Iraq is one of the few countries to benefit from the Iranian sanctions’ exemptions. The United States has repeatedly extended the period of a sanctions waiver for Iraq — most recently in September — due to Baghdad's dependence on Iran’s gas and electricity. Iraq’s need to comply with the OPEC+ quotas has a negative impact on the situation, since with the cut of oil production in Iraq the volume of associated gas production also decreased. And this, in turn, again increases dependence on the gas imported from Iran.
If Baghdad loses the possibility to import electricity from Iran, Iraq will not be able to receive the same volume from another source. After Iraq's OPEC+ agreement partners expressed dissatisfaction with Baghdad’s failure to comply with the terms of the deal in May and June, Baghdad abided by the quotas in August, when the production amounted to 3.023 million barrels per day. Thus, Iraq was again forced to ask for so-called compensatory cuts, i.e., cutting production to compensate for overproduction in prior months.
OPEC+ members that exceeded their oil production in May-July have committed to further production cuts. Iraq accounts for the largest share of the total 2.375 million barrels per day of the compensatory cuts. Despite such export volumes, the implementation of the Iraqi budget is experiencing serious problems, as the increasing number of cases of the coronavirus exacerbate the situation.
To comply with the OPEC+ deal, the federal Iraqi government in Baghdad and the Kurdistan Regional Government (KRG) in Erbil had previously agreed on a proportional cut in oil production. However, after receiving the data on oil exports for September 2020, the government in Baghdad, represented by Deputy Prime Minister and Finance Minsiter Ali Allawi, accused the KRG of exceeding the export quotas. According to figures of Iraq's state oil company State Organization for Marketing of Oil, dated Sept. 10, Erbil fulfilled its obligations under the quotas by only 79%, while Baghdad did so by 102%. Iraqi Kurdistan denied all the accusations. Nevertheless, the parties agreed to continue working together to find a compromise.
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