The Russian invasion of Ukraine on February 24 had a far-reaching impact beyond Europe and has had a substantial impact on the Middle East’s political and food security situation. The Ukraine crisis has had many positive and negative effects on Iraq as a country recalls the 19th anniversary of a similar invasion.

The effects of the Ukraine crisis have put the country in an unexpected situation so that it can both be affected by them and exploit them for the benefit of Iraq.

Dilemma of neutrality

Iraq has not taken a firm stand on the Ukraine crisis and has tried to adopt a neutral position because it has reciprocal relations with the West and Russia. On the one hand, about a quarter of Iraq’s oil is exported to Europe, and it is the fourth-largest oil exporter to the US, exporting an average of 155 thousand barrels per day. On the other hand, Russia has invested 14 billion dollars in Iraq, and Baghdad cannot be indifferent to Moscow. That is why Iraq abstained from voting in both the March 2 General Assembly vote to condemn Russia’s invasion of Ukraine and the April 7 vote to suspend Russia from the Human Rights Council to show its neutrality to both sides.

In contrast to the ruling elite, some Iraqi people and various parties, most of whom are supporters of the Axis of Resistance, support Russia. The Iraqi people see the Ukraine crisis as a reminder of their pain from the 2003 US invasion of their country, which brought them political instability and government corruption.

The Popular Mobilization Forces (PMF), characterized by their strong anti-Americanism, are among Russia’s defenders in the Ukraine war. Some have even given Putin a nickname – “Abu Ali” – a common name among Shiite Muslims and meant to portray a certain camaraderie.

Iraq seems stuck in the Ukraine crisis between two pro-Iranian groups and those who want independence from foreign powers. Both sides seek to show their power and gain credibility in this crisis. Internal divisions and external pressures will put the Iraqi government in a difficult position in the future to choose one side, making it difficult for Baghdad to play a neutral role.

The dual effects of the crisis on Iraq

Food insecurity is the main impact of the Ukraine crisis on Iraq, especially the poor people that led to the March 9 protests in Nasiriyah. Iraq imports nearly 50 per cent of its food, and even the prospects for food security are very disappointing.

Between 2000 and 2019, Iraq’s population grew by 66 per cent, from 23.5 million to 39 million in less than two decades, while due to water shortages, soil salinity, and political instability, only 3 to 4 million hectares, i.e., about a third of its cultivable land Can be allocated to agriculture.

The Ukraine crisis has pushed up the price of bread and seed oils in Iraq. In March, cooking oil increased by nearly 50 per cent, flour by 25 per cent, and rice by about 10 per cent. Ukraine was one of Iraq’s agricultural suppliers. About 55 per cent of Ukraine’s exports to Iraq in 2020 were seed oils worth 324 million dollars. The occupation of Ukraine disrupted this trade.

To reduce the protests that recalled a fear of a revival of the 2019 protest movement, the government increased the salaries of retirees earning less than 700 dollars by 10 per cent and a 70 dollars monthly allowance to civil servants earning less than 350 dollars. The government suspended customs duties on food products and essential consumer goods for two months but did not prevent prices from rising.

Rising energy prices are the second direct impact of the Ukraine crisis that Iraq can use as a lever in its economy. Given that 90 per cent of the budget is based on oil, Iraq can use the increase in oil prices to reduce the impact of food inflation and allocate living allowances in the public budget.

The Iraqi Ministry of Oil announced that it exported 100 million barrels in March, valued at 11.07 billion dollars, the highest level in 50 years since 1972. One month ago, in February, Iraqi oil exports were 8.5 billion dollars.

Iraq hopes that the rise in oil prices will increase oil exports and more assets, but it is not easy to talk about it. This is not the first time Iraq has announced its ambitions in oil production.

The former Iraqi oil minister hoped that oil exports would reach 10 to 12 million barrels per day in the next few years. According to the National Energy Strategic Plan adopted in 2013, Iraq should have exported 9 million barrels daily, along with other major exporters such as Russia and Saudi Arabia. However, it is facing many difficulties in taking advantage of the oil crisis following the Russian invasion.

Iraq needs much infrastructure for a short-term jump in oil production. The country is facing a severe water shortage crisis and to needs an additional three million barrels per day of water to inject into the reservoir, which is challenging to supply. In addition, foreign investors are reluctant to invest in Iraq’s energy sector due to widespread government corruption, lack of a stable investment environment and financial transparency, and lack of infrastructure. Shell, for example, sold its entire share in the West Qurna field. Exxon Mobile Corp also sold its 32.7 per cent stake in the same field to Iraq Petroleum Company. BP is looking to sell its assets because the investment environment in the country is unsuitable for significant investments.

In addition, it is unclear how Iraq can violate its 4.28 million barrels quota in OPEC. The members have resisted despite global pressure to increase production, and Iraq can be no exception to this rule. Iraq’s deputy Prime Minister Ali Allawi, during his visit to Washington on April 19, said that Iraq could not increase oil exports because it is committed to OPEC agreements.

Gas and gasoline prices have risen while the oil prices climbed. Iraq relies on imports to supply both. Iran supplies about a third of Iraq’s gas, and Iraq imports 16 million litres of gasoline daily. The crisis in Ukraine will make it challenging to supply gasoline. The government spends about $4 million daily to subsidize gasoline prices, and the rise in oil prices increases this amount.

The Ukraine crisis will also affect Iraq-Russia relations. Baghdad and Moscow have relations in energy investment and arms exports. Russia has invested about 14 billion dollars in Iraq’s oil fields. Russian oil companies such as Lukoil in the West Qurna-2 field, Gazbom in the Badra, and Rosneft fields in Kurdistan are currently active in Iraq. Global sanctions on Russia and US coercion may change Iraq’s view of continually cooperating with them in the future.

That is why the Iraqi central bank suggested that the government halt business operations and financial dealings with Russia following America’s far-reaching sanctions. If that happens, it will be hard for Baghdad to replace Russia with the bulk of its investments, and it will disrupt Iraq’s plans to develop fields and increase oil exports.

The deterrent effect of sanctions on Iraq’s purchase of Russian weapons could be more pronounced. Iraq ordered $1 billion in Russian tanks in 2017, which augment its extensive stocks of Russian-made armoured vehicles. Iraq also announced in May 2019 that it had decided to purchase Russia’s S-400 air defence system. However, Baghdad has not been able to buy it so far due to Countering American Adversaries Through Sanctions Act (CAATSA) secondary sanctions and probable opposition from Israel, Saudi Arabia, and the UAE. Russia’s desire for hard currency and potential loss of arms clients may facilitate an S-400 sale to Iraq.

The Ukraine crisis for Iraq is like a double-edged sword that can help improve or worsen Iraq’s economic, political, and social situation. It all depends on the length of the war, how the international community interacts with Russia in the future, and Iraq’s capabilities.