Iraqi protests and the oil sector
On July 27, 2022, a large group of Iraqi protestors led by the Shiite cleric Muqtada al-Sadr attacked the Council of Representatives of Iraq building in Baghdad's Green Zone. The storming often referred to as the "Ashura Revolution" or the "Muharram Revolution" by Sadrists, took place following the disclosure of information regarding Mohammed Shia' Al Sudani's nomination for the position of the prime minister of Iraq by Shiite forces opposed to the Sadrist movement.Al-Sadr effectively vetoed Nouri al-bid Maliki's earlier in July by accusing the former prime minister of corruption in a tweet. The crowd dispersed after al-Sadr publicly urged people to "pray and go home" and after the incumbent prime minister of Iraq, Mustafa Al-Kadhimi demanded that they "immediately withdraw." However, they returned a week later after al-Sadr urged them to demand reforms.
Background and timeline:
In the 2018 parliamentary elections, al-Sadr's faction which featured an unusual coalition of communists and secular Iraqis unexpectedly prevailed and won 54 seats. Adel Abdul-Mahdi was ultimately chosen as prime minister after months of political stalemate caused by the poll, which was marred by claims that it was not free and fair. In response, protests over unemployment, subpar services, and corruption erupted in Baghdad and other cities throughout southern Iraq. The protests were largely devoid of any sectarian or cross-ethnic undertone with no political force supporting them. Al-Sadr, whose political coalition received the most votes in the elections last year, encouraged lawmakers to abstain from meetings until the demonstrators' demands were satisfied and also called for reelections.
The six months of ambiguity that followed the departure of Prime Minister Abdul-Mahdi in November 2019 were ultimately resolved by the election of Prime Minister Mustafa al-Kadhimi in May 2020. Significant protests persisted in Iraq from February 2020 until July 2021, with al- Sadr's supporters occasionally battling with other protestors, particularly in the holy city of Najaf. At least 560 protestors and members of the Iraqi security forces died during the overall protest movement. Meanwhile, protests demanding an early election and the US withdrawal from Iraq were still being held by al-supporters.
In July 2021, Prime Minister al-Kadhimi announced that elections would take place in June 2021 rather than the previously announced date in 2022. However, the polls didn't open until October 2021. Al-movement Sadr's won 73 seats in the fractious 329-seat parliament, more than any other party in the elections of 2021. Protests erupted as some pro-Iranian Shia organizations opposed to al-Sadr claimed fraud. However, the outcomes were approved by the nation's Supreme Court in December.
An attempt on the life of Iraqi Prime Minister Mustafa al-Kadhimi in November 2021 brought attention to the rising unrest following the election. Although no one group took ownership, it was widely believed to have been the work of pro-Iranian militias who were dissatisfied with the election results. The attempted murder made tensions between Shia groups more likely to rise. After deadly demonstrations outside of Baghdad's high-security Green Zone.
In July 2022, hundreds of al-supporters Sadr's stormed the Baghdad parliament in protest at the CFA's choice for prime minister, just days after a large prayer gathering that demonstrated his ongoing popularity. Supporters of Al-Sadr were urged to continue the sit-in until demands, including the dissolution of the legislature and early elections, were met. The Supreme Judicial Council said it lacked the jurisdiction to dissolve the assembly after al-Sadr gave Iraq's top court one week to do so in order to hold new elections. The news was made as demonstrations grew outside the court's administrative offices. Numerous thousands of people joined the long-running al-Sadr supporters' protests and rapidly overran the Republican Palace in the Green Zone. In response to the violence, the military of Iraq issued a statewide curfew and the interim prime minister halted cabinet meetings. As night fell, clashes broke out between the Popular Mobilisation Forces, affiliated with the CFA, and Saraya al-Salam (Peace Brigade), an al-Sadr-aligned militia that claimed to have been sent to the Green Zone to protect protestors. Military personnel from Iraq were also stationed nearby [1].
Later developments:
Former Prime Minister Mustafa al-Kadhimi committed to compensating protestors and their families for both the relatives of those who died in protests and those who were injured, in addition to holding those responsible for violence against protesters accountable [2]. The government of Al-Kadhimi attempted to offer compensation to the families of people murdered during protests. Iraq's Martyrs Foundation, an organization founded in 2005 to offer compensation to the families of victims of Saddam Hussein's government, gives them a one-time payment. Days into the rebellion, on October 5, 2019, the administration of Prime Minister Adel Abdul Mehdi announced that demonstrators slain while participating in rallies will be regarded as martyrs, making their families eligible for support from the Martyrs Foundation.
Effects on the oil sector:
There are several issues for new enterprises because of the continuous protest and the history of the nation. With militancy and widespread corruption, the protest simply makes it more challenging for both new and existing companies and firms to operate. Since most businesses cannot operate because the nation only receives 6 hours of electricity on average each day, they must either accept these consequences or look for private electricity generators owned by powerful businessmen and militants. As a result, the militants who are sabotaging the electricity supply and making commerce impossible are receiving more funding [3]. As tribesmen want to be absorbed into these companies and receive the benefits, the death of a protestor and the involvement of tribes in the protest can also have an impact on business. Since many businesses feel that their interests may be harmed by this and are therefore evacuating their officials from the scene. Businesses must ensure that their assets on the ground are better safeguarded since there is a possibility that this protest may turn into a stalemate between the army and these tribes.
Analysts believe that the political unrest in Iraq could pose a serious threat to the world's oil markets [4]. Fernando Ferreira, director at Rapidan Energy Group, stated that although Iraqi output is often very resilient to turmoil, the current political situation is extremely poisonous and poses a significant risk to the oil business. Ferreira noted that escalating instability might make OPEC+ decision-making more cautious.
These worries follow from the escalating protests in Iraq following al- Sadr's announcement of his political retirement. Sadr's plea for peace has reduced the likelihood of an interruption in oil supply, but Ferreira warned that the conflict between the country's Shia groups is far from settled and that civil upheaval in Iraq will continue to pose a recurring threat to oil markets.
As per, Timothy France, a senior oil market analyst at Refinitiv, slips in Iraqi oil output could be substantial in a world oil market already under pressure from low oil stockpiles and major OPEC countries not meeting their quota commitments.
Conclusion:
As a result of the perpetual protests and the subsequent civil unrest, it is estimated that around a million barrels of Iraqi oil per day may not be able to reach the market [5]. Given that Iraq is OPEC's second-largest oil producer after Saudi Arabia, the removal of a million barrels a day from the market would have a significant effect on the state of the global supply crisis. The market would be greatly impacted by anything that might have an influence on Iraqi production. However, given that nations are still attempting to accumulate energy reserves in time for the next winter, the impact would probably be significant. The European Union's ban on Russian oil is anticipated to take full effect while Russia has already warned that its natural gas supply could be interrupted this winter.
According to Alaa Al-Yassiri, Director General of the state-run oil marketing company known as SOMO, "violent protests and acts in Iraq did not impede the operations of Iraqi oil exports through the southern ports." Europe is having trouble finding alternate sources of supplies as a planned December embargo of Russian imports via sea threatens to make an already precarious supply situation worse [6]. Al-Yassiri claimed that Iraq would increase oil exports to Europe if requested to do so and that the country is thinking about increasing Europe's export share from the present 20% to 40%. In order to conduct export negotiations, a SOMO group will travel to Germany. Iraq is looking for new clients in Europe. Asia is the biggest market for Middle Eastern suppliers like Iraq, and SOMO has gotten requests from countries like India and China to deliver more supplies to Asia.
As the protest goes on, it will have an effect on the whole energy market. Even though protesters have not yet reached the oil production facilities, there is still a risk of disruption that could hurt not only Iraq, the second-largest oil supplier among OPEC nations but also the West due to their decision to boycott oil from Russia and look for alternatives.
Endnotes:
1. “Timeline: What led to the fighting in Iraq’s capital Baghdad”, Al Jazeera, 20 August 2022 https://www.aljazeera.com/news/2022/8/30/timeline-what-led-to-al-sadrs-withdrawal-deadly-iraq-clashes
2. “To Sleep the Law: Violence Against Protesters and Unaccountable Perpetrators in Iraq”, Human Rights Watch, November 2022 https://www.hrw.org/report/2022/11/29/sleep-law/violence-against-protesters-and-unaccountable-perpetrators-iraq
3. Naman Anand, “Impact of Iraq protests on the soil sector of Iraq”, Modern Diplomacy, 01 January 2023 https://moderndiplomacy.eu/2023/01/01/impact-of-iraq-protests-on-the-oil-sector-of-iraq/
4. Lee Ying Shan, “Iraq’s extraordinary toxic turmoil is a considerable risk to the oil market, say analysts”, CNBC, 31 August 2022 https://www.cnbc.com/2022/08/31/iraqs-political-turmoil-poses-risk-to-oil-markets-says-analysts-.html
5. Jennifer Sor, “A million barrels per day of Iraqi oil could be taken off the market as violence breaks out in the country, RBC commodities chief says”, Markets Insider, 30 August 2022 https://markets.businessinsider.com/news/commodities/energy-crisis-iraq-oil-million-barrels-supply-shortage-protests-baghdad-2022-8
6. Kadhim Ajrash & Anthony Di Paola, “Renewed Unrest in Iraq Leaves Oil Traders on Edge Over Supply”, Bloomberg, 30 August 2022 https://www.bloomberg.com/news/articles/2022-08-30/deadly-clashes-in-baghdad-yet-to-hit-iraq-s-oil-production
Pic Courtsey-Md Mahdi at unsplash.com
(the views expressed are those of the author and do not represent views of CESCUBE.)