The Oil Market Isn’t Just About Profits
Iraq’s Oil Crisis Leads to Domestic Chaos
As I stated in my previous article, Iraq’s dependence on oil and the turmoil gripping the country has led to massive budgetary deficits and market instability in the country. As of July 23rd, Iraq’s oil problems have also led to British military intervention.
Because the Iraqi government failed to make payments to the major oil companies extracting its oil, they reduced their output. This, combined with the Iraqi government selling its oil for cash and its limited refining capabilities, has led to drastic fuel shortages throughout the country.
In Basra, the safest and most western of Iraq cities, the citizens are not accustomed to fuel shortages and the resulting power outages. Because of this, for the past week its inhabitants have taken to the streets to protest. During the protests, an Iraqi 20 year old male was shot by police, which resulted in further protesting and violence. On top of that, extremist elements from local militias took steps to create chaos and violence by firing on civilians.
In order to help quell the violence and appease the protesters, the Iraqi government called on the British to bring extra fuel into the city and help repair the damaged infrastructure providing electricity to the city. In order to escalate mayhem, extremist elements killed a British soldier transporting mail and money to the UN building in Basra. They also opened fire on British troops transporting the fuel, who returned fire and killed two of the insurgents. Thousands of protesters have also blocked key roads used by British troops and have thrown rocks at the troops as they have driven by.
Because of this violence, the government of Iraq has blocked all access into and out of the city, preventing vital fuel shipments from reaching their destinations to the north and preventing further commercial transactions from being carried out with the rest of the country.
With Basra being the most secure and peaceful city in Iraq, as well as the heart of its oil infrastructure, these deadly encounters with local security forces and British troops have once again brought to light the significant instability that still remains with Iraq’s internal security and financial markets.