Oil-dependent Iraq has been warned that its economy might fall into “intensive care” if it does not diversify in line with global efforts to reduce the impact of fossil fuels on the environment.
Baghdad has been sluggish to adapt, despite the fact that the rest of the world is working to wean itself off of hydrocarbons. The massive oil reserves of the country are sufficient to produce crude oil at current rates for another century.
The energy sector has been under pressure for many years to contribute to the achievement of the target of maintaining global temperatures at 1.5 degrees Celsius over pre-industrial levels while simultaneously lowering emissions of greenhouse gases.
Britain, Canada, France, Germany, Italy, Japan, and the United States are the members of the Group of Seven (G7), and in April, they made a commitment to “accelerate” their “exit” from fossil fuels, with the goal of reaching carbon neutrality “at the latest” by the year 2050.
However, earnings from the sale of the commodity accounts for ninety percent of Iraq’s budget revenue as the country works to recover from years of destructive battles and political upheaval, making the country excessively dependent on the industry.
According to Ammar al-Azzawi, a political scientist, “at the moment, the entire economy is dependent on oil and the price of oil.”
“If the price of oil falls, our economy will be rushed to the emergency room.”
Before the rest of the globe switches to using alternate energy sources, he recommends developing Iraq’s industrial, agricultural, and tourism sectors as a solution to the problem.
The European Union announced in March that it would stop selling combustion engines in new automobiles by the year 2035. This means that new cars will no longer be able to emit any CO2 into the atmosphere.
According to Ali al-Saffar, climate director at the Rockefeller Foundation in New York, a global “energy transition is taking place; however, it is not yet taking place at the speed and scale that scientists and experts tell us is necessary to avert the worst impacts of climate change.”
“Make the most of the present.”
The 42 million people who call Iraq home are already experiencing the repercussions of Iraq’s protracted droughts, which are frequently interrupted by sandstorms.
The United Nations recognizes this primarily dry nation as one of the five nations throughout the world that are deemed to be among those most severely impacted by particular aspects of climate change.
When the worldwide demand for crude fell in 2020 as a result of the coronavirus epidemic, Iraq saw the negative side effects of its dependence on oil.
According to Saffar, “Iraq’s export revenues plummeted,” and “poverty rates in the country almost immediately doubled.”
Iraq, which has been plagued by violence for decades and is home to infrastructure that is falling apart, requires revenue from oil sales in order to finance its restoration.
According to a report published in March by the World Bank, the percentage of public investments tied to oil will rise to sixty percent in 2021 from less than seventeen percent in 2010.
Nevertheless, “the ease with which oil income is generated and can be redistributed to maintain networks of (political) power,” the global lender warned, “weakens” any push for reforms.
It advised Iraq to “seize the current moment of high oil prices” to begin its transition away from its reliance on oil, else it risks having to deal with more costly and challenging reforms in the future.
Muzhar Saleh, an economic adviser to the prime minister of Iraq, predicted that Baghdad will “diversify the economy” during the following ten years.
According to what he said, the government’s primary focus is on agriculture and significant projects that are supported through public-private partnerships, in addition to allied businesses such as the production of fertilizer.
Saleh has high hopes that Iraq would be able to double the amount of arable land it uses, from the current figure of fewer than one million hectares to more than 1.5 million with the use of new irrigation methods.
“In 50 years, we will not be as dependent on oil as we are today,” he predicted, referring to our reliance on fossil fuels.
According to projections provided by the World Bank, Iraq would require a total expenditure of $233 billion, which will be spread out across the period of time between now and 2040.
According to the bank, these investments will include financing to overhaul the inefficient electrical sector of the nation as well as funding to strengthen the economic role of the private sector.
There are also a number of projects that are currently under way to prevent gas flaring, which is a harmful method of crude extraction in which natural gas is allowed to escape.
Iraq has signed multiple contracts for solar facilities, including one with TotalEnergies of France, in an effort to meet its goal of deriving one-third of its electricity requirements from renewable sources by the year 2030.
One car salesperson in Baghdad remarked that Iraq is scarcely aware of the current hybrid vehicle technology that he offers, in contrast to the European Union’s goal of installing electric vehicle charging stations on major highways by the year 2026 and hydrogen refueling stations by the year 2031. Both of these goals have been set for the EU.
Hassanein Makkie, speaking at his dealership, stated that “the next step is electric cars… within the next two or three years.”
However, in a nation where the reliability of the electricity sector is extremely low, this approach raises a number of issues.
“In order to generate huge amounts of electricity, the necessary infrastructure must be in place. We are not ready,” Makkie stated.