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Economy, Government Role in the Economy

primary agent, Organization of Petroleum Exporting Countries, communication networks, different social classes, nationalization

The early 1970s was a time of important development for the Iraqi economy and the government’s role in it. In 1972 the government nationalized the Iraq Petroleum Company (IPC), which had been owned by foreign oil companies. The nationalization, together with the steep rise in the price of crude oil that the Organization of Petroleum Exporting Countries (OPEC) engineered in 1973, had the effect of raising Iraq’s oil revenues more than eightfold—from $1 billion in 1972 to $8.2 billion in 1975. This sharp increase in revenue solidified the government’s role in the economy, making the government the primary agent for transferring wealth from the petroleum industry to the rest of the economy. In this way the government acquired the unprecedented power to allocate economic resources to various sectors of the economy and among different social classes and groups. Beginning in the 1970s, the Iraqi government came to be the primary determiner of employment, income distribution, and development, both of economic sectors and of geographical regions. It carried out extensive economic planning and exercised heavy control over agriculture, foreign trade, communication networks, banking services, public utilities, and industrial production, leaving only small-scale industry, shops, farms, and some services to the private sector.

The crushing nature of the UN sanctions means that Iraq’s economic policy at the start of the 21st century focuses mainly on building a coalition of nations to support the removal of the sanctions. The primary way the Iraqi government can win support from other nations is by promising lucrative post-sanction oil contracts to potential allies. Most experts believe that Russia, China, and France will be the main beneficiaries of these promises and expect that these countries will support softening the sanctions. However, the sanctions are not likely to be fully lifted as long as Hussein remains in power. Meanwhile, the Iraqi government is expected to focus on circumventing the sanctions, primarily through oil smuggling.

Article key phrases:

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