Iraq's membership of OPEC

Iraq is a Founder Member of the Organization of the Petroleum Exporting Countries (OPEC) but has had its production quota suspended since 1998 because of the impact that the Gulf War and subsequent sanctions on Iraq had upon the oil industry.

=Foundation=

Iraq hosted the conference that led to the foundation of OPEC in Baghdad, Iraq, in September 1960, with Iran, Kuwait, Saudi Arabia and Venezuela. .

Iraq was immediately disappointed by the reluctance of other OPEC member countries to adopt a single negotiating stance with international oil companies. . Instead, each member country had decided to negotiate separately, with the result that the supermajors were able to switch production away from Iraq, where conditions were becoming harder for them due to rising demands from the government.

OPEC played a key part in Iraq's nationalisation in 1972, providing loans to compensate for a transitional period where Baghdad would lose revenues from the Iraq Petroleum Company.

=Rivalry with Iran=

Iraq was locked in rivalry with neighbouring producer Iran in the 1980s over OPEC production quotas, at the same time that they fought an eight-year war. Iraq demanded parity of quota with Iran at around 3.4 million barrels of oil per day (mb/d), but OPEC consistently denied this as Iran's stated proven reserves were higher, and OPEC quotas are based on reserves.

In response, Iraq flouted the quotas. In 1986, then Minister of Oil Issam Chalabi said Iraq would ignore its OPEC quota of 1.54 mb/d export, producing instead whatever amount would best serve Iraqi interests.

=Suspension=

After the 1991 Gulf War, the United Nations Security Council imposed a continuing ban on Iraqi oil exports that remained in place until the Oil for Food program was initiated in 1996.

But between then and the outbreak of the second Gulf War in April 2003, Iraq's production did not rise above 1.5 mb/d, and its exports were lower, falling well below its export quota.

As a result, in 1998, OPEC formally suspended Iraq's production quota, a state of affairs that remains until this day. Nonetheless, Iraq asked in October 2011 to rejoin the OPEC county system by 2014."

=Recent Iraq Activity within OPEC= When Iraqi oil output reached its highest in two decades in February 2011 at an average of 2.08 mb/d, which also made it the biggest single contributor to world oil supply growth that month, OPEC is said to have felt its control on the global supply of oil threatened. Leo Drollas, from the Centre for Global Energy Studies, stated that an extended period of stability for Iraq "could have a major destabilising effect on OPEC and the oil price."

By June 2011, Iraq produced 2.7 mb/d. Hussain al-Shahristani, Deputy Prime Minister for Energy, stated that the country would be likely to reach 3 mb/d by the end of the year. The Iraqi Ministry of Oil had already stated, in March 2011, that the country could reach 5.6 mb/d by 2014 and even 12 to 13 mb/d by 2017 - to be sure, if insurgent activity were kept in check, pipelines upgrades were successful and long-term production-expansion contracts with international oil companies (IOL) were signed.

In October 2011, the country asked to rejoin OPEC's quota system for crude input in 2014 as it reached an average of 2.9 mb/d. Falah al-Amri, director of the State Oil Marketing Organisation (SOMO), stated that the country aims to increase oil output to 3.4 mb/d for 2012 and to 4.5 mb/d in 2013. However, al-Amri has indicated that the country "will seek the biggest possible quota."

At present, Iraq is striving to support an increase in OPEC output, although Abdul Karim al-Luaibi, Iraqi Minister of Oil, speculates that OPEC will likely decide to cut oil output in December 2011. Iran, supported by African OPEC members and Venezuela, has blocked Saudi Arabia's proposals to increase output throughout 2011.

In June 2011, Iran successfully opposed a move led by Saudi Arabia to raise OPEC oil output quotas in order to meet shortfalls in supplies from Libya. As a result, no formal agreement on OPEC production levels could be reached. In November 2011, Iran moved to reduce oil output back to the volumes before Libya's civil war. However, if oil output were to be boosted unilaterally again, as it occurred in June 2011, by Saudi Arabia and its supporters - which include Iraq - Iran's move may not matter in the long run.

According to industry sources speaking to the Petroleum Economist, Iraq "has not played its OPEC politics very carefully" by coordinating its position with Iran's, leading to stand-offs with Saudi Arabia and other Gulf countries. OPEC sources suggested that Iraq production output of 4 to 4.5 million barrels per day (bpd) would be likely to trigger a discussion on quotas.

=References= 