Fuel Subsidies in Iraq

In order to comply with the terms of its Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) in late 2007, Iraq reduced its large subsidy programs, nearly eliminating fuel subsidies which had until then cost as much as US $4 billion per year. This implied increasing fuel prices by 15 percent.

Prior to this fuel subsidies had encouraged black market activity and incentivised the endemic problem of theft and smuggling of crude in Iraq. This happened as fuel was bought cheaply in Iraq at fixed prices and smuggled to countries such as Iran, Kuwait and the United Emirates for a profit. In 2005 Iraqi gasoline cost around 5 cents per gallon, whereas neighbouring Kuwait was charging 79 cents per gallon.

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