Oil Powers Bought Iraqi Compliance – And Something Else, Too
They may have paid for compliance, but they were really buying something else.
With COVID-19 cases now starting to ravage a politically fragile Iraq – which is also the center of a proxy war between the US and Iran – there’s never been a better time for the country to ask for aid. Aid is a bargaining chip, and oil production cuts are the end game because Iraq is never in a financial position to comply.
What Iraq wants, specifically, is an IMF loan of up to some $5 billion and Saudi investment in its natural gas fields.
So far, money–and the prospect of more–has bought Iraq’s best run at compliance yet: By mid-June, Iraq had made good on a pledge to make cuts, and for the full month, its oil exports had dropped by 310,000 bpd (9%). For July, Iraq says it plans to reduce crude oil exports (Basra Light) by half.
Even without Iraq’s full compliance, numbers seem to show that OPEC compliance overall was still over 100% last month, thanks to efforts by others to cut more than pledged. Iraq, quite simply, cannot comply: It’s too politically fragile and has too many ‘civil servants’ to pay off for loyalty.
That’s why we should look at ‘aid’ as buying something other than production cuts that have already been accounted for.
