Iraqi oil in return for Iraqi debts

Iraq has agreed to exchange its debts to the oil companies developing its giant fields with crude oil, media reports have said.

Iraqi oil ministry has said that the prices of the crude oil given to the western companies were relative to prices in international markets.

Aljazeera.net reported a senior official in the British Oil Company BP saying that his firm had loaded more crude oil from Iraq during the last two months in return for its services in the south of the country.

Following the drop in oil prices from $115 per barrel to $56, the amount of crude needed to pay the companies has roughly doubled – causing a deficit in the Iraqi government’s budget.

Reuters reported that Iraq, OPEC’s second-biggest oil producer, boosted its output to 3.40 million barrels a day in January from 3.05 million a year earlier.

The Iraqis have a problem, Reuters explained, the number of barrels they have to give to the companies as service fees has risen two-fold because oil prices have fallen to half.

As a result, sources told Reuters, Iraq is not providing the service companies with the repayment volumes they are due.

“We took crude in return for Iraq’s debts [owed to BP],” a BP official reported by Aljazeera.net.

Expert in the Iraqi issue economist

Majed Al-Souri, an expert in Iraqi economy, told Aljazeera.net that paying the debts to the oil companies through giving them more crude oil is good for Iraq, “but the prices must keep up with the international markets… This is a major privilege for Iraq that helps it deal with its current financial crisis.”

Al-Souri said that this must not continue when the financial crisis of the country comes to an end, calling on the government not to waste the country’s money.

He said that this happened in the past and this occurs in post of the oil-producing countries such as Saudi Arabia, for example.