An annual budget consists of the collection of revenues and their redistribution towards expenditures. The main principle of budgeting is to maintain a balance between revenues and expenditures by increasing revenue sources and reducing expenditures. However, in Iraq, this has been the opposite. Over the past two decades, for example, expenses have increased 29-fold, while revenues have increased only eight-and-a-half times.
On May 22 and 23, 2024, Mahmoud Baban, a research fellow at Rudaw Research Center, speaker at the Second Kurdish Studies Conference, organized by the London School of Economics and Political Science (LSE), the University of Sheffield, Atlantic Fellows for Social and Economic Equity (AFSEE), and Bloomsbury Publishing in Sheffield.
In this round, 22 companies from 13 countries indicated readiness to invest in Iraq's oil, gas, and joint fields, but only Chinese and Kurdistan Region companies secured contracts with profit shares ranging from 6.67% to 32%.
The upcoming years are expected to witness the completion of over 47,000 housing units, adding to the existing stock. Notably, the cumulative number of housing units constructed in the central area of Sulaimani province since 2006 totals 90,000 units.
The Iraqi Ministry of Electricity has reiterated its intention to purchase gas from the KRG in the upcoming months. Dana Gas previously announced the completion of an additional 250 million cubic feet of gas production, slated for availability in the second quarter of this year. However, it remains uncertain whether this supply will be allocated for power plants within the Kurdistan Region or Iraq at large.
Throughout the suspension period, the estimated loss surpasses $11 billion if the Kurdistan Region were to sell its own oil independently, escalating to $13 billion if Baghdad were to market it at the price of Iraqi oil exports in 2023.
This rapid acceleration in housing development is not confined to Erbil; it is a trend observed across the Kurdistan Region. In Sulaimani, for instance, the number of real estate investment projects currently underway has surged two to threefold compared to previous years, reflecting the region's robust growth and burgeoning housing market.
In terms of revenue, the budget projected Iraq's total revenue in 2023 to reach 134.5 trillion dinars, comprising 117.2 trillion dinars from oil revenue and 17.3 trillion dinars from non-oil revenue. However, according to the Ministry of Finance's annual report, Iraq's total oil and non-oil revenues amounted to 135.6 trillion dinars, with oil revenues at 125.8 trillion dinars and non-oil revenues at 9.7 trillion dinars.
China's trade with Iraq has consistently expanded year after year, with recent figures nearing $50 billion, representing over two-thirds of Iraq's exports to China. Moreover, China's investments in Iraq's energy and real estate sectors have surpassed those of neighboring countries over the last two decades.
Last year, based on IOC reports and gathered data, oil production in the Kurdistan Region fell short of 100 million barrels, marking a significant decline from the 158 million barrels produced across all fields in 2022. This represented a staggering 42 percent decrease in oil production and a corresponding 67 percent reduction in revenues compared to the previous year.
Despite SOMO's preliminary and final data on export oil revenues showing a $48 million difference, there remains a staggering billion-dollar gap between the Iraqi Finance Ministry's report and that of SOMO and the Iraqi Oil Ministry. This disparity exceeded $4 billion in 2023.
Beyond alleged security concerns, Iran's true objective appears to be destabilizing the Kurdistan Region, impacting key sectors like real estate and energy.
This issue has broader implications, including US-Iraq relations and US economic sanctions against other countries. Actions and warnings from the Americans alone depreciated the Iraqi dinar against the dollar, despite efforts by the Iraqi government and the central bank to increase the dinar value. Despite adjustments, it still trades above 1,540 dinars per dollar in the markets, highlighting the significant impact of American statements on Iraq's economic situation.
Iraq plans to increase its refinery capacity to 1.25 million barrels of crude oil in the coming years. Apart from its five official refineries, the Kurdistan Region owns dozens of small and medium-sized unofficial refineries in Erbil, Sulaimani, and Duhok provinces. Collectively, these facilities currently refine over 286,000 barrels of crude oil daily, exporting their products to domestic markets.
On February 6, 2024, the Iraqi Oil Ministry is set to unveil the victors of the fifth+ and sixth rounds of oil and gas contracts covering 30 fields. While major firms from the United States and Britain have opted out, Chinese and Russian companies are eager to expand. Notably, the French have reached a historic agreement, and there are calls from the Gulf, particularly Saudi Aramco, for a reevaluation of the contract structures.
