page_title: Economy of Iraq
section_title: Energy
hierarchical_section_title: Economy of Iraq / Primary sectors / Energy
caption_attribution_description: English: Map of countries with proven oil reserves according to U.S. EIA (start of 2017)
context_page_description: The economy of Iraq is dominated by the oil sector, which has provided about 99.7% of foreign exchange earnings in modern times. Iraq's hitherto agrarian economy underwent rapid development following the 14 July Revolution overthrowing the Hashemite Iraqi monarchy, becoming the third-largest economy in the Middle East by 1980. This occurred in part because of the Iraqi government's successful industrialization and infrastructure development initiatives in the 1970's, which included irrigation projects, railway and highway construction, and rural electricfication.
  In the 1980s, financial problems caused by massive expenditures in the Iran-Iraq War and damage to oil export facilities by Iran led the Ba'athist government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $80 billion from the war.
context_section_description: Iraq is one of the most oil-rich countries in the world. The country holding the fifth largest proven crude oil reserves, totaling 147.22 billion barrels at the end of 2017. Most of this oil—4 million barrels per day out of 4.3 million barrels produced daily—is exported, making Iraq the third-largest exporter of oil. Despite its ongoing civil war, Iraq was able to increase oil production during 2015 and 2016, with production dipping by 3.5 percent in 2017 due to conflict with the Kurdistan Regional Government and OPEC production limits. By world standards, production costs for Iraqi oil are relatively low. However, four wars—the 1980–1988 Iraq-Iran War, 1991 Gulf War, the 2003-2011 War in Iraq, and the civil war—and the 1991–2003 UN sanctions have left the industry's infrastructure in poor condition, and the de facto independence of oil-rich Kurdistan Region have limited production.
  In the 1970s, Iraq produced over 3.5 million barrels of oil per day. Production began to fall during the Iran-Iraq War, before plummeting 85 percent after the 1991 invasion of Kuwait. UN sanctions prevented the export of oil until 1996, and then allowed exports only in exchange for humanitarian aid in the Oil-for-Food Programme.
  The 2003 lifting of sanctions enabled production—and exports—to restart. Production has since recovered to pre-Gulf War levels, and most of Iraq's oil infrastructure has been repaired, in spite of persistent sabotage by the Islamic State (ISIL) and others. In 2004 Iraq had eight oil refineries, the largest of which were at Baiji, Basra, and Daura.
  Despite its oil wealth, sabotage and technical problems at refineries have forced Iraq to import petroleum, other refined oil products, and electricity from neighboring countries, especially Iran. In 2004, for example, Iraq spent $60 million per month for imported gasoline. Sabotage
  In late 2004 and early 2005, regular sabotage of plants and pipelines reduced export and domestic distribution of oil, particularly to Baghdad. Nationwide fuel shortages and power outages resulted. Persistent ISIL sabotage of pipelines, power plants and power lines, and theft of oil and electricity have also contributed to the July 2018 protests in southern Iraq.
  In 2004 plans called for increased domestic utilization of natural gas to replace oil and for use in the petrochemical industry. However, because most of Iraq's gas output is associated with oil, output growth depends on developments in the oil industry.
  Half of Iraq's power plants were destroyed in the Persian Gulf War of 1991, and full recovery never occurred. In mid-2004, Iraq had an estimated 5,000 megawatts of power-generating capacity, compared with 7,500 megawatts of demand. At that time, the transmission system included 17,700 kilometers of line. In 2004 plans called for construction of two new power plants and restoration of existing plants and transmission lines to ease the blackouts and economic hardship caused by this shortfall, but sabotage and looting kept capacity below 6,000 megawatts. The ongoing civil war, sabotage of transmission lines, and government corruption caused the electricity shortage to worsen: by 2010 demand outstripped supply by 6000 megawatts.
  Oil continues to dominate Iraq's economy. As of 2018, oil is responsible for over 65 percent of GDP, 90 percent of government revenue. Petroleum constitutes 94% of Iraq's exports with a value of $59.73 billion in 2017. The central government hopes to diversify the economy away from oil, and has had some success: non-oil GDP growth, which was below the regional average from 2014-2016, pushed above the average in 2017. Despite this, the percent of government spending going to non-oil investment has continued to decline since 2013 and now stands at only 34 percent.
caption: A map of world oil reserves according to U.S. EIA, 2017
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