One of the most striking features of the world oil map is the concentration of crude oil reserves in a few countries. In the Western Hemisphere, most of the oil reserves are concentrated in the United States, Venezuela, Mexico, and Canada. In the Eastern Hemisphere, they are concentrated in the former Soviet Union, North Africa, and the Middle East. Because of the stage of their economic development, the United States and the former Soviet Union developed their oil industries primarily to meet their countries’ own demands for energy. But since other oil-producing countries have a very low indigenous demand for energy, their oil resources were developed to meet world demand for oil-mainly that of the industrialized countries of Western Europe, Japan, and later on the United States. Foreign capital and technology had to be called upon ...
Contents
Tables / xi Acknowledgments xiii Introduction / xv
1. The Evolution of Iraq’s Oil Industry / 1 Oil Concessions in Iraq and the Agreement of1952 / 2 The Growth of Output and Revenue / 2 Oil Output / 3 The Pricing of Iraq Crude Oil to 1950 / 4 Price Developments, 1950-1960 / 6 Nationalization and Oil Price Developments in the OPEC Era / 8 The 1973 Oil Price Revolution / 10 The Emergence of Iraq's National Oil Industry / 12 Notes / 13
2. Oil and Development under the Monarchy, 1950-1958 / 17 The Development Board and Its Programs, 1950-1958 / 17 Planned versus Actual Development Spending, 1951/52-1957/58 / 19 Highlights of Allocations for Development, 1950-1958 / 21 The Development Board and the Agricultural Sector / 24 The Development Board and the Industrial Sector / 29 Notes / 33
3. Oil and Development Planning, 1958-1968 / 35 Development Planning in the Qasim Era, 1958-1963 / 36 Development Planning under the Are f Brothers / 43 The Economy’s Past Performance as a Guide for the Plan / 45 Sectoral Expenditure under the FYP / 46 Actual Performance of the FYP / 49 Notes / 52
4. The Baath Party and Its National Development Plans / 55 Evolution of Arab Nationalism / 55 The Political Economy of Arab Nationalism 58 The National Development Plan, 1970/71-1974/75 / 62 The Strategy of the Plan / 62 Quantitative Goals of the Plan / 63 Assessment of the National Development Plan / 68 The 1975 Investment Program / 71 Development Planning after 1975 / 72 Notes / 75
5. The Iran-Iraq War and the Demise of Development / 79 The War and the Iraqi Economy / 79 The War, Iraq’s Oil, and Saudi Arabia's Oil Policy / 83 The War and the Deterioration of the Iraqi Economy / 87 The War and the End of Development / 89 War Labor Mobilization and the Economy / 91 Military Expenditures and Iraq's GNP and Oil Revenue / 94 The War and Military and Nonmilitary Imports / 95 Privatization under War Conditions / 96 An Estimate of the Cost of the Destruction / 99 Notes / 103
6. The Invasion of Kuwait and the Destruction of Development / 105 Abundance of Problems versus Scarcity of Resources / 105 Government Borrowing, Money Supply, and Inflation / 106 The Emerging Problem of External Debt / 109 Military Industries and the Use of Scarce Resources / 109 OPEC Failure and the Iraq-Kuwait Oil Confrontation / 111 The Invasion and the Economic Sanctions / 118 An Estimate of Iraq's Human Losses / 120 An Estimate of Iraq's Economic Losses / 121 Impact on Personal Income, Consumption, and Cost of Living / 123 Notes / 124
7. Iraq’s Economic Development, 1950-1990: An Assessment / 127 Evolution of the New State / 127 Regional and International Context 130 Ideological Dimensions / 133 An Assessment of Iraq's Development, 1950-1990 / 136 Development Problems, 1958-1980 / 139 Development Problems, 1980-1993 / 145 Notes / 147
8. What Economic Future for Iraq? / 151 Sanctions, Reparations, Debt, and Reconstruction / 151 The $586-Billion Question / 153 An Estimate of Oil Revenue to 2010 / 153 The Burden of Foreign Deb t / 157 The Burden of War Reparations / 158 United Nations Sanctions / 158 Other Claims on Scarce Resources / 159 The Continued Crisis of the Economy / 160 The Problem of Hyperinflation and the Exchange Rate / 164 What Economic Future for Iraq? / 167 Notes / 168
2.1 General Programs of Development Board’s Projects / 18 2.2 Total Planned and Actual Development Expenditures and Revenues, 1951/52-1957/58 / 20
3.1 Provisional and Detailed Economic Plans / 38 3.2 Planned and Actual Development Expenditures, 1958/59-1962/63 / 40 3.3 Allocated, Budgeted, and Actual Expenditure and Revenue: Five-Year Plan, 1965/66-1969/70 / 47 3.4 Projected and Actual Growth Rates under the Five-Year Economic Plan, 1965-1969 / 50
4.1 NDP: Annual Average Sectoral Growth Rates, 1970-1974 / 64 4.2 NDP: Projected Total Increases in Certain Economic Indicators, 1970-1974 / 65 4.3 NDP: Sectoral Allocations and Revenue, 1970-1974 / 65 4.4 NDP: Aggregate Sectoral Distribution of Planned Expenditures, 1970-1974 / 67 4.5 NDP: Distribution of Development Projects by Sector, 1970-1974 / 69 4.6 NDP: Revised Allocations, Actual Expenditures, and Revenue, 1970-1974 / 71 4.7 NDP: Target and Actual Values of Certain Economic Indicators, 1974 / 72 4.8 Sectoral Allocations under Annual Plans, 1976-1980 / 74
5.1 Investment Programs and Annual Plans, 1976-1983 / 82 5.2 Labor Force and Armed Forces, 1970-1988 / 92 5.3 Military Expenditures, Oil Revenue, and GDP, 1970-1989 / 93 5.4 Nonmilitary and Military Imports, 1970-1989 / 96 5.5 Changing Composition of GDP, 1975-1988 / 101
6.1 Estimates of Labor Earnings in Iraq, August 1991, Compared with Various Benchmarks / 124
7.1 Planned and Actual Development Expenditures, 1951-1980 / 142 8.1 Gross Domestic Product and GDP per Capita in Constant 1980 Prices, 1950-1993 / 152
INTRODUCTION
In 1960, Iraq’s real GDP measured in 1980 prices was $8.7 billion. In 1979 GDP peaked at $54 billion. And by 1993 Iraq’s GDP has declined to $10 billion, the equivalent of what it was in 1961. Put another way, these figures inform us that more than three decades of real GDP growth have been erased. But these dismal statistics tell a small part of this unique episode in the history of the second half of this century. This is so because the GDP in 1961 had to support 7 million people; in 1993 it had to support a population that has grown to nearly 21 million. Such a drastic collapse in per capita GDP translates into the nullification of nearly half a century of growth and improvement in the living standards of the population.
To place this change in some international context, Iraq in the years prior to its invasion of Kuwait was at the top of the per capita GDP ladder of developing countries. By 1993, real monthly earnings were lower than the monthly earnings of unskilled agricultural workers in India-one of the poorest countries in the world. What happened to an economy noted for the wealth of its oil reserves, agricultural potential, water resources, relatively high rates of literacy and skills, vast access to foreign technology and expertise, an enviable balance-of-payments surplus and foreign reserves, and a long history of determined effort to develop and diversify the economy? Simply stated, the central concern of this work is to find an explanation or explanations of what happened to cause this unprecedented and unparalleled collapse. To this end, the first chapter is devoted to an examination of the critical role of the oil sector in the Iraqi economy. Chapter 2 is devoted to a study of Iraq’s development policies under the monarchy and assesses development programs and policies in the 1950s. In the following chapter, the development plans of the republican regime in the period 1958-68 are evaluated. In Chapter 4, the Baath party’s economic philosophy, development strategies, and plans are analyzed. The demise of development that started with the outbreak of the Iran-Iraq war of 1980-88 is examined in Chapter 5. In Chapter 6, the economic consequences of the 1990 invasion of Kuwait, including the impact of the United Nations sanctions on the Iraqi economy, are examined. Chapter 7 examines Iraq’s changing economic fortunes in the period 1950-93, and the last chapter attempts to shed some light on Iraq’s economic future against the background of the economic destruction of the two Gulf wars.
The Economy of Iraq
Chapter 1
The Evolution of Iraq’s Oil Industry
One of the most striking features of the world oil map is the concentration of crude oil reserves in a few countries. In the Western Hemisphere, most of the oil reserves are concentrated in the United States, Venezuela, Mexico, and Canada. In the Eastern Hemisphere, they are concentrated in the former Soviet Union, North Africa, and the Middle East. Because of the stage of their economic development, the United States and the former Soviet Union developed their oil industries primarily to meet their countries’ own demands for energy. But since other oil-producing countries have a very low indigenous demand for energy, their oil resources were developed to meet world demand for oil-mainly that of the industrialized countries of Western Europe, Japan, and later on the United States. Foreign capital and technology had to be called upon to develop oil resources since capital requirements for developing, producing, transporting, refining, and finally marketing oil products were well beyond the capabilities of countries like Venezuela, Iraq, Iran, Kuwait, Saudi Arabia, Libya, Indonesia, Nigeria, and Algeria. The pattern of relationships between Iraq, as well as other oil-producing countries, and the oil companies exploiting oil resources was regulated by concession agreements. According to the provisions of the concession, the foreign-owned oil company obtained an exclusive right to develop and export Iraq’s oil; it was the sole determinant of the level of oil output and export; and it alone had the prerogative to set the price of oil. In short, the government had no input in the development or the pricing of what became the most important commodity of the national economy. The role of the government was a passive one in that it became a recipient of a fixed sum per unit of export.1 …..
Abbas Alnasrawi
The Economy of Iraq Oil, Wars, Destruction of Development and Prospects, 1950-2010
Greenwood Press
Greenwood Press Westport, Connecticu The Economy of Iraq Oil, Wars, Destruction of Development and Prospects, 1950-2010 Abbas Alnasrawi
Recent Titles in Contributions in Economics and Economic History
The American Pulp and Paper Industry, 1900-1940: Mill Survival, Firm Structure, and Industry Relocation Nancy Kane Ohanian
Aspirations and Realities: A Documentary History of Economic Development Policy in Ireland since 1922 James L. Wiles and Richard B. Finnegan
Multinational Culture: Social Impacts of a Global Economy Cheryl R. Lehman and Russell M. Moore, editors
The Age of Giant Corporations: A Microeconomic History of American Business, 1914-1992, A Third Edition Robert Sobel
International Agriculture Trade and Market Development Policy in the 1990s John W. Helmuth and Don F. Hadwiger, editors
Comparative Studies of Local Economic Development: Problems in Policy Implementation Peter B. Meyer, editor
United States-Japan Trade in Telecommunications: Conflict and Compromise Meheroo Jussawalla, editor
Pacific-Asia and the Future of the World-System Ravi Arvind Palat, editor
Development versus Stagnation: Technological Continuity and Agricultural Progress in Pre-Modem China Gang Deng
Commodity Chains and Global Capitalism Gary Gereffi and Miguel E. Korzeniewicz, editors
Global Telecommunications Policies: The Challenge of Change Meheroo Jussawalla, editor
The State and Capitalism in Israel Amir Ben-Porat
Contributions in Economics and Economic History, Number 154
Greenwood Press Westport, Connecticut – London
Library of Congress Cataloglng-in-Publicatlon Data
Alnasrawi, Abbas. The economy of Iraq: oil, wars, destruction of development and prospects, 1950-2010 I Abbas Alnasrawi. p. cm. - (Contributions in economics and economic history, ISSN 0084-9235; no. 154) Includes bibliographical references and index. ISBN 0-313-29186-1 (alk. paper) 1. Petroleum industry and trade-Iraq-History-20th century. 2. Petroleum industry and trade-Iraq-Forecasting. 3. Iran-Iraq War, 1980-1988-Economic aspects - Iraq. 4. Persian Gulf War, 1991--Economic aspects-Iraq. 5. Iraq-Economic conditions. I. Title. II. Series. HD9576.I72A647 1994 330.9567'0442-dc20 / 93-37510
British Library Cataloguing in Publication Data is available.
All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher.
Library of Congress Catalog Card Number: 93-37510 ISBN: 0-313-29186-1 ISSN: 0084-9235
First published in 1994 Greenwood Press, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. Printed in the United States of America ∞ The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48-1984). 10 98765432
