Baghdad Erbil Conflict And Economy of Iraq

Baghdad Erbil ConflictThe oil conflict between Iraq and Kurdistan has reached at a serious stage where both of the regions have taken stand on their own conditions to resolve this matter. Kurdistan decided to boycott all parliamentary sessions and meetings for discussions and approval of the annual budget of Iraq, until new rules and regulations for oil and gas. It is admitted fact that budget 2014 will not be able to approve with participation of Kurdistan. Kurdistan known’s and understands the importance of their existence in the parliament for approval of the budget. Therefore they have taken this step to ensure their demands, but remember it will have to pay cost if the conflict not resolved earlier.

Kurdistan is one of the most affected areas of Iraq due to lack of funds. The relevant ministries are not issuing funds for different departments that require funds to pay salaries of employees that are waiting for 4 months. The delay of the final budget has destroyed the like of a common man in Iraq whether in Baghdad or in Erbil. After the boycott of parliamentary sessions by Kurdistan, the government of Iraq decided to postpone budget 2014 to the next year. That’s means the budget 2014 will be declared next year with the budget 2015. If this happens, the Kurdistan will have to bear huge loss. Before giving any comment on the situation of Kurdistan and Iraq, let’s understand the background of this issue.

Background
Iraq and KurdistanIn the final draft of the budget prepared by finance committee of Iraq a condition was imposed on the Kurdistan for the export of crude oil in the international market that totally rejected. According to this condition, Kurdistan was asked to export 400,000 barrels oil per day through Baghdad pipe lines. It is the per day export quantity that they had to complete every day. In case, if Kurdistan failed to export such quantity in the market through Baghdad pipe lines, the 17% of the total budget of Kurdistan will be deducted as penalty in the final budget of Iraq.

Kurdistan refused to accept this and considered it as against the interest of Kurdistan. Kurdistan was ready to export 100,000 barrels oil per day through Baghdad pipelines as they consider the total capacity of Kurdistan is 100,000 barrels per day. But Baghdad is not ready to accept this suggestion by Kurdistan and consider that Kurdistan has capacity to export 42, 0000 barrels per day through Baghdad pipelines and they are just asking for 400,000 barrels per day. Both of them are not ready to accept the conditions of each either and a deadlock has been created between both of the region on this issue. One thing that is common in both of these regions is the Turkey. Kurdistan is exporting its oil through Turkey pipelines and Iraq has not any problem with that and it also appreciates this thing. But Turkey was not nominated as arbitrator by Iraq as it has soft corner for United States of America.

Arbitration
United Sates of America offered its arbitration to resolve this issue between Baghdad and Kurdistan but Iraq did not give proper answer for this offer made by United States of America. Therefore are many groups in Iraq even in the parliament that don’t want any involvement of United States of America in the region as most of them hat United States of America. Furthermore Iran has greater influence in Iraq even in the parliament and can influence the key decisions of Iraq today and Iran will never allow United States of America to take part in any of economic issue as they consider United States their native enemy.

In fact Kurdistan is also not ready to accept the arbitration of United States of America because of oil prices conflict issue. Kurdistan is trying to sale crude oil in the international market at lesser prices than the other countries in the region. But Iraq and United States are not happy with the decision and got stay orders for this sale in the international market. Therefore Kurdistan will not accept the judgment of United States gave on the issue of oil and gas conflict. Kurdistan has soft corner for Turkey and it consider it as a neutral country to give opinion on this issue.

Effects on Economy
Economy of IraqThe economy of Iraq badly impacted with the tension between Baghdad and Erbil. Due to this conflict, the final budget of Iraq is pending approval. The budget cannot be approved without developing consensus between both of the regions. Due to unapproved of the budget the ministry of fiancé is not issuing funds to the many of the departments of the country. This leads to shortage of budget that is impacting the whole business operations in the country. The foreign companies operating on the different oil projects also need funds to meet their operational needs.

The central bank of Iraq is looking to enhance the value of Iraqi dinar at local and global level. The financial operations are freezing in the country due to delay in the budget. The central bank of Iraq will not be able to enhance the value of currency if the country is jam due to lack of funds. The economic policy of Iraq is also being affected by the lack of funds in the country. The funds are required to keen machinery functional in the country. The economists are well aware of the drawback of unapproved budget. Most of the international companies don’t trust the country where funds are not available to make their machinery functional.

Iraq has applied to membership of World Trade Organization and the application is in progress. Lots depend on the economy of Iraq now to get this membership. According to rules and regulation, the country must have strong currency to trade internationally. To make currency tradable internationally, Iraq will have to enhance the value of Iraqi dinar. There are two short methods available for Iraq to enhance the value of Iraqi dinar in the market. One is the purchase of gold and second is the revaluation. If we focus on first option, we will have to spend huge amount of cash to purchase gold ingots to increase the reserves of country. The reserves of the country will decide whether the country is strong or not. If the reserves of the country are better that’s mean the value of home currency is strong and if the gold reserves are small that means the currency of the country is poor.

The Conflict in The Eye of a Common Person
The common people of Iraq and Kurdistan don’t want any kind of deferens in the relationships of both regions. The Abdel an Iraqi told that they don’t want any kind of conflict with Kurdistan as they already have lost lots of things and don’t want to see it in the future. Kurdistan and Iraq need to understand the will of a common person and need to work for the welfare and prosperity of a common man by resolving the pity disputes by mutual consultancy and consensus. The Kurdistan need to stop boycotted and need to attend the parliament session to approve annual budget.

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