Iraq's natural resources

• Official Name: Republic of Iraq

Summary: In the twenty-first century, Iraq is an energy-rich country that is nevertheless unable to meet its own energy needs and is a long way from recovering from several decades of war, economic sanctions, and internal calamity.

The home of the cradle of civilization, the modern state of Iraq dates to 1919, when the region was removed from Ottoman Empire control in the wake of World War I. It was governed under the authority of the United Kingdom until 1932 and ruled by a monarchy established in 1921 until its overthrow in 1958. The succeeding Republic of Iraq, controlled by the Arab Socialist Ba’ath Party beginning in 1968, lasted until an American-led invasion in 2003 during the Iraq War. The next three years saw a series of transitional governments: first a multinational military coalition, followed by the Iraqi Interim Government and the Iraqi Transitional Government, until the Iraqi republic’s government took office in May 2006, following a December 2005 general election and the approval of a new constitution.

The new Iraqi government consists of a constitutional democracy with a national assembly, a prime minister named by the largest party in the assembly, an elected president and vice president, and a cabinet of ministers proposed by the prime minister and approved by the National Assembly. Both the prime minister and the president are considered fairly weak executives, with the ministers having considerable authority over their departments and the Assembly holding most of the power. Iraq is an energy-rich country that is unable to meet its own energy needs and is recovering from decades of war, economic sanctions, and internal calamity.

Iraq's economy remained dominated by the oil sector. According to the US Energy Information Administration (EIA), in 2023, oil accounted for about 90 percent of Iraq's government revenue. This spoke to the need for economic diversification in the long term, but it also indicated much about the economy, which remains undermined by corruption and internal instability.

Oil

Iraq possesses considerable oil reserves, officially ranked as the fourth-largest reserves in the world by World Population Review, although the Iraqi government claims that new exploration data show that these reserves are the largest (larger even than Saudi Arabia’s). Estimates have varied wildly throughout the years, from the US Geological Survey’s estimate of 78 billion barrels and the Central Intelligence Agency’s estimate of 145 billion barrels to the Iraqi government’s claim of 350 billion barrels. However, the size of the reserves may be irrelevant: After decades of economic sanctions, multiple wars, and prolonged civil unrest and insurgency, Iraq’s oil infrastructure is vastly out of date. Approximately 90 percent of the country’s power generation and distribution systems were destroyed in 1991 during the Persian Gulf War, and full recovery had not yet been achieved when the Iraq War began a decade later.

Furthermore, even in 1991 the country was still suffering from the 1980–88 Iran-Iraq War, which left the nation deeply in debt to foreign creditors and with losses amounting to nearly $100 billion; much of the infrastructure destroyed in 1991 was new construction that was part of the late 1980s attempt at recovery. The 2003 invasion by the United States and subsequent insurgency by the Islamic State group (commonly known as ISIS) have complicated that much-prolonged recovery; even after the implementation of an ambitious infrastructure-rebuilding program in 2004, sabotage, looting, and other violence limited the gains to about 20 percent—well below demand in a country that in theory has resources far in excess of what is needed for energy independence. Iraq has therefore faced regular fuel shortages and power outages, while the economy has been wracked by sabotage of pipelines and power plants.

Wells and other facilities are in need of repair, and the state of oil technology remains to be fully modernized. The World Bank has estimated that just maintaining 2010 production levels would require an investment of $1 billion per year in maintenance, repairs, and infrastructure improvements. More earnest reconstruction—not simply maintaining the state of the industry but rebuilding it and bringing it up to a modern standard—could increase that cost one hundredfold.

Furthermore, Iraq’s oil resources are not evenly distributed across sectarian lines, with little of the country’s oil in the possession of the Sunni population in central Iraq; most of it is in the Shiite south or Kurdish north. Despite these problems, oil wealth is the country’s surest route to rebuilding in the wake of the war, and the former minister of oil and former deputy prime minister of energy, nuclear scientist Hussain Ibrahim Saleh al-Shahristani, promised that money spent on the oil industry would generate revenue that in turn would pay for improvements in transportation, education, and health care, among other gains.

According to the EIA, Iraq's net oil revenues rose from $92 billion in 2021 to $131 billion in 2022. The EIA reported that Iraq's crude oil revenues dropped an estimated 22 percent from 2022 to 2023, following lower production mandated by OPEC+ and lower crude oil prices. However, in 2024, this drop was offset somewhat by an increase in production in Kurdistan.

Oil Contracts

In 2009, the Iraqi Oil Ministry issued service contracts to develop Iraq’s existing oil fields in a move toward repairing the energy sector and moving closer to economic health and energy independence. These contracts covered seven oil fields and fifteen different foreign companies from Asia, Europe, and the United States, with the goal of increasing production to 11.9 million barrels per day, nearly as much as Saudi Arabia’s daily production of 12.5 million barrels. Iraq’s production share of these contracts was 25 percent, with the United Kingdom as the next largest beneficiary at 19 percent.

Since 2009, with the advent of these contracts, oil export earnings have returned to the levels seen before the Iraq War, though production hovered around 4 million barrels per day in mid-2016. However, this increase was instrumental in more than doubling Iraq’s gross domestic product from its 2005 level, although inflation—while remaining under control since 2006—remained uncomfortably high.

The United States has always supported private industry endeavors and Western investment in the rest of the world, often requiring reforms supporting such endeavors as a condition for its aid; in this case, the United States required the new body of law as a condition for ending its occupation. The accusation has also been leveled that no-bid contracts were awarded to American companies when other companies would have provided the same value of service for a lower percentage of revenue.

Key to the criticism was the fact that, although Saudi Arabia may have larger oil reserves, many of its reserves were reaching, or had reached, the point where the oil was becoming increasingly difficult and increasingly expensive to extract after decades of production. In Iraq, by contrast, the oil was some of the easiest and cheapest in the world to extract, particularly because the oil fields had been underexploited for so long. Therefore, although the country was unable to make efficient use of its oil reserves, critics argued that it had been forced to trade significant long-term profits in return for short-term solutions, whereas the foreign companies involved have little to lose.

In the 2020s, Iraq sought to increase both its oil and natural gas production. In 2024, it signed contracts with thirteen companies for oil and gas exploration. This was done in part to lessen its dependence on natural gas imported from Iran. The agreements had goals of increasing its oil production by 750,000 barrels of crude oil per day and 850 million standard cubic feet of gas.

Other Industry

Iraq’s macroeconomic gains have not yet had much impact on the day-to-day life of the majority of its citizens, who are still fraught with economic hardship worsened by corruption, an anemic private sector, an ineffective banking system, rampant unemployment, energy shortages, and, of course, the disruptions of the ongoing insurgency by ISIS, which some would characterize as more akin to a civil war. According to the World Factbook (2025), Iraq's economy remained highly dependent on oil, which made it vulnerable to fluctuations in oil prices. The country is dependent on imports for most sectors.

Electricity

Electricity in Iraq is subsidized, one of the factors responsible for increasing demand, along with the economic growth of the postwar years and especially the surge in purchases of electrical appliances and consumer electronics. Air conditioners, for instance, were banned under the regime of Saddam Hussein and are not so expensive as to be out of reach for the average Iraqi family, but they can be incredibly resource-intensive. In 2023, its electricity generation was 31.339 million kW, while its consumption was 73.521 billion kWh, according to the World Factbook.

Bibliography

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Ebel, Robert E. Geopolitics and Energy in Iraq. Washington, DC: Center for Strategic and International Studies, 2010.

“EU and Iraq Sign Strategic Energy Partnership.” Petroleum Review 64, no. 757 (February 1, 2010).

"Iraq." US Energy Information Administration (EIA), 14 July 2025, www.eia.gov/international/overview/country/irq. Accessed 30 Sept. 2025.

Iraq Energy Policy, Laws and Regulation Handbook. Washington, DC: International Business Publications, 2008.

"Iraq." The World Factbook, Central Intelligence Agency, 17 Apr. 2025, www.cia.gov/the-world-factbook/. Accessed 30 Sept. 2025.
Rasheed, Ahmed and Nayera Abdallah. "Iraq Initials 13 Exploration Deals as Seeks to Focus on Natural Gas." Reuters, 4 Aug. 2024, www.reuters.com/business/energy/iraq-signs-initial-deals-13-oil-gas-exploration-blocks-fields-ministry-2024-08-14/. Accessed 30 Sept. 2025.