re neries does not satisfy domestic demand at a time that Iraq should become a major source of
these products by having a large re ning capacities relative to its crude oil reserves.
e total oil re ning capacities in Iraq has reached approximately 750.000 barrels per day
in 2008. is amount is insu cient to satisfy domestic demand, making Iraq import re ned
oil products (Musa, 2011). Table 6, shows details of Iraq crude oil re ning capacity in 2008 and
2016. ere are new re neries opened to 2012 such as: Karbala, Maissan, Nassiriya, Kirkuk, Ni-
newa, Iraq’s oil capacity passed from 630 bbl/d in 2008 to around 886 bbl/d in 2012.
Re nery Location Capacity
(bbl/d)
2008
Capacity
(bbl/d)
2016
Baji North-Central Iraq 310.000 310.000
Basrah Near Basrah 150.000 140.000
Daura Baghdad 110.000 210.000
Erbil Erbil 40.000 40.000
Diwaniyah Diwaniyah 20.000
Kasak Ninewa 10.000
K-3 Haditha, Kirkuk,
Khanaquin, Mu ilah,
Najaf, Nassiriyah-
Samawah, Gaiyarah-
Mosul, Maysan
Scaltered ≤ 20.000 each 30.000 -180.000
Table 6. Existed re neries and its capacities in Iraq 2008 and 2012.
Source: Musa, (2011).
. P S C F O C I
One of the types of managing the oil production in Iraq has been the Production-Sharing Cont-
racts (PSC), proposed in Indonesia in the 1960’s, as a solution to the relations between a FOC
and an oil-exporting state (Behn, 2007).. ese types of contracts are fundamentally a pro t-sha-
ring contract between a host state and any FOC. e contract allows FOCs to develop oil elds
in an oil-exporting state in exchange for an agreed percentage of the oil production. e main
aims of the state in negotiating a PSC are: a) increasing revenues by limiting the FOC’s in this
sector, b) establishing a legal regime that allows to the state the control on the projects, and c),
maximizing pro t through contract stability.
ese competing interests create tensions in the contract negotiations. While the oil resour-
ces technically and legally remain with the state, the PSC allows the FOC to manage and operate
the development of the oil eld. Some experts argue that these contracts are just a modern form
of the traditional concession agreement, the continuity of an imperial model which allows FOCs
the exploitation of the resources of developing countries (Behn, 2007).
According Maugeri (2012) in 2009, the government of Iraq awarded to several international
oils companies the re-development contracts for 11 of the most important country’s oil elds.
KÖZ-GAZDASÁG 2018/3148
Re-development contracts for the super-giants oil elds of Kirkuk, Nasiriyah and East Baghdad,
are to be o ered in auction at a later date. e awarded re-development contracts have the aim
to reaching a total production of more than 11.6 mbd, it means 9.60 mbd, more than the existing
level of mentioned elds (See Table 7).
Field Foreign Companies Initial Production
(mbd)
Production Target
(mbd)
Rumalia BP (38%)
CNPC (37%)
1.10
West Qurna 1 Exxon (60%)
Shell (15%)
0.27 2.35
Zubair
Eni (32.8)
Occidental (23.5%)
Kogas (18.75)
0.20 1.20
Missan Fields* CNOOC (63.75%)
TPAO (11.25%)
0.10 0.45
Majnoon Shell (45%)
Petronas (18.75%)1.80
0.05 1.80
West Qurna 2 Lukoil (56.25%)
Statoil (18.75)
0.12 1.80
Halfaya
CNPC (37.50%)
Petronas (18.75%)
Total (18.75%)
0.07 0.54
Gharaf Petronas (45%)
Japex (30%)
0.03 0.23
Badra Gazprom (30%)
Kogas (22.5%)
Petronas (15.5%)
TPAO (7.5%)
0.02 0.17
Qaiyarah Sonangol (75%) 0.02 0.12
Najmah Sonangol (75%) 0.02 0.11
Total Production 2.00* 11.62**
Table 7. Peak Planned Production of Already Awarded Iraqi Oil Contracts.
* Includes the Fakka, Buzurgan and Abu Ghirab elds
** End of 2011. Includes other elds that still await re-development, like supergiant Kirkuk,
East Baghdad, and Nasiyriah.
Source: (Maugeri, 2012).
Some of the most important international oil companies, including Eni, Exxon, Shell and BP,
as well as, some of the national oil companies such as CNOOC, Gazprom, PetroChina and Lukoil,
are still operating in Iraq. In the Kurdistan Regions, were the more attractive production sharing
contracts have been o ered, there are some independent operators, like Gulf Keystone, MOL
Group, DNO and Afren. Exxon, Total, and Chevron, the biggest IOCs have also entered the Kur-
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 149
distan region, defying threats by the central government that they may lose licenses in the south.
According to several oil companies, the renovations of Iraqi elds showed an important growing
in the production level and a steady ow of oil. e evidence showed that future production could
be major than the contractual targets established upon with the Iraqi government (Center on
Global Energy Policy, 2014). As a result of oil elds mismanagement and poor technology used in
the past, there are still several of the Iraq’s elds underexploited (Maugeri, 2012).
Under the contract terms for the re-development of the West Qurna oil eld with proven re-
serves of 43 bb, the multinationals companies ExxonMobil and Shell will invest $50 bn divided
evenly between direct investment and operational costs. In return, the two companies will receive
$1.9 for every barrel produced and the contract could be extended for another ve years. BP and
China’s CNPC will re-develop Rumaila oil eld with 17 bb of reserves and will be paid $2 per bar-
rel produced to raise production from the current 1 mbd to 2.85 mbd (Mamdouh Salameh, 2013).
e Italian consortium Eni is expected to develop the 4.1 bb Zubair oil eld, which lies near
West Qurna and Rumaila. Eni and its partners, the US Occidental Petroleum Corporation and
South Korea’s KOGAS, aim is to reach 1.1 mbd up from the current 200,000 b/d. Output from
West Qurna stage 1, Rumaila and Zubair is projected to reach 6.4 mbd in 6-7 years with the
companies expected to invest $100 bn in the projects (Mamdouh Salameh, 2013).
e optimal production of crude oil can be achieved through the development of the inf-
rastructure of the extractive sector, but it is not enough for Iraq as it faces two problems (Musa,
2011). First, the limited marketing possibilities, for example, ports and pipelines are not ready,
speci cally the pipelines stretching through Syria and Jordan. In addition, the Iraqi-Saudi pipe-
line is also broken down since 1990. is pipeline has a full capacity of 1.65 million barrels per
day. e Iraqi-Turkey pipeline is the only one of the pipelines as good as for exporting as with
full capacity, by 1.6 million barrels/day. Moreover, the south ports are functioning well, which
includes the port of Basras (Al-Bakr, previously), that has a capacity of up to 82,000 barrels per
hour with about 1.6 mbd and the port of Khor Amaya, which was expanded in 1974 to become
having a capacity by 1.6 mbd as well (Table 8).
Exporting Facility Exporting Capacity (mbd)
Iraqui-Turkish Line 1.6
Iraqui-Saudi Line 1.65
Iraqui-Syrian Line 1.4
Basra Port (Formerly Al Baker) 1.6
Khor al-Amaya 1.6
Total 7.85
Table 8. Iraq´s Crude Oil Exporting Capacity at 2010.
Source: Musa, (2011).
e Iraq Prime Minister Advisory Commission, presented an estimation for the Northern
Evacuation with 3.75 mmbpd by 2017, North-South Link, 3.15 mmbpd by 2017, and Southern
Evacuation 6.8 mmbpd in 2014. Regarding to the share of Iraq in the Organization of Petroleum
Exporting Countries (OPEC), it lags signi cantly a er the Iran-Iraq war in 1980, and its crude
oil production without the quota to it of the total OPEC production, which make part of its
KÖZ-GAZDASÁG 2018/3150
distributive share to go to other members (Iraq Prime Minister Advisory Commission, 2012).
erefore, the idea of raising Iraq’s production to high levels will require coordination with the
rest of the organization’s members and agree to amend its share of the output, especially since
Iraq is unable to reach its production to its share since the early eighties, as well as its needs to
maximize oil revenues, in order to develop its economy e ectively (Musa, 2011).
If the re-development plans are applied without any inconvenience, Iraq’s oil production
could rise from 3.00 mbd in 2013 to 12.72 mbd by 2020 (See Appendix 1). In this scenario, Iraq
might emerge as the largest crude oil producer and exporter in the world. Probably, Iraq could
reach additional unrestricted new production of 10.4 mbd in 2020, or 5.13 mbd recognizing the
di erent risks (Mamdouh Salameh, 2013).
. O I’
Iraq has a population around 36 mill of people, the unemployment rate is about 18 % overall, the
level of deprivation and poverty is one of the highest in most of southern and middle provinces,
the poverty incidence in rural areas (30.6 %) is more than twice the poverty incidence in urban
sectors (14.8 %) and also there is a gap between the rural and urban areas regarding the access
to improved water sources and sanitation facilities, the incidence of poverty is specially located
in the southern and middle provinces, regions were the most giants oil elds are located (World
Bank, 2014). us, the question of redistribution of oil wealth in Iraq should be analyzed seri-
ously in order to improve the level of human development and the conditions of the population
in condition of poverty, by allowing peace and respect for the human rights.
Figure 2. Crude Oil Prices 2008-2018.
Source: Macrotrends, (2018)
Figure 2, illustrates the trend of the oil prices in the las ten years, the most important to un-
derline here is the fall of the prices in 2008 which coincide with the crisis of the global economy
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 151
in the same year and the fall of the prices a er 2014. e issue here is the global discussion on
the Paris agreement and its implications with the development of alternatives sources of energy,
which push-down the oil prices. is situation a ects directly the economy and call the attention
on the Iraq dependence to just one sector and its implications in the low development of the rest
sectors.
. T
Political instability, internal con ict, underdevelopment of the oil sector, are the three main obs-
tacles for an equitable redistribution of the oil wealth in Iraq. e Human Development Report
(HDR) in 2016, shown the performance of Iraq regarding several human development indica-
tors (United Nations Development Programme, 2016).
Firstly, according to the Human Development Index, Iraq is a country with medium level of
human development, Iraq’s HDI value for 2015 was 0.649, ranking it 121 out of 188 countries
and territories. Iraq’s 2015 HDI is below the average for Arab countries as Algeria and Saudi Ara-
bia which have HDIs ranked 83 and 38 correspondingly. From 1990 and 2015, Iraq’s HDI value
pass from 0.572 to 0.649. In the period 1990-2015, Iraq’s mean years of schooling increased by
3.4 years, expected years of schooling raised by 0.5 years and life expectancy at birth increased
by 3.4 years. Iraq’s GNI per capita increased by about 8.3 percent between 1990 and 2015 (United
Nations Development Programme, 2016).
Secondly, the Inequality adjusted HDI (IHDI), which is basically the HDI discounted for
inequalities. While Iraq’s HDI for 2015 was 0.649, the IHDI falls to 0.505, a loss of 22.3 % as a
consequence to inequality in the distribution of the HDI dimension indices. e Human inequ-
ality coe cient for Iraq is equal to 22.0 %. e average loss due to inequality for Arab States is
27.5% and for medium HDI countries is 25.7 % (United Nations Development Programme,
2016).
ird, the Gender Development Index (GDI) which re ects gender inequalities according
the same three dimensions of the HDI, it is de ned as a ratio of the female to the male HDI, and
in the 2015 was calculated for 160 countries. In Iraq, the HDI value is 0.569, contrasted with
0.708 for males, shows a GDI value of 0.804, positioning the country into Group 5. e GDI
value for Saudi Arabia was 0.882 and 0.854 for Algeria.
Fourth, e Gender Inequality Index (GII) presented in the 2010 HDR, re ects gender-based
inequalities in three dimensions, such as economic activity, reproductive health, and empower-
ment. Iraq´s GII for 2015 was 0.525, ranking it 123 out of 159 countries. Algeria and Saudi Ara-
bia were ranked at 94 and 50 respectively on this index for the same year. In Iraq, 35.8 percent
of adult women have reached at least a secondary level of education compared to 55.5 percent of
their male counterparts and 26.5 % of parliamentary seats are held by women. For every 100,000
live births, 50 women die from pregnancy related causes; and the adolescent birth rate is 84.0
births per 1,000 women of ages 15-19. Female participation in the labour market is 15.1 %, very
low compared to 69.7 % for men (United Nations Development Programme, 2016).
Finally, the Multidimensional Poverty Index (MPI) is focused in three main dimensions:
living standards, health and education. In 2011, the most recent MPI for Iraq was 13.3 % of the
population (4,241 thousand people) are poor from this multidimensional perspective, while an
additional 7.4 % live near multidimensional poverty (2,343 thousand people). e MPI, is the
KÖZ-GAZDASÁG 2018/3152
share of the population that is poor from the di erent dimensions assessed, adjusted by the in-
tensity of the deprivations, was 0.052, and the average deprivation score experienced by people
in multidimensional poverty, was 39.4 % (United Nations Development Programme, 2016). e
average user in developing nations consumes less than one h, which is an important develop-
ment indicator, one manifestation of this problem is exempli ed in the case of Iraq, where post-
invasion domestic oil consumption has fallen by over one third, and even in China, where mean
per-capita energy use is 1/15th that of the US (Williams, 2006, p. 1086).
. P
e indicators presented above, show the improvement in some aspects but the critical situa-
tion in terms or inequality of gender. Nevertheless, another important issues to analyze are the
di erences among the principles and positions of the main communities such as the Kurds, the
Sunni Arabs and the Shias, because each one of the groups, coalitions and domestic trends of the
country has di erent views on federalism as a way to organize the Iraqi state (Moradi & Mota-
lebi, 2015). us, there is a division even into the di erent groups which compose the dominant
groups, becoming the rst challenge to the stablishing of a democracy in Iraq.
Some of the obstacles for development of Iraqi oil sector are strictly related with political
instability, the lack of criteria in the bargaining power by the government, and the low-level inf-
rastructure development (Mamdouh Salameh, 2013). ese problems could signi cantly reduce
Iraq’s future supply. Iraq’s oil industry has been devastated by three wars between 1979 and 2003
and its recovering depends on urgent political actions and billions of dollars of investments for
rehabilitation (Mamdouh Salameh, 2013). e IOCs should take social corporate responsibility
seriously in order to redevelop the oil infrastructure, the modernization of its infrastructure and
the expansion of pipelines and oil-export terminals on the Gulf, in order to increase oil revenues
in the short and medium terms, and nally the creation of an environment of political stability in
the country are a necessary and urgent condition for the stabilization of the economy and Iraq´s
society (Ghadhban, 2009).
Between 1941 and 2014, at least ten wars have been fought over oil, among them the 21st
century’s rst oil war was marked by the invasion of Iraq by the US army in 2003 (M. Sala-
meh, 2008). e study of Danju, Maasoglu, and Maasoglu by comparing several theories, such
as Realism, Liberalism and Marxism, analyzes foreign policy issues di erently, these theories
are focused on the individual, state, systemic and socio-economic level of analysis, with the aim
of explaining the foreign policy issues and decisions. By analyzing, di erent theories this study
explains the decision of George W. Bush to invade Iraq (Danju, Maasoglu, & Maasoglu, 2013).
is study concludes that Us decision led by George W. Bush decision was advantageous
for the US, in the national and international level, obtaining the control of oil resources. us,
the main aim of this war was to serve US interests. George W. Bush (as a rational and individu-
al actor) considered the costs and bene ts of invading Iraq a er 9/11. Realist theory from the
perspective of the individual level, allows the analysis of US decision to invade Iraq. Realism
considers national interest, rational decision taken by individuals (Danju et al., 2013). is topic
can be addressed in another research.
Chwastiak, addressed the issue of how some US companies have earn incredible pro ts from
the ostensible reconstruction of Iraq, while the Iraqis and US taxpayers have su ered the worst
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 153
part. His study illustrates how Bush Administration created a type of capitalist paradise for pre-
dominantly US and UK corporations working on the reconstruction of Iraq, and also how the
corruption and fraud has been institutionalized in the Iraq reconstruction (Chwastiak, 2013).
Whit the aim of controlling the market of oil, the US has been receiving unexpected outcom-
es of the invasion of Iraq a ecting also the local stability as well as explains:
If the intention of the war was to secure cheap oil supplies for the United States, the consequences
have been the opposite: oil prices have soared. e war has also impacted on the global oil produc-
tion capacity by creating instability in the Middle East and thus increasing the risk of investing in
the region (M Salameh, 2008, p.12).
e instability a er the war of 2003, untill today has been a constant in the daily life of Iraq.
Saddam was sentenced to death by hanging, and the execution took place on Saturday 30 De-
cember 2006, a er being condemned of crimes against humanity by the Iraqi Special Tribunal
for the murder of 148 Iraqi Shi’ites in 1982, in retaliation for an assassination attempt against
him (BBC, 2006). As a result, a civil war has been held by the di erent ethnical groups and the
emerging Islamic State (IS) emerged as a new army of revels which a ects directly the security
and rights of the population and the infrastructure of the country (Gvenetadze & Hegazy, 2015).
. T
e mismanagement of the oil sector is the result of the political instability and the corruption
inside the Iraq institutions. e establishment of a government a er Hussein’s era has not been
an easy challenge due the cultural di erences and the internal instability. In relation with the
government decisions the major issue with the new oil law is not in its authorization of FOC
involvement, rather the extent of involvement that the neither a completely privatized oil sector
nor a completely nationalized new Oil Law permits. e new Oil Law should allow foreign in-
volvement, but in manner compatible with Iraq’s ideals of oil sovereignty. Iraq is now tasked with
modifying its Oil Law, despite its political weakness, into an equitable legal framework for the
future exploitation of Iraq’s oil reserves. Balancing the oil-consumption world’s pursuit of pet-
roleum against growing economic poverty, violent instability, sectarian division, lack of political
cohesion, and the need for oil revenue Iraq’s leaders have a challenging road ahead (Behn, 2007).
Despite of the low level of development in the oil sector infrastructure, the war has seriously
a ected the existing infrastructure. us, the development of a governmental policy to regulate
the di erent oil sector activities and the development of strategic alliances are extremely urgent
and important. According Musa, (2011) the tension appears in the bargaining on the level of
control of the oil sector between the state and the FOC, in this sense, some possible alternatives
for Iraqi oil sector management can take the following systems:
a. Public sector management system, where the government controls the activities of the oil
sector, exploration, drilling, production and marketing, with the possibility of leasing
foreign private companies in any activity to provide service.
b. Concession system, which was implemented by most of the oil countries until the 1970s
and in Iraq until 1972, it includes granting one foreign company or more long-term
KÖZ-GAZDASÁG 2018/3154
contracts for crude oil extraction and the extracted crude oil shall become property of
the company which can act by either sale or re ning and it pays rent, as well as paying
tax on pro ts.
c. In a Share contracts system, the company or, group of foreign companies, provide the
necessary funding to complete the exploration and extraction, including the infrast-
ructure, and then the crude oil extracted quantities are divided into two quantities. e
rst, called cost oil and its ownership goes to the foreign company to cover cost, and this
quantity is o en marked in the upper limits by 40%, while the second is so-called pro t
oil, which is divided between foreign companies and countries that possess oil at rates
agreed upon, in addition the state gets a royal for the overall production, taxes on pro-
ts, and it may enter as the owner also as a trading partner in the contract and provide
a share of the capital and receives the same percentage of cost oil and pro t oil.
d. With a Contracting or service contracts, the government controls over the activities of
the oil sector, and it is granting foreign companies a speci c part of the activities, where
foreign companies bear the burdens and risks in return for agreed share it gets in the
activities that will be made later.
Reducing geographically expansive oil consumption could yield multiple bene ts running the
gamut of geopolitical, economic and even the environmental concerns, if adherence to higher emis-
sion–reduction standards compels the implementation of less wasteful processes (Williams, 2006,
p. 1086). Nevertheless, there is an evident tension between the economic interests of the multi-
national companies, the national interests and the problems faced by the humanity currently, as
the global warming which has been the core of di erent rounds at the global level where there is
a focus on establishing a new era of renewable energies.
e Iraqi authorities must to achieve both, the development of the oil sector and the stabi-
lity of the economic, social and political situation in the country. ere is a paradox that rich
countries in terms of natural resources tend to have less levels of democracy,3 less economic
growth and less development, than countries with fewer natural resources, in some case this
situation is explained by some aspects that need to be overcome like: asymmetries in the level of
development, volatility of revenue, lack of economic diversi cation, wasteful spending and weak
institutions and accountability, and the internal war (British Petroleum, 2016).
. C
Iraq has one of the largest proven oil reserves in the world a er Saudi Arab and the United Arabs
Emirates, nevertheless, a er three wars between 1979 and 2003, the con ict has produced poli-
tical instability, the mismanagement of the oil sector and the lack of a modernization of the oil
sector infrastructure, creating obstacles to the development of the most important asset in the
Iraq´s economy. e periods corresponding with high level of oil prices, has not been re ected
3 e study of World Bank, Republic of Iraq Public Expenditure Review., provide new evidence regarding
the impact of oil wealth on democracy, his analysis shows that larger oil discoveries are causally linked to
slower transitions to democracy
NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 155
in improvements of the human development conditions or Iraq people. Such a complex situation
implies, on one hand, a reduction in the production and productivity of this sector, and on the
other, the improvement of human development of Iraqi people.
e structural challenges for the development of Iraqi oil sector are related with political
instability, governmental decisions, and the reconstruction and development of the existing inf-
rastructure such as pipelines and export terminals. Iraq can dominate the world oil market in
the second and third decades of the 21st century, but it depends of the capability to overcome
the instability emerged a er the war, the calculation and exploitation of the real potential of the
oil elds and its technological development.
e history of oil sector in Iraq, has been marked by di erent wars, but ultimately, the po-
litical instability has been linked the US invasion promoted in 2003 and the rising of the IS,
and then, the execution of Saddam Hussein. e war, as well as, the attacks of the rebels as the
militants of the IS leaved serious damages in the population, in the Iraq´s heritage and the inf-
rastructure of oil in Iraq. us, the human development in Iraq is a ected by interests con icts
among the Foreign Oil Companies, the domestic interests (sovereignty) and the claiming of the
Iraq´s people.
B
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NEMZETKÖZI KAPCSOLATOK MULTIDISZCIPLINÁRIS DOKTORI ISKOLA 157
Appendix 1. Iraq´s Current & Projected Oil Production, Consumption & Exports, 2010-2020 (mbd)
2010 2011 2012 2013 2014 2015 2020
Production 2.49 2.80 3.14 3.11 3.28 4.03 12.72
Consumption 0.60 0.75 0.79 0.83 - - 1.17
Exports 1.89 2.17 2.33 2.41 2.51 2.22 -
Source: Own calculations based in (United Nations Development Programme, 2016) and
(United Nations Development Programme, 2016).
