Impact of Wars and Sanctions on Iraq

Iraq has endured three major wars since 1980 and strict economic sanctions between 1990 and 2003. Iraq's oil infrastructure was damaged in the Iran-Iraq War of the 1980s, the Gulf War of the early 1990s and the Iraq war of the 2000s, while UN sanctions from 1990 to 2003 severely limited Iraq's ability to export oil and gain access to the latest technology to develop its fields. The combined effect of wars and sanctions have resulted in dramatic fluctuations in Iraq's oil production and economic involvement in the world market.

=Iran-Iraq War 1980-1988= Iraq's oil production reached its all-time peak of 3.5 million barrels per day (bpd) in 1979 prior to its invasion of Iran, but the war had a quick and debilitating impact on Iraq's production capability. Iraq's two primary offshore export terminals on the Persian Gulf, Mina al Bakr and Khawr al Amayah, as well as the Basra refinery, were severely damaged by Iranian attacks in the opening weeks of the conflict. The destruction of Iraq's Persian Gulf terminals caused it to rely exclusively on pipelines to the Mediterranean for exports. Then in 1982 Syria, allied with Iran, closed the 650,000 bpd-capacity Banias pipeline, which had been a vital Iraqi access route to the Mediterranean Sea and European oil markets, leaving Iraq with only the pipeline to Dortyol in Turkey. Oil production dropped to 2.5 million bpd in 1980 and by 1983 had fallen to less than 1 million bpd. By 1983, Iraq's export capabilities were only 700,000 bpd, or less than 30% of operable field production capacity at that time.

Partially in an attempt to break a stalemate that had settled by 1984, Iraq intensified its attacks on Iranian commercial shipping. According to author Efraim Karsh, Saddam Hussein had hoped this would provoke Iran to close the Straits of Hormuz, a critical shipping lane in the Persian Gulf. This might have left powers such as the United States little choice but to intervene. Instead, Iran reciprocated the new wave of assaults by attacking tankers carrying Iraqi oil from Kuwait, along with any tanker of other Persian Gulf states supporting Iraq. The resulting "tanker war", as it has come to be known, brought extensive damage to Iraqi and Iranian shipping capability and that of other Gulf states, and reduced shipping in the Gulf by 25% by 1984.

While damage to oil installations both in Iraq and Iran was extensive, some observers, such as M. S. El Azhary, have suggested that the real damage to Iraqi and Iranian oil sectors came in the form of lost revenue. The war depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with foreign debt of more than $40 billion, particularly to Saudi Arabia and Kuwait. By 1988, Iraq had to rely on a shrinking source of oil revenue which generated only $11 billion, compared with $26 billion in 1980.

=Persian Gulf War 1991= After Iraq invaded Kuwait in August 1990, a US and UK-led coalition initiated a massive aerial campaign against them in January 1991. Nearly a month of air strikes, targeted primarily Iraq's electricity and fuel production infrastructure, dropping around 1200 tons of bombs to shut down the national refining and distribution system. Iraq's three biggest refineries, Baiji, Basra and Doura, were all bombed in the coalition air campaign, as was the strategic Faw peninsula, site of the Korr Al Amaya and Mina al Bakr export terminals, which had only recently been restored to near full capacity after the Iran-Iraq war.

The air campaign wiped out many of Iraq's oil facilities and approximately 80 percent of its refining capacity was damaged. Additionally, more than half of Iraq's 20 electrical generator sites were completely destroyed, rendering its remaining un-bombed assets dysfunctional, and 42 of its 53 bridges were rendered impassible.

=Sanctions 1990-2003= Iraq was under sanctions imposed by the United Nations Security Council (UNSC) from August 1990, when Iraq invaded Kuwait, until May 2003, after Saddam Hussein's regime had been toppled. According to Foreign Affairs magazine the sanctions were longest running, most comprehensive, and most controversial in the history of the United Nations, virtually cutting Iraq off from the world economy with catastrophic consequences for both the economy and the people of Iraq.

The sanctions included a ban on all trade, an oil embargo, a freezing of Iraqi government financial assets abroad, an arms embargo, suspension of international flights, and banned financial transactions. The UNSC also called upon member states to enforce naval and air blockades  against  Iraq.

Economic impacts included, but were not limited to: decreased imports of industrial and commercial parts and fuel, decreased exports and access to foreign currency, loss of trade partners leading to the closure of business and industry, inflation, emergence of black (parallel) markets, decreased overall economic activity (industry, commerce, agriculture, etc,; and the collapse of public and private infrastructure. Sanctions also took a large human toll, with close to 1 million estimated by UNICEF to be dead between 1991 and 1998 due to mass starvation and disease.

Beginning in 1996, the United Nations implemented its Oil-for-Food Program, which allowed Iraq to sell oil to finance the purchase of humanitarian goods. Iraq was permitted to sell $2 billion worth of oil every six months, with two-thirds of that amount to be used to meet humanitarian needs. In 1998 the limit on the level of Iraqi oil exports under the program was raised to $5.26 billion every six months, and in December 1999 the ceiling on Iraqi oil exports under the program was removed. The program made available vast funds for the purchase of food, medicine, and essential civilian goods; $24.4 billion worth of goods were delivered to Iraq from the program's inception until November 2002.

=Iraq War 2003=

Iraqi oil installations suffered little damage during the 2003 US-led invasion of Iraq, with an estimated nine wells were set on fire. But oil infrastructure was targeted for attack by insurgents and smugglers on many occasions in the invasion's immediate aftermath and in the following years. In addition, most of Iraq's power is generated from oil, and without a steady supply, power plants were unable to reach capacity and blackouts were frequent in the months following the invasion.

Most attacks focused on pipeline systems in northern Iraq, especially the Kirkuk-Ceyhan oil pipeline, which impacted the governments ability to gain export revenues. Southern pipeline infrastructure was also targeted as a means of making oil and refined products more vulnerable to theft and diversion. Highly-organised smuggling operations leveraged supply and price imbalances in the Iraqi refined fuel market to create lucrative oil sale opportunities. The US Department of Defense estimated that in one case as much as 70% of the fuel processed at Baiji was lost to the black market, possibly as much as $2 billion a year.” The sabotage of Iraq's network of pipelines served to create an inhospitable environment for international oil companies (IOCs), leading many to halt their operations in Iraq and divert investments to more stable security environments.

Initiatives such as the Pipeline Exclusion Zones (PEZs), established in 2007 in order to restrict access to vital oil arteries and build obstacles for attacks, helped improve the security of some of Iraq's oil infrastructure. But violence and attacks on infrastructure continued and, as of late 2011, the security situation in Iraq remained difficult.

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