Oil alone is not enough

All it takes is for the price of a barrel of oil to slip a few dollars on world markets, and talk begins in Baghdad of budget deficits, delayed salaries and postponed projects. This equation, which we have lived with for decades, sums up the crisis of the Iraqi economy: a country rich in resources, yet exposed to a single factor it cannot control.

Oil accounts for more than 90 per cent of public budget revenue, while most spending goes on salaries, pensions and subsidies. This means that any tremor in the markets turns straight into anxiety in every Iraqi home, and that investment in the future always stays at the bottom of the list of priorities.

Where do the opportunities lie?

Diversification is not a new slogan; it has featured in almost every government programme. What is needed today is to move from headlines to sectors. Iraq has real opportunities that require no miracles: vast farmland, a location linking the Gulf to Europe, a consumer market of more than 46 million people, and gas reserves that are burned off into the air today instead of powering factories.

• Manufacturing linked to oil and gas, such as petrochemicals and fertilisers, instead of exporting crude alone.
• Agriculture and food processing, starting with dates, grains and dairy products, much of which we import.
• Transport and logistics, as the Grand Faw Port and the Development Road project near completion.
• Religious and archaeological tourism, which receives millions of visitors a year without services worthy of them.

These sectors do not grow by administrative decree, but in a business environment that local investors trust even before foreign ones: swift commercial courts, registration procedures that do not take months, and a banking system that lends to small businesses instead of merely handling public-sector salaries.

The experience of oil-producing states in the region offers useful lessons. Some have succeeded in building ports, industrial zones, airlines and tourist destinations that today generate income rivalling that of oil. It did not happen overnight, but through plans spanning two decades or more, and through professional management that shielded projects from political upheaval and from shifting priorities with every new government.

A state that pays its salaries from a single well is gambling its children’s future on a price it does not set.

Who pays the cost of delay?

Many fear that diversification will mean fewer government jobs or higher prices, and that is a legitimate fear that must be addressed frankly. Reform imposed all at once, without a social safety net, will collide with the street; but reform that keeps being postponed will collide with something harsher: the day when revenue is not enough to cover salaries at all.

Oil will remain the backbone of our economy for years to come, and no one is calling for it to be abandoned. What is needed is to invest its revenues today in building an economy that can live without it tomorrow, and to count every dinar that goes to a factory, a farm or a port as an investment in the country’s stability before it is a figure in the budget tables.