Oil companies should be paid in crude oil, not cash: parliamentary committee

ERBIL, Kurdistan Region - The Iraqi parliament’s economic committee has called on the government to face the country’s current crisis by paying oil companies with crude oil instead of cash.

Economic woes pushed Iraqis onto the streets in central and southern parts of the country in October 2019, protesting for change and an end to rampant corruption and unemployment.

Iraq’s parliamentary economic committee has prepared a proposal  consisting of 14 recommendations to the Iraqi government on how to tackle the multitude of problems Iraq is facing, including the coronavirus pandemic and huge drop in oil prices.

Iraq’s state-media, Iraqi News Agency (INA) released on Thursday recommendations that the economic committee has sent to the Iraqi government.

The set of recommendations include paying international oil companies operating in Iraq in crude oil rather than cash.

The committee has also called on the federal government to assume responsibility of the Kurdistan Region’s oil produce, to be sold by Baghdad rather than the Kurdistan Regional Government.  The revenue would then be divided among the provinces according to their population size.

Replacing cash with crude oil comes at a time when Iraq is struggling to cope with the dramatic drop in oil prices across the globe. 

World oil prices almost halved last month as a result of a standoff between oil producing rivals Saudi Arabia and Russia, floating just shy of $20 a barrel.

Iraq’s oil revenues for the month of March were $2.98 billion, with an  average export of 3.390 million barrels per day (bpd).

By contrast, Iraq’s oil revenues for the month of February stood at  $5.52 billion, with an average export of 3.391 million bpd.  

According to oil ministry figures, Iraq increased oil production in  March by around 7 million barrels compared to February. However, as prices tumbled, its revenues actually fell.

Iraq produced a total of 105.1 million barrels of oil in March, compared to 98.3 million in February.

However, a barrel of Iraqi oil sold for an average of $28.436 in March, down  from an average of $51.374 the month before.

Other recommendations given including reducing the salaries of high-ranking government employees by 60 percent, and lower governmental and investment spending.

Postponing all  foreign debts, including money owed to neighbouring Kuwait, has also been proposed  by the economic committee. 

Iraq’s relations with Kuwait were harmed during Saddam Hussein’s regime. The dictator often referred to Kuwait as the 19th province of  Iraq and invaded the energy-rich nation on the Persian Gulf in 1990  following Iraq’s war with Iran in what is known as the Gulf War.

Baghdad has been repaying billions of dollars in reparations to Kuwait for the Gulf War. 

Committee member Mazin Al-Faily  released a statement clarifying why the economic committee  has proposed the moves.

“The committee has sent the Iraqi government 14 recommendations on how to cope  with the current crisis Iraq is going through,” al-Faily  said in a statement published by INA on Thursday, adding that the current situation is “severe.”

The spread of coronavirus has also played havoc with Iraq’s economy, forcing businesses to shut and airlines to grind to halt. The country has been placed on lockdown since March 22 in attempt to prevent further infection. 

There are now 728 confirmed cases of the virus in Iraq, including 52 deaths and 182  recoveries, including in the Kurdistan Region.

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