Iraqi premier says oil price plunge ‘catastrophic’ to economy

By Nourideen Hameed

Azzaman, January 26, 2015

The fall in oil prices is having serious consequences on the economy and the budget, Prime Minister Haider Abadi said.

“Frankly, I think the impact is catastrophic,” Abadi said when asked on his opinion about the sharp drop in oil prices.

Abadi made the remarks as he was answering reporters’ questions on the progress Iraqi troops were making in the fight against Islamic State militants, particularly in the restive Province of Anbar, west of Baghdad.

Oil prices have lost nearly 50% of their value since June last year.

The plunge could not have come at a worse time for Iraq as it started with a massive invasion of Islamic State jihadists who overrun large swathes of territory in the northern and western parts of the country.

The ongoing war with the jihadist group has forced Iraq to allocate the lion’s share of its oil revenues for weapons purchases and its bloating military and security organizations.

Abadi estimated that Iraq was losing at least 40% of its income from oil sales as a result of the price plunge.

“The price of oil that we have been selling this month is less than 40% of what it used to be while 85% of the our budget depends on oil revenues,” he said.

Iraq has said it is willing to exchange its oil for weapons as part of a new drive called oil-for-weapons contracts.

The Defense Ministry says it has agreed with several countries among them the U.S. to delay payments for the weapons they ship to Iraq until oil prices start firming once again.