Oil tankers in Erbil. Credit Khaled Hasan for The New York Times
Reuters: Economic 'tsunami' undermines war against Islamic State in Iraq - Kurdish deputy PM
Iraq's Kurdistan region is in danger of being drowned by an economic "tsunami" as global oil prices plunge, its deputy prime minister said, warning it could undermine the war effort against Islamic State.
Four months in arrears and deeply in debt, the Kurdistan Regional Government (KRG), which depends on oil revenue to survive, has been hit hard by oil's slump below $30 per barrel this week from over $100 a barrel two years ago.
Even before oil's most recent losses, the autonomous region was unable to meet a bloated public payroll including the salaries of its own armed forces, the peshmerga, which are on the front line against Islamic State.
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WNU Editor: One can also assume that low oil prices and persistent Russian air strikes are also undermining the Islamic State's war efforts against the Kurds. On a side note .... Kurdish oil has always been a center of dispute in this part of the world .... Kurds’ Oil Deals With Turkey Raise Fears of Fissures in Iraq (NYT)
3 comments:
It's a self inflicted problem. Barzani's insistence that Kurdish Oil is Kurdish Oil, but the other Provinces oil is Iraqi Oil and therefor the profits must be shared with the Kurds have created three problems;
1) The Kurdish Oil has to be smuggled out through Turkey, as a result the Kurds only get a tiny fraction of the world price,
2) The oil smuggling has created a "privledged" Criminal Syndicate of Kurds, Turks and even ISIS members, which may keep Barzani in power, and make his family rich, but it's bad news for Kurdish Democracy,
3) The Kurdish position has caused the Iraqi Government to stop transfers to the Kurds, ( which amount to 13% of Iraqi GDP), cutting the Kurds off from the benifits of not only the much larger Iraqi Oil exports, but also the industrial, chemical and agriculture exports.
Anyone that based their economic growth on oil or natural resources alone will hurt big time in the current situation. It looks like the world based everything on high oil prices, should be interesting to see just how wacky this gets.
TWN,
It's a lot tougher than that. When resource prices are down, historically, manufacturing and services are up, but they are all down.
Under Kensian Economics, " now" is the time for Governments to invest in infrastructure as material and labour costs are low, unemployment and under employment are high, ( so you can build for a fraction of the cost), and by putting money in the hands of workers and Companies, who will spend that money, you kickstart the economy.
In Austerian Economics, now is when you cut taxes, cut wages, cut benifits, cut social services, cut Govenment spending, but not on the Military), engage in QE so that Wall Street can use 0.15% loans to bet on the Markets, Corporations can use 0.5% loans to buy back stocks and drive up stock values, hoarding cash for a future economic turn around.
Japan's still waiting after 40 years for an economic turn around.
And in Alberta, they are saying the Alberta Prayer,
"Please Dear God, give us another oil boom, we promise not to piss it away like last time!"
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