Iraq and OPEC… between quota pressures and denial of withdrawal economy

Al Jazeera correspondents

Baghdad – Despite the Iraqi government’s denial of any intention to withdraw from the Organization of the Petroleum Exporting Countries (OPEC), the controversy raised by reports speaking about this possibility has opened a wide discussion regarding the future of Baghdad’s relationship with the organization, as it seeks to increase its production share to meet its growing financial needs. While observers see that threatening withdrawal is nothing more than a negotiating card to pressure to raise the production ceiling, others warn that any step of this kind may reflect on Iraq’s position within the organization and the balances of the global oil market.

The controversy came after a Reuters report quoted informed sources that Iraq may consider all options if it does not obtain a significant increase in its production quota, including examining the possibility of withdrawing from OPEC. However, the Iraqi government was quick to deny this proposal, stressing its adherence to its membership in the organization, while continuing to demand a review of production ceilings in line with its production capabilities and economic conditions.

Oil Ministry spokesman, Salim Al-Rikabi, told Al Jazeera Net that the ministry’s statement was clear in denying what was raised regarding Iraq’s withdrawal from OPEC, stressing that the government did not present this option.

He explained that Iraq’s demand to reconsider production ceilings comes in line with its production capabilities, taking into account the wars, destruction and siege that the Iraqi oil industry has been exposed to over the past decades, adding that Iraq seeks to have its production at a fair level that allows it to regain its position as the second largest producer within the organization, indicating that any required increase in the production ceiling is still the subject of research and discussion within OPEC.

Confused language

Oil expert Asim Jihad believes that the controversy that accompanied this file revealed confusion in the official oil discourse, stressing that the demand to increase the quota is a legitimate right for Iraq, but the method of presenting it is no less important than its content.

Jihad added to Al Jazeera Net that Iraq has a legitimate right to demand an increase in its production quota, but presenting this demand in threatening language or through contradictory statements – as he described it – is not consistent with Iraq’s status as a founding country and the second largest producer in the organization, which may create sensitivity with the producing countries.

He pointed out that the real challenge is not limited to the quota, but rather includes managing export bottlenecks, rehabilitating ports and pipelines, in addition to adopting smart oil diplomacy that strengthens Iraq’s negotiating position without entering into a confrontation with OPEC.

Jihad explained that raising the production quota will not achieve the desired benefit unless it coincides with addressing the challenges of the export structure, through an agreement with Türkiye, rehabilitating the pipeline network, and diversifying export outlets.

Why is Iraq demanding an increase in its share?

Specialists confirm that Baghdad is relying on technical and economic justifications for its demand to increase its production ceiling, related to the increase in its production capacity and its need for additional financial resources, as well as a review of the expected quotas within the “OPEC Plus” alliance.

In this context, the head of the Iraq Energy Center, Furat Al-Moussawi, told Al Jazeera Net that Iraq’s demand to raise its production quota in OPEC was driven by financial pressures resulting from the decline in exports due to the closure of the Strait of Hormuz, in addition to its endeavor to stabilize its reference production capacity within the expected technical review of the 2027 quotas in OPEC Plus, also benefiting from the changes that the organization witnessed after the UAE’s withdrawal about two months ago, which gave Baghdad a wider margin of maneuver.

Al-Musawi explained that Baghdad believes that its current quota, amounting to 4.378 million barrels per day in July, is not commensurate with its oil reserves nor with the needs of a country with a population exceeding 46 million people.

He pointed out that Iraq is demanding, in the near term, a gradual increase ranging between 150 and 300 thousand barrels per day, while its strategic vision aims to raise its sustainable production capacity to about 7 million barrels per day during the coming years.

Gains and risks

Despite the fact that withdrawal may provide Iraq with greater flexibility in managing its production and concluding bilateral agreements, according to experts, they warn that such a step may have major repercussions on the oil market and on Iraq’s position within the organization.

In this context, oil and energy affairs expert Adel Sadiq told Al Jazeera Net that Iraq’s withdrawal from OPEC entails gains and risks at the same time. On the one hand, it allows freedom from production ceilings and opens the way for concluding bilateral agreements, including a joint energy and development fund project with the United States that depends on the allocation of about 500 thousand barrels per day.

He warned that the step may lead to an increase in oil supply, noting that Iraq, as the second largest producer in the organization with a production of about 4.3 million barrels per day, and a country in which it is established, its exit may have major repercussions on the future of OPEC.

Sadiq added that the most appropriate option for Baghdad, if the organization does not respond to its demands, is to continue negotiations within the OPEC Plus alliance, expecting Iraq to receive an increase of about 26 thousand barrels per day during the next meeting. He also indicated that suspending membership may represent a compromise option, similar to what Indonesia did previously, pointing out that Iraq has activated the export of fuel oil through the Syrian port of Banias, with expectations that exports will exceed 600 thousand barrels during the coming period.

Oil sector data indicate that OPEC countries produce about 40% of global oil supplies, and possess approximately 80% of proven reserves, while these percentages rise to about 55% of supplies and 90% of reserves when counting OPEC Plus countries, which gives the alliance great weight in directing global oil markets and influencing price levels.