BAGHDAD, (Reuters) – Prime Minister Nuri al-Maliki called on Iraq on Wednesday to shed its dependence on oil production and warned that it would remain susceptible to global economic crises if it did not.
Iraq needed to pour money into reviving idle agricultural and industrial sectors, he said, but acknowledged that revenues from oil exports would be needed to do that, at first.
“The chronic problem that Iraq has suffered from for a long time is its dependence on a single resource,” Maliki said at a conference on how Iraq can end its reliance on its oil reserves, the world’s third largest.
Oil prices have fallen more than $100 from their peak of $147 per barrel last summer due to the worst global economic slump since the Great Depression of the 1930s.
Iraq depends on oil exports for more than 90 percent of government revenue, and it has had to cut its 2009 budget twice already, starving itself of investment funds just when it needs billions of dollars to rebuild after years of war.
Cut off from the global financial system, and still rocked by frequent car and suicide bombs as its forces and U.S. troops battle pockets of insurgents, Iraq appears relatively untouched in some ways by the world recession.
Property prices in many areas are soaring as the violence unleashed by the 2003 U.S.-led invasion subsides, inflation is dipping and economic growth appears to be taking off.
But private capital is limited after decades of flight and foreign investors are cautious while the bombs continue to explode, so any reduction in government spending could have a profound impact on the economy.
In recent days, government officials appear to have become increasingly alarmed at the prospect of diminishing revenues.
The warning from Maliki, who emerged from Jan. 31 provincial elections with broad popular support for his advocacy of a strong centralised state, was preceded on Sunday by a similar call for action by Planning Minister Ali Baban.
“The Iraqi economy will not develop so long as it is subject to the pressures of having a single resource,” Maliki said. “Any country dependent on a single resource will find its economy and services, and even its political stability and security, shaken if that resource becomes volatile.”
Maliki said the oil sector had not been maintained properly for decades and had been brought “to the brink of ruin”.
In addition to sabotage by insurgents since the invasion, Iraq’s pipelines, oil fields and refineries have been battered by international sanctions plus theft and oil-smuggling.
“Despite all the efforts of the Oil Ministry and the government to develop the oil sector, especially after we achieved a measure of security, we still need more funds and capabilities,” Maliki said. “The most crucial thing we need is time. Time is a decisive factor in the development of the Iraqi oil industry.”
Iraq plans to open up some of its prime oil and gas fields to international oil firms this year through two rounds of bidding.
Enthusiasm for the contracts has been tempered by concerns about security and by the failure of Maliki’s government to pass a new national oil law. Oil majors hope the law will define the distribution of oil revenues between the provinces and the central government, and also permit production-sharing agreements.