On October 15, 1927, in the legendary "Baba Karker" square near Kirkuk, oil gushed from well number 1, introducing Iraq as the first major oil producer among Arab countries in the Eastern Mediterranean into the club of oil giants in the world. Since then, Iraq's fate has been tied to oil. However, now, nearly a century after this event, oil has come closer to distancing Iraq from development rather than bringing it closer. Nevertheless, there remains the possibility of changing the country's trajectory towards sustainable development by developing petrochemical chains.
Today, Iraq is among the largest oil producers in the world. According to the latest official statistics, daily crude oil production in Iraq currently ranges between 4.3 and 4.6 million barrels, within the framework of OPEC+ agreements. From this massive quantity, the country's estimated local consumption, considering the aging refineries and the lack of advanced industries in the later stages, is approximately 1 million barrels per day. The remainder, around 3.5 million barrels per day, is pumped to global markets as crude oil without any added value through the export ports in Basra and Turkish Ceyhan. This absolute dependence on exporting raw material has made the state's budget structure exceedingly fragile. According to data from the World Bank and the International Monetary Fund, over 90% of Iraqi public budget revenues come directly from crude oil sales. This means that state employee salaries, infrastructure construction and rehabilitation projects, budget allocations for health and education, and even the simplest public services all depend on and remain hostage to fluctuations in global oil prices.
In the natural gas sector, the story is more tragic and costly. Iraq, with proven natural gas reserves of about 132 trillion cubic feet, is one of the richest countries in the region in this regard. However, the lack of infrastructure for collecting, processing, and transporting gas has led the country to consistently rank high in the "flaring of associated gas" index. According to reports from the World Bank and the International Energy Agency, Iraq flares between 17 and 18 billion cubic meters of associated gas annually, making it the second-largest gas waste producer in the world after Russia. While this enormous national wealth disappears into the air without being utilized in the slightest, Iraq is forced to import natural gas and electricity to compensate for its power generation fuel shortages, and due to insufficient imports to meet the country's needs, it continues to suffer from a chronic crisis of daily power outages.
But where does this crude oil, exported at the expense of destroying development opportunities, go? The main destinations for Iraq's exports are the thirsty Asian markets, which account for over 70% of the total crude oil shipments from this country, according to the official statistics of the Iraqi Ministry of Oil and OPEC reports. At the top of the buyers' list are three countries: India, China, and South Korea. Following these three countries are Turkey and some European destinations like Greece and Italy in subsequent ranks. The bitter paradox here is that many of these countries buy Iraqi crude oil at the base price, then transform it in their massive and advanced refineries into gasoline, diesel, and various petrochemical products, later returning a large part of those products to Iraq at significantly higher prices. It is a cycle in which Iraq plays both the role of a cheap supplier of raw materials for these countries' industries and as the consumer market for their expensive products.
This vicious cycle has roots in several interconnected and fundamental challenges. Iraq's economy heavily relies on a single product, making it susceptible to shocks. The total domestic refining capacity remains significantly below the real needs of the country. Flared associated gas wastes billions of dollars in potential revenues. Additionally, corruption and weak governance are the missing links for transparency in the oil revenue chain to development. However, looking at the experiences of other countries shows that the way out of this situation is a tested path. Saudi Arabia, through the establishment of the petrochemical giant "SABIC" and the industrial cities of Jubail and Yanbu, and Japan, South Korea, and India, by converting imported crude oil into value-added products, have all proven that the secret to success lies in viewing oil not as a ready-for-sale booty but as a raw material for a vast industrial chain.
What needs to be done?
The way out of this challenge and moving the country towards sustainable development lies not in slogans but in changing the direction of the state's strategy from exporting crude oil to developing downstream industries. Iraq can, by emulating the model of the "special economic zone for petrochemicals in Saudi Jubail" in Basra, attract foreign investors with smart incentives and access to cheap feedstocks, and transform its oil and gas before export into value-added products. On the other hand, signing production-sharing contracts with global petrochemical giants, rather than the current low-yield service contracts, will bring technology and export markets into the country. Additionally, completely halting flaring using the BOT investment model will turn associated gas from an environmental threat into feedstocks for power plants and petrochemical complexes. These three steps will transform the vicious cycle of raw exports into a sustainable engine for employment and generating foreign currency.
The story of Iraq's oil, from the day the "Baba Karker" well gushed to today, is a tale of wealth standing at a crossroads between continuing to sell raw or building a future based on added value and sustainable development.