In the Western world, there are two dominant views of the Middle East: the first portrays it as a land of immense wealth built on the back of oil, while the second depicts it as a region ravaged by war and terror, dictated by conflicting theology and oppressive regimes. In light of the recent airstrikes in Iraq and Syria, we have decided to briefly delve into the basic economics and history of both these countries
Iraq, Cradle of civilization
In 2023, Iraq was the 6th largest oil producer on the planet, representing almost 8% of global reserves, with a daily output of around 4.28 million barrels and daily consumption of around 860,000 barrels. However, unlike other oil producers, Iraq is one of the most oil-dependent nations on the planet. According to the World Bank, in the last decade, around 99% of Iraq’s exports consisted of oil, also making up around 42% of its 230 billion-dollar-plus GDP. This overreliance highlights how vulnerable the Iraqi economy is to volatility in oil markets. As investors broadly begin to embrace the theme of decarbonization, the idea of investing in Iraq (if it is unable to diversify its economy) seems unattractive.
The idea of diversifying the economy is something which fellow OPEC member The Kingdom of Saudi Arabia has welcomed with its Vision 2023 Goals; however, Saudi Arabia has a very strong governance system in regard to regulation and is economically stable, unlike Iraq where a quarter of the population lives below the poverty line. It was also ranked 154/180 in the 2023 Corruption Perception Index. Earlier this week, there were allegations of corruption in the United Nations development program operating in Iraq, demonstrating how Iraq’s redevelopment is severely hindered by poor governance.
Wider Context
Iraq is a nation that has been plagued by instability, with the Gulf War and subsequent fallout being huge determinants of today’s political and economic instability. The nation also has a huge internal security problem with a sprawling network of Iranian-backed militias and paramilitary groups operating on the ground. The largest of these is the Popular Mobilization Forces (PMF) which is also merged with the Iraqi Army, a Shiite group formed from 60+ militias formed in 2014 to counter ISIS, which had control of over 40% of Iraq. Through these groups, Iran has been able to grow its influence in Iraq. Once considered regional enemies, Iran has been able to ascertain a great level of control, with Iranian militias targeting American bases from Iraqi soil – prompting Sunday’s US airstrikes in Western Iraq supposedly targeting a “weapons warehouse
Syria
Syria is amongst one of the world’s most destitute nations, ranking 138th in the world with a mere 11-billion-dollar GDP. Data around what constitutes its exports is very skewed, with some sources claiming exports to primarily consist of olive oil, cotton, and Calcium Phosphate. In 2010, before the collapse of the Syrian economy, GDP was around 60 billion dollars, with the main exports being petroleum resources. Syria ranks around 150th in the world HDI rankings, with 90% of the population living below the poverty line, to the point where NGOs are effectively doing more for humanitarian causes than the supposed “government”, and with regional conflict and water scarcity, the economy seems as if it is only going to contract even further
The last recorded inflation rate in January 2023 was 89.70%, but due to the lack of reliable data, the actual rate could be far higher. The Syrian Pound has also lost 99% of its value since the beginning of the conflict. Syria also suffered an earthquake in February 2023 with an estimated damage of 5.1 billion dollars. The outlook for the Syrian economy is extremely bleak with a large number of loans supposedly propping up the constantly weakening economy
Wider context - Fall from Grace
Syria’s fall from grace is rooted in several factors, the first catalyst being the Arab spring where after the fall of Egypt (Mubarak) and Tunisia’s president’s (Ben Ali), pro- democracy activists in Syria tried their luck and began peacefully protesting. The Assad regime responded cruelly and killed/imprisoned many activists, thus causing rebel factions to arise from the Syrian military, plunging the nation into civil war. Alongside this, a drought in the countryside further worsened poverty around the country, prompting farming families to move to urban centres.
As rebellion spurred, the Assad-regime aligned themselves with Russia and Iran (primarily in return for favourable arm sales), and now an opposing US-led coalition alongside Turkey, which had initially been set up to combat ISIS (which held around 1/3 of Syria at one point), began to train anti-government rebels and conducted strikes against the government. To put it quite simply, Syria effectively became a playground for these nations and a whole host of terror groups/militias to test out weapons, with the Russians testing over 320 different types of weapons in Syria and both the US, Turkey, and Russia being accused of engaging in chemical warfare. On Sunday four strikes took place in Syria targeting Iranian-backed militias and it is believed 18 militants were killed
White Phosphorus
The result of these conflicts and disasters (earthquakes) has accounted for over 230,784 deaths (including 30,000 children) and over 14 million people displaced. According to UNICEF, the growth of over 650,000 children below the age of 5 is stunted due to malnutrition. And an estimated 2.5 million children are out of school