Iraq Suffers $60 Billion Loss Due to Middle East Conflict

Iraq has incurred an economic loss of approximately $60 billion since the start of the Middle East conflict in February, according to the Iraqi Foreign Minister Foad Hussein. The losses are due to a sharp decline in oil exports and disruption in maritime traffic through the Strait of Hormuz. Hussein revealed this during a meeting with his Italian counterpart in Rome on Thursday evening.

The conflict has led to a significant economic crisis in Iraq, with oil exports, which account for about 90% of the country's revenues, declining sharply. This has forced the government to resort to domestic borrowing, while consumer prices have risen and foreign currency reserves have decreased by about $20 billion.

Prior to the war, Iraq, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced around four million barrels of oil per day, exporting about 3.5 million barrels, mostly from southern fields via the Strait of Hormuz. Iran's restrictions on maritime traffic in the strait have halted Iraqi oil exports, leading authorities to stop production in most fields after storage tanks filled up. Iraq has since relied on exporting limited quantities via tanker trucks through Syria and a pipeline through Turkey.

After months of decline, Iraq's oil exports improved in September, reaching 2.6 million barrels per day from September 1 to 21, according to data from the Iraqi Ministry of Oil. The International Monetary Fund (IMF) noted that Iraq is one of the countries most affected by transportation disruptions due to the war, given its heavy reliance on oil revenues to fund state expenditures and imports.

Amid economic pressures, the Central Bank of Iraq raised the official exchange rate of the dollar for the first time in over three years, following a decline in the country's foreign currency reserves. The Iraqi government depends on oil revenues in dollars to fund imports, maintain the stability of the dinar, and pay the salaries of public sector employees and retirees, who make up about 20% of the country's population of over 46 million people.

The Iraqi authorities are seeking to reduce dependence on oil through an economic diversification plan. The plan aims to increase the contribution of non-oil revenues from the current 10% to 45% by 2037.

**Context:** The economic impact of the Middle East conflict on Iraq highlights the country's vulnerability to disruptions in oil exports and maritime traffic. The conflict has exacerbated Iraq's economic challenges, forcing the government to implement measures to mitigate the crisis and reduce dependence on oil revenues.