A Future Undecided: Will Iraq emerge from its status as a failed state?
Thirty years ago, the two superpowers – the United States and the Union Soviet Socialist Republic (USSR), and Iran had a great interest in developing a relationship with Iraq due to the country’s immense oil wealth.
From the Babylon Empire of 2,000 BC to the Abbasid of 750 AD, Iraq has been the center of civilization leading into the 20th Century. Iran sits in the thickest of the Middle East, with Kuwait to the south and Iran to the east.
It seems hard for anyone from Generation Y to imagine Iraq as a beacon of hope and a nation of enormous wealth. However, Iraq is capable of producing six million barrels of oil a day which equates to about two billion barrels annually, according to Henry Thompson of Auburn University. The price for a barrel of oil in the US ranges from $40 to $150 whereas the cost of extraction is a little over $5 in the Middle East.
What do these numbers mean and more importantly, why are they relevant? Thompson states that with the $50 cost of a barrel and the production of 2 billion barrels per year, Iraqi oil can sell for $100 million in international markets. The country has 12% of proven oil reserves and sits on the second largest oil reserve in the world. The current situation in Iraq has created controversy amongst economists, politicians and historians over whether oil has become a “grace or a curse.”
Some intellectuals believe that abundance of wealth from oil is why US soldiers are situated in the Sunni-dominated state today. Iraq has been referred to “an isle sitting on a lake of oil” and has ideal conditions for extracting crude oil—neither water nor gas is injected into oil cylinders to increase pressure. Iraq is an easy investment, according to a Chinese source, because it has the highest production of oil with the lowest cost per barrel.
Despite the promise of oil wealth, most of the income from the oil industry is controlled by the government. Thompson says that this is most likely why the Iraqi government, and “perhaps the Iraqis themselves, [are] very wealthy.” Thompson’s statement refers to the state of the country prior to foreign intervention and invasion.
Additionally, the United Nations (UN) placed sanctions on 80% of Iraq’s oil fields—only 15 of which are functional, but with outdated technology. Due to currently low income, the maintenance of oil rigs has decreased. If all 75 of the country’s oil fields work with the most efficiency possible, then it is plausible that Iraq will begin to drop ranks on the Failed State Index.
Iraq’s position on the list has varied since 2006; however, it has been in the top ten since the beginning of US intervention in 2003. Last year, Iraq dropped from the fifth spot to sixth, right after the Democratic Republic of Congo. The list is compiled by a series of warnings or “indicators of state vulnerability”. This series is made up of two economic, four social and six political indicators. Among the top ten, excluding Iraq, are Somalia, Zimbabwe, Afghanistan and Pakistan.
Some progress has been made in the country by this statistic alone. In addition, parliamentary elections were held earlier this year in Iraq. Violence in the country increased, especially around voting stations, and warnings were established nationally to keep casualties at a minimum. Some people heeded these warnings and remained at home while others walked the dangerous two miles to a voting station. The fact that Iraqi men and women wanted their vote to count so much that they put their lives at risk shows the potential positive and democratic change the country is currently undergoing.
For now, the final economic sign of a positive future for my country is in the hands of the banks. Yes, the banks have a large part to do in the salvation of a war-ridden nation. HSBC Bank, based in Nevada, bought 70% of Iraq’s largest national bank, Dar es Salaam.
HSBC bank noted that the economy, despite numerous years of war, has seen a large intake of profits. This is due to the increase in development projects and rising state salaries in 2007. Since then, there was a slight drop in oil prices during the 2008 presidential elections in the US which contributed to the budget cuts.
Even with budget cuts, the oil business alone has the capability of bringing in $100 million. This is enough proof that Iraq is worth the investment of millions despite its status as a “failed state”.
It is also mentionable that the spirit of the Iraqi people is a strong one given the amount of chaos and devastation the people have witnessed from the Iraq-Iran war of 1980 to 1988, the Gulf War from 1989 to 1991, to the invasion of the US and its allies countries in 2003.
As long as there is oil, there is one country that needs the resource. As long as there is the need, there will always be the investment. For precisely this reason, Iraq will indeed rebuild itself from the devastation due to many years of war. The process will be a long one that will require millions of dollars. However, I have full confidence that my country will rise above the odds.
From the Babylon Empire of 2,000 BC to the Abbasid of 750 AD, Iraq has been the center of civilization leading into the 20th Century. Iran sits in the thickest of the Middle East, with Kuwait to the south and Iran to the east.
It seems hard for anyone from Generation Y to imagine Iraq as a beacon of hope and a nation of enormous wealth. However, Iraq is capable of producing six million barrels of oil a day which equates to about two billion barrels annually, according to Henry Thompson of Auburn University. The price for a barrel of oil in the US ranges from $40 to $150 whereas the cost of extraction is a little over $5 in the Middle East.
What do these numbers mean and more importantly, why are they relevant? Thompson states that with the $50 cost of a barrel and the production of 2 billion barrels per year, Iraqi oil can sell for $100 million in international markets. The country has 12% of proven oil reserves and sits on the second largest oil reserve in the world. The current situation in Iraq has created controversy amongst economists, politicians and historians over whether oil has become a “grace or a curse.”
Some intellectuals believe that abundance of wealth from oil is why US soldiers are situated in the Sunni-dominated state today. Iraq has been referred to “an isle sitting on a lake of oil” and has ideal conditions for extracting crude oil—neither water nor gas is injected into oil cylinders to increase pressure. Iraq is an easy investment, according to a Chinese source, because it has the highest production of oil with the lowest cost per barrel.
Despite the promise of oil wealth, most of the income from the oil industry is controlled by the government. Thompson says that this is most likely why the Iraqi government, and “perhaps the Iraqis themselves, [are] very wealthy.” Thompson’s statement refers to the state of the country prior to foreign intervention and invasion.
Additionally, the United Nations (UN) placed sanctions on 80% of Iraq’s oil fields—only 15 of which are functional, but with outdated technology. Due to currently low income, the maintenance of oil rigs has decreased. If all 75 of the country’s oil fields work with the most efficiency possible, then it is plausible that Iraq will begin to drop ranks on the Failed State Index.
Iraq’s position on the list has varied since 2006; however, it has been in the top ten since the beginning of US intervention in 2003. Last year, Iraq dropped from the fifth spot to sixth, right after the Democratic Republic of Congo. The list is compiled by a series of warnings or “indicators of state vulnerability”. This series is made up of two economic, four social and six political indicators. Among the top ten, excluding Iraq, are Somalia, Zimbabwe, Afghanistan and Pakistan.
Some progress has been made in the country by this statistic alone. In addition, parliamentary elections were held earlier this year in Iraq. Violence in the country increased, especially around voting stations, and warnings were established nationally to keep casualties at a minimum. Some people heeded these warnings and remained at home while others walked the dangerous two miles to a voting station. The fact that Iraqi men and women wanted their vote to count so much that they put their lives at risk shows the potential positive and democratic change the country is currently undergoing.
For now, the final economic sign of a positive future for my country is in the hands of the banks. Yes, the banks have a large part to do in the salvation of a war-ridden nation. HSBC Bank, based in Nevada, bought 70% of Iraq’s largest national bank, Dar es Salaam.
HSBC bank noted that the economy, despite numerous years of war, has seen a large intake of profits. This is due to the increase in development projects and rising state salaries in 2007. Since then, there was a slight drop in oil prices during the 2008 presidential elections in the US which contributed to the budget cuts.
Even with budget cuts, the oil business alone has the capability of bringing in $100 million. This is enough proof that Iraq is worth the investment of millions despite its status as a “failed state”.
It is also mentionable that the spirit of the Iraqi people is a strong one given the amount of chaos and devastation the people have witnessed from the Iraq-Iran war of 1980 to 1988, the Gulf War from 1989 to 1991, to the invasion of the US and its allies countries in 2003.
As long as there is oil, there is one country that needs the resource. As long as there is the need, there will always be the investment. For precisely this reason, Iraq will indeed rebuild itself from the devastation due to many years of war. The process will be a long one that will require millions of dollars. However, I have full confidence that my country will rise above the odds.
© 2010 Created by Mark Schulte.
