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FW: query re oil sales

> At the conference this weekend it was suggested that with investment  Iraq
> may be able to increase pumping capacity  up to 8 or even 12 million
> a day of oil, allowing it to generate large revenues for the civilian
> program.
> I was puzzled by this because my understanding of OPEC is that Iraq would
> not be allowed to pump that much oil, nor would any OPEC producer.
> In addition, wouldn't increasing the volume of Iraqi oil result in a
> decrease in price of oil, negating any extra revenues which could
> be earned from the larger volume?
> I've wrestled around with the increasing oil sales and can't really see
> way Iraq could earn more from oil sales in the next few years than $16
> billion apart from an increase in the oil price.

Thanks Richard,

Yes, I think that you're right about the problem of OPEC quotas.  Currently
Iraq is not required to adhere to quotas, a peculiar feature of the
sanctions that George Joffé mentioned.  So, the questions are, if Iraq was
negotiating with OPEC: (i) would it ever be allowed 12 million bbl/day? and
(ii) what would happen to the price of oil?

The answer to both depends on the growth of global demand for oil.
Economies are still very dependent upon the use of oil as a fuel.  Therefore
economic growth still depends heavily on additional use of petroleum.  As
economies grow, the demand for oil increases, increases the price of oil
unless supply also increases.  So, Iraq's exports could grow to meet demand

It is also possible that Iraq's oil exports could grow without growth in
world demand.  Iraq could argue that it deserves a bigger slice of the "pie"
of OPEC exports.  This would require other countries to reduce their own
exports if the aim is for OPEC to maintain a constant level of export.
This, I think, is a less likely scenario as (i) it's always harder to
convince people to accept less so that others can have more; and (ii) world
oil demand is likely to grow.

I hope that this helps,

Colin Rowat
Iraq Sanctions Project Coordinator
Center for Economic and Social Rights
162 Montague Street
Brooklyn, NY 11201
Tel: (718) 237-9145 x 19
Fax: (718) 237-9147
Mob: (917) 517-5840
Mob. mail:

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