The agreement made Monday settles — for the time being, at least — a dispute between oil giants Saudi Arabia and Russia, that created chaos for the price of oil when the two countries couldn’t agree on a plan to reduce production in line with shrinking global demand amid the coronavirus pandemic.
When leaders of OPEC+ — an expanded grouping of 24 petroleum-exporting countries that includes Russia, Kazakhstan, Malaysia and Mexico and accounts for almost half of global crude — met on Saturday, they gave each other just another month to reach a more permanent solution to keeping oil production in line with global demand.
That ask is more difficult for some countries than others, explains Noam Raydan, a Baghdad-based geopolitical analyst.
“It will be very hard for Iraq to comply,” Raydan told Rudaw in an interview on Saturday, noting that Iraq has been unable to comply completely with OPEC-agreed production quotas since 2017. When the 13-member cartel – in which Iraq is the second-largest oil producer – agreed to make deep cuts in oil production in order to coordinate prices, Iraq argued that financial problems stemming from its ongoing war against Islamic State (ISIS) militants, who at one point had overrun nearly a third of the country, made it impossible to comply.
“This is a country that is trying to bring itself back together, and that's why a lot of people are against the cuts in Iraq,” said Raydan. “They say that Iraq cannot cut a huge volume like one million barrels per day because it needs it, especially given the financial and security challenges,” she added. “Iraq cannot compare itself to other countries in the Gulf region.”
The condition for a new deal between superpowers Saudi Arabia and Russia to extend production cuts to help stabilize the oil market was that every member comply fully.
Iraq has struggled to adhere with the previously-agreed target to reduce production by 1.06 million barrels per day (bpd), only managing to lower its output by 400,000 bpd in May.
The country relies on its wealth of oil reserves for nearly 90 percent of Iraq’s yearly budget, according to data from the UK-based Iraq Energy Institute. That dependence has left it fundamentally susceptible to capricious changes in the market, resulting in chronic financial crises that regularly leave leaders unable to agree on an annual budget well into the year. For the average Iraqi, that instability translates into failing infrastructure, unclean water, and the delayed payment of salaries to public sector workers.
Iraq has signaled it intends to comply, despite the challenges ahead. “Iraq reconfirms its full adherence to the agreement,” said oil ministry spokesman Assem Jihad, affirming that “oil producers should yield to a unified stance in order to revive the oil market, through finding effective solutions to restore its stability and balance,” he said in a press statement on June 8.
But Iraq still has issues that it needs to sort out, says Raydan. “Let's not forget that there are still problems that are unresolved between the KRG and Baghdad – so it will be very hard for Iraq to comply.”
