Iraq’s Oil History & Outlook, Part One
As the world’s second-largest owner of oil reserves, Iraq is growing rapidly as a regional economic power. And, the country faces an even brighter future ahead.
Since the Iraqi economy and Iraqi Dinar depend on revenues from oil sales, understanding Iraq’s oil industry is key to understanding the nation’s economy and benefiting from its growth.
In Part One of this two-part series we’ll look at the history of Iraq’s petroleum industry and its current state of development, including the major players.
Then in Part Two we’ll examine how new petroleum technologies are increasing Iraqi oil output and sales revenues, and consider the future outlook for Iraq’s economy and the Dinar as they relate to the oil industry.
Oil Rich
Iraq is rich with petroleum. In fact, there’s so much oil that throughout the country there are numerous locations with natural seepage of bitumen and liquid petroleum. The Persian word naft and the Greek word naptha refer to this seeping oil.
Ancient uses of petroleum included waterproofing walls and roofs, and paving. Yet, because of the lack of drilling and transportation technologies, during ancient times petroleum was only used locally and only in relatively small quantities.
Beginning in the 1850s governments and businesses worldwide began to focus on petroleum as an energy source instead of merely using it for construction purposes.
By the 1860s entrepreneurs had begun searching globally for petroleum, and Iraq turned out to be an especially rich source.
The Beginning of the Iraqi Oil Industry
Although geologists first began drilling for oil in Iraq in 1908, it wasn’t until 1925 that commercially successful wells were developed. Then, in 1927 several major wells were drilled, and Iraq’s first pipeline and refinery were built.
The earliest oil companies to explore Iraq were the Anglo-Persian Oil Company (or APOC), and the Turkish Petroleum Company (TPC), which would later become the Iraq Petroleum Company (IPC).
Early in the 20th Century many British, American, French and German diplomats and businessmen became focused on the lucrative opportunities in Iraq’s oilfields. Industrialized nations were searching eagerly for energy sources to support their own growth
In 1905 the Germans sent a geologic survey team, and in 1908 the Americans sent Admiral Colby Chester as representative of the New York Chamber of Commerce to propose the construction of oilfields and other infrastructure.
However, before Americans or Europeans could gain a foothold in the Iraqi oil industry, the leader of the Ottoman Turks was ousted in a coup.
This downfall of the Ottoman Empire worried Westerners who had invested heavily in petroleum development. The Brits in particular were alarmed by the local political changes, and they were desperate to find ways to avoid being shut out of the regional oil boom.
Beginning in 1910, the British-owned Turkish National Bank and the Royal Dutch Shell Oil Company worked closely with Calouste Gulbenkian, a shrewd, politically-connected Turkish-Armenian petroleum engineer and businessman, in order to enter the Iraqi oil exploration and production business.
By 1912 the Turkish Petroleum Company (TPC) was registered in London and well-capitalized for business. However, the company didn’t have any exploration or drilling concessions from the government. The TPC had money and political clout in Britain, but not in Turkey or Iraq.
Finally, after intensive lobbying by the British and German ambassadors, in 1914 the leader of Turkey, the Grand Vizier Said Halim, granted broad concessions to the TPC for exploring and drilling for oil in both the Mosul and Baghdad areas.
Regarding ownership of TPC, the Turkish National Bank (secretly owned by British interests) was supposed to own 50% of the company, and Deutsche Bank was to receive 25%, and Royal Dutch Shell 25%.
Yet, because these ?major players? were unable to obtain the necessary mineral concessions from the then-Turkish ruler of Iraq, they were forced to rely on Mr. Gulbenkian to convince him. The Turks hesitated to allow TPC, a foreign company, to enter Iraq
Mr. Gulbenkian’s multicultural business skills and his close relationship with the Turkish leaders in control of Iraq helped him persuade them to allow TPC to drill and explore throughout Iraq.
He insisted on receiving 5% ownership as his commission for closing the deal, which earned him lifelong recognition as ?Mr. Five Percent.?
More Delays
By unlucky coincidence, on July 28th, 1914 ? the same day that the Turkish Grand Vizier granted his oil-drilling concession to TPC ? in Europe a nationalist assassinated the Austrian Archduke Franz Ferdinand, which triggered World War I.
When the war ended four years later, Turkey and Germany were defeated and the Ottoman Empire was divided into separate states. Iraq was placed under British control.
In 1921 the Brits installed Sultan Faisal as ruler of Iraq. He remained in power until 1933. Faisal was succeeded first by his son, and later by his grandson, Faisal II. All three rulers supported the development of Iraqi oilfields by foreign partnerships.
Iraq continued under this British-sponsored monarchy until the 1958 revolution which brought the Ba’ath Party to power and eventually led to the rise of Saddam Hussein.
The Search for Oil Resumed after World War I
In 1920 the British and French secretly agreed that the original German shares of TPC would be transferred to the French, as a wartime reparation.
Yet, the Americans were afraid of domestic oil shortages. With urging from the U.S. government, the British concluded that oil ventures in Iraq would be easier and more profitable if they were developed with American technology, capital and political support. So, American interests were brought into the mix.
In March 1925 the TPC finally received a concession from the new Iraqi government, and soon afterward a large expedition arrived to begin drilling.
Several wells were drilled; most were unproductive, yet one well in particular was extremely productive.
Kirkuk
Iraq’s first successful well was drilled near the city of Kirkuk in 1927. In fact, the name Kirkuk is a variation of gurgur, which means ?flames.? It refers to the numerous oil seeps in the area, some of which burned for many years after lightning strikes set them ablaze.
This well became Iraq’s first gusher. When the drillers struck oil there, the extreme oil pressure blew out the valves on their safety equipment and petroleum gushed for nine days before the well could be brought under control.
Kirkuk proved to be the first major discovery for the TPC, and a turning point in the development of Iraq’s oilfields. Even today, Kirkuk is still the country’s single biggest oilfield, thought to hold at least 12 billion barrels.
Oil exports from the Kirkuk field started in 1934 once the IPC completed the twelve-inch pipelines to carry Iraqi oil to refineries in Haifa (then in Palestine) and Tripoli in Lebanon.
The Iraq Petroleum Company
In 1929 the TPC changed its name to the Iraq Petroleum Company (IPC), and in the following year the Iraqi nation gained its independence from Britain.
Between 1925 and 1961 the IPC had a tight monopoly on all petroleum exploration and production throughout Iraq. Even today, although not operating actively the company remains based in London and it still owned jointly by several of the world’s biggest oil companies.
By 1930 there were at least twenty producing oil wells located in and around Kirkuk. Other regions of Iraq were slower to yield petroleum ? The next oil discovery didn’t come until 1937 with the Ain Zalah field.
In 1931 the government signed a fresh new revenue agreement with the IPC, by which the company paid to the government a royalty of four British shillings in gold per each metric ton of oil produced, and an agreed minimum annual payment of at least ?400,000 during the first 20 years.
The new agreement granted development of the northwest region of Iraq to a consortium of oil companies operating as the Mosul Petroleum Company. And, in 1938 the new Basrah Petroleum Company began drilling at sites in southern Iraq.
Nationalization of Iraq’s Oil Industry
These three companies ? The Iraq Petroleum Company, Mosul Petroleum Company, and Basrah Petroleum Company ? became the nucleus of the Iraqi petroleum industry.
In 1961 the Iraqi government began the process of nationalizing the IPC and eventually expropriated 95% of its drilling concessions.
The Iraq National Oil Company (or INOC) was created by the Iraqi government to replace the IPC and operate the nation’s oil industry.
The foreign owners of the IPC were alarmed by the prospect of losing their assets, so they offered to sweeten the terms of their original contract by increasing monthly oil production, increasing prices, and offering the government advance royalty payments.
In 1967 and 1969 Iraq and the Soviet Union signed agreements by which the Soviets would provide technical and financial assistance to the INOC. American business interests were alarmed at the prospect that the Soviets might eventually control U.S. access to foreign oil.
Emboldened by Soviet assistance, the Iraqi government demanded ever-better terms from the IPC. In 1970 the government gave the company a list of demands which included 20% of IPC’s assets and even more control over operations.
Greedy for more, in 1972 the Ba’athist government finally nationalized all IPC operations and handed them over to the government-controlled INOC.
In that same year, the North Rumaila Field was opened for production with technical help from the Soviets.
Iraqi Oil Industry Controlled by Saddam Hussein
During this period Saddam Hussein emerged as the leader of Iraq. From the beginning he worked tirelessly to consolidate his control over Iraq’s economy, and especially the oil industry.
Saddam also began placing family members and henchmen in managerial roles throughout the Iraqi government and oil industry. His goal was to squeeze maximum profit from Iraq’s booming economy.
Within its first few years of controlling the industry, the INOC succeeded in increasing Iraq’s total production from about 1.5 million barrels per day (bpd) to a peak of more than 3 million bpd by 1980.
However, between 1980 to 1988 the Iraq-Iran War greatly reduced Iraq’s oil production and weakened its economy.
The war was sparked by Saddam’s expansionist aggression against Iran, and during a brief invasion the Iraqi forces successfully seized Iranian oilfields in border areas, before being repelled.
The war dragged on for several years without significant gains on either side, and hostilities finally ended in 1988 without a written treaty.
Partly because of the hardships caused by the war, in 1987 the Iraqi government separated the INOC into several regional oil companies, the biggest of which were the North Oil Company (NOC) headquartered in Kirkuk and the South Oil Company (SOC) in Basrah.
The Gulf War
In August of 1990 Saddam Hussein ordered the invasion of neighboring Kuwait. He apparently sought to acquire Kuwait’s oil reserves while expanding Iraqi control over the region. The United Nations responded with increasingly-strict economic sanctions, but Saddam was undeterred.
In January 1991 the U.S.-led coalition began a military campaign which quickly drove the invading Iraqi forces out of Kuwait.
During the 1990s, the global economic sanctions against Iraq continued, and they had a devastating effect on the nation’s oil industry. Unable to obtain critical replacement parts for aging equipment, the Iraqi oil industry quickly deteriorated.
Oil production slowed to a trickle, and the impact of UN sanctions continued to hinder the Iraqi economy until the eventual ouster of Saddam Hussein in 2003.
Next: The New Iraqi Oil Industry, and the Future Outlook for Iraq’s Economy and Dinar
The Gulf War was the beginning of the end for Iraq’s decaying, nationalized oil industry. After Saddam’s departure the country’s economy and oil industry would have a fresh opportunity for growth.
In the upcoming Part Two of this series we’ll look at the growth and development of Iraqi petroleum infrastructure since the end of the Saddam era.
Most importantly, we’ll consider the future outlook for Iraq’s oil industry, and how Iraq’s economy and the Iraqi Dinar will benefit from the nation’s oil wealth going forward.
Knowledge is a powerful key to success. If you’d like to learn more about Iraq’s oil industry and what it means for the Dinar, just click below.
Iraq as I know is a desert land and the Iraqi currency has a lower rate as compare to the USD. But what I think it won?t be a far distance future where Iraqi Dinar will rise again and can be higher as compare to the other currencies of the world. But as of now, the current situation of the country doesn?t support the vision of the government. I appreciate the efforts of the writer of this article as I can see, there is a huge information provided about the oil industry. The information here will provide a solution to the Iraq and the government can learn how to manage their growth by promoting their oil for the increasing the growth of the country.
The basic of every economic growth lies in the decision making power of the government. Every decision taken regarding the country?s economic will definitely help in achieving growth and if you are available with oil reserve then there stand a chance to grow rapidly instead of gradually. The economic growth will be so rapid that the world will see, learn, and take the example of the decision the government had taken which gave such a high economic growth.
The real teacher of any person or nation is history, where we have seen many ups and downs in the value of Iraqi Dinar and the economic disturbances due to the ISIS. When I try to check the value of USD(US Dollar) to IQD (Iraqi Dinar), I found that 1USD = 1107.10 IQD, which a lot more than what it was before 1990. In ancient times, there was quite a reverse situation in case of IQD and the USD. But today’s situation, I don?t when it?s going to get changed. After looking on the present situation, there is a ray of hope out of the silver lining, but when it?s going to become dark no one can say about it.
I read in the news, daily there is some or the other things happening in the Iraq. Say dinar scams, ISIS or the people unrest of Basra, all these are not letting Iraq to become stable. This will have adverse effect on the Iraq?s economy and the status of the country.
As per my knowledge, the Iraqi dinar can improve if the oil industry in the Iraq flourishes. The major concern of the government should how to rise their Iraqi currency to the higher most level from the current position. Iraq is said to have ranked second in the world for its oil reserves and there are plenty of the oil industries ready to open in the Iraq. But due to the uncertainty of the government what I think they are suffering.
If oil is the medium for the Iraqi economic growth then why not to allow the companies to set up and generate revenue from them which will lead Iraq towards a better future then what exactly they are having recently. The whole scenario will change and Iraq will be a heaven for all. This is what the ideal conditions people are thinking about it. Generally, what I think Iraqi should focus on the oil industries that will generate revenue and increase the standard on living of the people. The Middle East has always provided the world with oil and Iraq has the highest reserves of oil as per records. Iraq should now start a large-scale distribution of the oil from its reserves.
About future of Iraqi dinar this what Forbes have to say:
It?s not looking good for the Iraqi dinar revaluation.
For those just tuning in, millions of Iraqi dinars have been sold to ?investors? hoping to make a windfall when, and if, the currency is revalued in their favor. No one knows how many people have been sold this tale of overnight wealth since the dealers for these notes are not regulated.
As you?ve probably noted from the headlines, Iraq is in bad shape. Sunni insurgents have taken most of the northwestern part of the country; the central government and army are weak, abusive and indecisive; and the Kurds are asserting their virtual autonomy in the Northeast.
Iraq is basically enmeshed in a brutal civil war without any cohesive social fabric to pull it back together. Except for some military advisers, the U.S. and Western powers are staying out of the country. Iraq could very well break apart into three separate regions dominated by Sunnis, Shiites and Kurds. No one is sure what?s going to happen next.
Source: http://www.forbes.com/sites/johnwasik/2014/07/28/the-dinars-dismal-future-sell-now/
I what to do is a mystery infront of me.
I found myself excited when I read this article about the future of the Iraqi dinar and the country?s economy. I have read the similar sort of article here: http://photos.state.gov/libraries/spain/5/archivo/iraq.pdf Here is the small paragraph taken from it:
We speak about the reconstruction of Iraq, but that word is misleading. We are looking not at econstruction, but at construction, not at rebuilding, but at building. The Iraqi people must overcome the damage of 25 years of corrupt and vicious tyranny to build their society into a lively and historic center in the Middle East. As a result of Saddam Hussein s misrule, Iraq s economy deteriorated significantly. GDP fell from almost $180 billion in 1979 when Saddam took power to around $50 billion in 2001. Twenty-five years ago per capita income was approximately $17,000 on a par with Italy based on purchasing power. Today, per capita income is around $2000, comparable to El Salvador. Moreover, the United Nations Development Programmes Arab Development Report 2002 ranked Iraq in 110th place among 111 countries on its Alternative Human Development Index, which measures such things as life expectancy at birth, educational attainment and enjoyment of civil and political liberties. Iraq?s economy today not only has shrunk, it is distorted in the way that the economies of Eastern Europe and the Soviet Union once were. Central control removed incentives for production. Overcoming the legacy of state planning and controlled prices will be arduous and time consuming. There are many tasks ahead, including solving problems in the most critical sectors, properly managing the newly created development Fund for Iraq, creating a healthy trade and investment climate and transitioning the country off the Oil for Food Program.
Now as the new reforms are taking place, there is a hope of Iraqi dinar revaluation, as per Iraqi dinar latest news. There are lot of Iraqi dinar speculation which may help us get hint about what the Iraqi government could do for their rapid economic growth. I have read an article that was somewhere related to it, here is a part of it:
The new money became the official currency of Iraq Jan. 15 after a three-month exchange period that also has involved the destruction of tons of Saddam Hussein-era notes, according to a joint CPA-Central Bank of Iraq news release.
“The new dinar is a real improvement over the old,” Ahmed Salman Jaburi, deputy governor of Iraq’s Central Bank, asserted in the news release.
Because the new money has security features that make it hard to counterfeit, it has the Iraqi public’s confidence, he said. The new money “will provide a firm foundation” for Iraq’s economic future, Juburi noted in the release.
The updated currency, the release said, jettisons the image of deposed dictator Saddam Hussein in favor of depictions of important Iraqi scientific contributions, Iraqi history, landscapes and economic life.
Jaburi praised the combined efforts of Central Bank managers and staff, coalition planners, economists, and Iraqi and coalition security forces in designing, printing and distributing the new money.
Shipments of the new Iraqi currency began arriving in Baghdad Sept. 17, and exchange of the new currency for old began Oct. 15. The value of Iraq’s money, the release noted, has gone up by 25 percent since then.
A fleet of small aircraft delivered the new money to regional banking centers, and Iraqi armored vans and large trucks effected delivery of the cash to outlying bank branches.
Despite a number of insurgent attacks on convoys delivering new currency and picking up old notes, no money was lost, according to the news release.
Thousands of Iraqi tellers at 250 bank branches across Iraq worked overtime to make the currency exchange happen, the release said.
Source: http://archive.defense.gov/news/newsarticle.aspx?id=27488
Iraq?s future is optimistic, as said in some Iraqi dinar news. The Iraqi dinar value got degraded during the Saddam?s regime but the day has changed. In one of the report of cia.gov, it says:
?Under the rule of Saddam, economic data were considered state secrets; thus, reliable data for the era was limited. According to the Economist Intelligence Unit data, Iraq?s GDP stood at roughly $38 billion in 1989, measured in constant 2003 dollars. From 1990 until Saddam accepted the terms and conditions of UN Resolution 986 in 1996 the GDP in Iraq remained at less than 30 percent of the 1989 value. In the 1996 to 2002 period, the data shows a gradual recovery as GDP increased from $10.6 billion in 1996 to $33 billion in 2000 before dropping back to $29 billion in 2001.?
Also further it states the technique of revenue sources for the Iraq, as:
Iraq?s oil development began in 1901. The Iraq National Oil Company (INOC) was formed in 1964, and with Iraqi oil nationalization between 1972 and 1975, INOC took over from the international oil companies previously running the country?s oil industry. In 1987, INOC was dissolved and merged with the MoO. Before the Gulf War, oil accounted for more than 60 percent of the country?s GDP and 95 percent of foreign currency earnings. Following Iraq?s invasion of Kuwait in 1990 and the embargo on Iraqi oil exports, Iraqi oil production fell to 10 percent of its prewar level from 3.5 million barrels per day in July 1990 to around 350,000 barrels per day in July 1991. UN-approved oil exports began in December 1996 after Iraq finally accepted UNSCR 986 (passed in April 1995). However, Iraq?s oil sector continued to suffer from years of poor oil reservoir management; corrosion problems at various oil facilities; deterioration of water injection facilities; lack of spare parts, materials, equipment, and damage to oil storage and pumping facilities.
Here we can say oil industry can influence the rapid growth of the economic economy.
To grow rapidly, the Iraq has to focus on four major factors that could lead to growth in Iraqi dinar value and change the economic structure of the country. Here are the four factors that could help in Iraqi dinar revaluation:
Oil: Since the liberation, Iraqi and U.S. engineers have been working around the clock to restore production so that Iraq will be able to meet domestic needs and begin earning revenues through exports. A lot of progress has been made already, but much more remains to be done. Because the oil sector is of such central importance and the issues it faces so complex, I will provide more details about it later in my testimony.
Food and Agriculture: Locally produced products, such as fruits and vegetables are now traded freely in open markets. Our challenge will be to extend this to grains, wheat and rice, which are the staples of the Iraqi diet. USDA and AID have already begun to think through and implement steps needed to reintroduce competitiveness to Iraqi agriculture. For example, USAID and USDA have already designed and are putting in place a project to assist agricultural production and develop agricultural enterprise, credit availability and infrastructure. In the 1980’s the United States was Iraq’s largest supplier of agricultural products. We now look forward to rebuilding cooperation between Iraqi and U.S. agricultural sectors.
Transportation: In civil aviation, the aircraft of Iraqi Airways, the former national carrier, are parked outside Iraq and are not airworthy. Moreover, Baghdad International Airport has taxi lane craters, broken runway lights, unexploded ordinance, plumbing difficulties, and security access control problems. There is also no functioning civil aviation authority to oversee airport security, flight safety oversight, and the administration of civair services. Despite these obstacles, the Coalition Provisional Authority hopes to resume civair services before July to accelerate the flow of U.S. and foreign actors involved in reconstruction efforts. We foresee that with the improvement of Iraq s internal transport system, trade and investment relations with its neighbors will also improve.
Telecommunications :Telecommunications remains a critical requirement for OCPA and the reconstruction effort. Prior to the conflict, Iraq had minimal telecommunications — some three phones per 100 citizens. Although among the lowest levels in the world, even this low figure overstates phone penetration experienced by the average Iraqi since the ruling institutions Baath Party, military and government offices controlled many of the phones. In addition, there was no wireless system, little Internet and few computers.
Source: http://photos.state.gov/libraries/spain/5/archivo/iraq.pdf
People suffered a huge in terms of employment and that result into Iraqi dinar devalue. Now after the dictators end, there is hope of improvement in the rate of Iraqi Dinar. Here is a part of report on the cia.gov related to the employment boosting in the country, which ultimately result into growth in economy:
Iraq?s economy suffered from under-employment, an economic affliction that was typical of oil-based economies. Iraq?s oil sector historically generated about 60 percent of Iraq?s GDP, but only employed two to three percent of Iraq?s labor force. Unemployment has risen significantly during the period of 1988-2003. Unemployment in Iraq during 2003 was estimated to be around 28 percent of the labor force. Some 40 percent of the employed are estimated to work in the public sector, many in marginalized economic activities, in difficult conditions, and for minimal pay. Women represent about 52 percent of Iraq?s population, but constitute only 23 percent of the formal workforce, mostly as middle level professionals in the public and service sectors and in rural areas as seasonal agricultural workers.
Over the long run, labor markets are affected by demographics, changes in productivity and the rate of growth in potential output. In the short run, these markets will reflect volatility in the level of economic activity. The unemployment rate in Iraq represents the ratio of those actively seeking work and the total number of people in the labor force. Iraq?s economy was powered mainly by state run centrally controlled government entities. Although Saddam did encourage privatization during the 1980s, this was not successful because of the continuing conflicts and lack of financing and support for private business owners in Iraq.
One can understand how employment can contribute to economic growth of the country.
Saddam?s regime badly hurt the Iraqi people, Iraqi dinar value and the economic growth of the country. The usembassy-mexico.gov says about the Saddam?s regime:
?Saddam Hussein and his regime led a life of privilege and luxury, while leaving the Iraqi people with an essential services infrastructure shattered by decades of neglect and mismanagement. Those out of favor were denied the simplest public services, with hunger and denial of essential services used as weapons of tyranny. As a result, northern and southern Iraq suffered a severe lack of electricity, water, health care, education facilities, and other vital resources. While it will take years to fully modernize Iraq?s infrastructure in the wake of Saddam?s decades of neglect, much progress has been made as the Coalition and the Iraqi people have worked hand in hand to improve Iraq ?s essential services.?
Still Iraq is developing and will soon be one of the developed countries of the world.
Iraq was released from the foreign debts, which will definitely going to help increase the rate of the Iraqi dinar. I also had gone through the report of the cia.gov where there is brief written about the foreign debts of the country. Here is the paragraph take from the report itself:
Iraq?s indebtedness has been the result primarily of the war with Iran. Iraq traditionally had been free of foreign debt and had accumulated foreign reserves that reached $35 billion by 1980. These reserves were exhausted in the early stages of the war with Iran. It is estimated that from 1980 to 1989 Iraq?s arms purchases alone totaled $54.7 billion. Following the war, Iraq was faced with the dilemma of paying off short-term debts to western creditors estimated between $35 to 45 billion at high interest rates. However, the Regime resisted western attempts through the International Monetary Fund (IMF) and World Bank to reschedule the debt primarily because Baghdad believed it could negotiate more favorable terms dealing with countries bilaterally.
Iraq?s foreign debt was comprised of western credit provided for military assistance, development finance and export guarantees. This assistance has been estimated at $35 billion in principal. The former Soviet Union and Russia also provided loans to Iraq via the Paris Club during the 1980s and 1990s for the development and production of military programs. Gulf States such as Saudi Arabia, Kuwait and the United Arab Emirates provided an additional $30 to 40 billion in financing to fight Iran. Although the Gulf States considered the financial support provided to Iraq to be a loan, Iraq believed that the Gulf States were required to provide help to Iraq in its fight to prevent the spread of radical Iranian fundamentalism.
In addition to the money borrowed by Iraq during the 1980s, Iraq has had compensation claims made for reparations of damage inflicted during the invasion and occupation of Kuwait during 1990 and 1991. The United Nations Compensation Commission (UNCC) was responsible for processing and collecting such claims as authorized by UNSCR 692. The OFF program provided that 30 percent of Iraq?s oil sales would be used to settle compensation claims authorized by the UNCC. This figure was reduced to 25 percent in December 2000 and was set at 5 percent when oil exports resumed after OIF. As of 7 May 2004, claims totaling $266 billion have been adjudicated and claims worth $48 billion have been awarded by the UNCC. Additional claims worth $83 billion need to be resolved.
Another source of potential financial obligations accrued by Iraq since 1990 were contracts signed with countries such as Russia, UAE, Egypt, China, France, and the Netherlands mainly in the energy and telecommunications sectors. Because of UN Sanctions during the period, the contracts were not executed. It is uncertain if these contracts will be honored in the future.