Oil Powers Bought Iraqi Compliance - And Something Else, Too
They may have paid for compliance, but they were really buying something else.
With COVID-19 cases now starting to ravage a politically fragile Iraq - which is also the center of a proxy war between the US and Iran - there's never been a better time for the country to ask for aid. Aid is a bargaining chip, and oil production cuts are the end game because Iraq is never in a financial position to comply.
What Iraq wants, specifically, is an IMF loan of up to some $5 billion and Saudi investment in its natural gas fields.
So far, money--and the prospect of more--has bought Iraq's best run at compliance yet: By mid-June, Iraq had made good on a pledge to make cuts, and for the full month, its oil exports had dropped by 310,000 bpd (9%). For July, Iraq says it plans to reduce crude oil exports (Basra Light) by half.
Even without Iraq's full compliance, numbers seem to show that OPEC compliance overall was still over 100% last month, thanks to efforts by others to cut more than pledged. Iraq, quite simply, cannot comply: It's too politically fragile and has too many 'civil servants' to pay off for loyalty.
That's why we should look at 'aid' as buying something other than production cuts that have already been accounted for.
It's buying a move against Iranian influence in Iraq. On June 25th, Iraq's new prime minister, Mustafa al-Kadhimi, launched a military raid against the…
Oil Powers Bought Iraqi Compliance - And Something Else, Too
They may have paid for compliance, but they were really buying something else.
With COVID-19 cases now starting to ravage a politically fragile Iraq - which is also the center of a proxy war between the US and Iran - there's never been a better time for the country to ask for aid. Aid is a bargaining chip, and oil production cuts are the end game because Iraq is never in a financial position to comply.
What Iraq wants, specifically, is an IMF loan of up to some $5 billion and Saudi investment in its natural gas fields.
So far, money--and the prospect of more--has bought Iraq's best run at compliance yet: By mid-June, Iraq had made good on a pledge to make cuts, and for the full month, its oil exports had dropped by 310,000 bpd (9%). For July, Iraq says it plans to reduce crude oil exports (Basra Light) by half.
Even without Iraq's full compliance, numbers seem to show that OPEC compliance overall was still over 100% last month, thanks to efforts by others to cut more than pledged. Iraq, quite simply, cannot comply: It's too politically fragile and has too many 'civil servants' to pay off for loyalty.
That's why we should look at 'aid' as buying something other than production cuts that have already been accounted for.
It's buying a move against Iranian influence in Iraq. On June 25th, Iraq's new prime minister, Mustafa al-Kadhimi, launched a military raid against the facilities of the Iranian-backed militia, Kataib Hezbollah, arresting 14 people. This is the same militia that is responsible for dozens of rocket attacks on US installations in Iraq.
Was that effective? No. In fact, it is just as probable that the raid was staged--or coordinated--with assistance from Iran itself. As for the 14 militia members rounded up in this raid, they were handed over to a security force that is actually dominated by pro-Iranian forces, and then released a day later. There has been no escalation of events since this raid. Kataib Hezbollah has responded only with cosmetic displays of intimidation. Continued funds from the United States and Saudi Arabia, however, will have to be backed by actual anti-Iranian movement.
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