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As Crisis in Iraq Drags On, So Too Does Economic Uncertainty

Civil war drags on in Iraq as the Islamic State of Iraq and Syria (ISIS), a Sunni al-Qaeda splinter group, continues to fight the Iraqi government and Shiite Prime Minister Nouri al-Maliki for control of northern Iraq. ISIS was formed by the unification of Sunni insurgents in Iraq and anti-Assad Islamists in Syria. The two groups have joined forces to take control of significant territory in both countries and wage war against the Iraqi government and Syrian dictator Bashar al-Assad. With control over most of northwestern Syria and northern Iraq, ISIS declared Sunday the creation of a new nation, to be called The Islamic State, according to a report Monday by Fox News. Its leader will be Abu Bakr al-Baghdadi, who will serve as the caliph, claiming to be the Islamic leader for jihadists everywhere (Fox News). Pressure on the Iraqi government to maintain their hold on the country mounts as these Sunni insurgents gain organization, territory and recognition.

The Iraqi Army and Shiite militiamen loyal to al-Maliki’s government have maintained a strong defense against Sunni insurgents just north of Baghdad. There has been no successful campaign to expel ISIS and restore order in northern Iraq, and many Iraqis have already fled and taken refuge in other countries. Maliki’s determination to maintain the Republic of Iraq has garnered support from several superpowers, including Russia. Russian experts arrived in Iraq Sunday with twelve new Russian warplanes for the fight against ISIS, according to Rod Nordland of the New York Times. The United States has been slower in its air support, but has recently promised F-16s and attack helicopters, and is in the process of providing both.

President Obama has also sent roughly 300 military advisors and several Special Forces units in the past weeks, according to Nordland. Iraq’s recent coalition of foreign support has been one of political irony, as Iran, long time political enemy of the United States, has also pledged military aid and sent advisors. In addition, Syrian President Bashar al-Assad, condemned by President Obama for human rights violations, has actively helped the Iraqi government, carrying out bombing raids on ISIS strongholds in northern Iraq as well as Syria, according to a repot by The Economist. Instead of being an example of nations overcoming their differences to support a common goal and ally, this ironic network of alliances reflects the chaos in the Middle East.

Iraq is OPEC’s second largest oil producer and the world’s eighth largest exporter. The country’s current political volatility has caused economic tremors throughout the oil industry. Beginning in March, Sunni insurgents have sabotaged several oil refineries in northern Iraq, including Iraq’s largest refinery in the city of Baiji two weeks ago. The insurgents took over 75% of the refinery according to Reuters, effectively shutting down all oil production and transportation out of the city. Amid recent confusion and conflicting reports over the control of the refinery, Iraq’s military spokesman, Major General Qassim Atta, held a televised news conference last Friday stating the Iraqi army’s successful re-takeover of the refinery (CNN). Aljazeera has corroborated these claims, but also addresses the conflicting reports by Sunni insurgents who are still claiming control, leaving the public no definite answer. Among this chaos and setback in oil production, prices have risen in past weeks. Brent Crude reached $115 per barrel as fighting intensified two weeks ago, but after a large offensive by government forces Monday, Brent Crude fell below $113 a barrel and fear of waning oil production declined.

The government’s maintenance of order in the Shiite-dominated and oil-rich South has also calmed worries. The region produces 90% of Iraq’s oil and has remained mostly unaffected by fighting. Fear over possible terrorism and sabotage of southern refineries, as well as other Shiite strongholds, however, still remains, threatening future oil supply and political stability. As long as this conflict remains unsolved, the prevention of investment, innovation, and activity in Iraq’s energy industry poses a huge threat to its petro-centered economy. As Iraq sits on the brink of a civil war, the global oil industry remains extremely fragile, not unlike the balance of power in the Middle East.

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About Evan Ocko

A junior contributor, Evan is an Economics major from Westchester, NY. Like any ex-high school athlete, he has recently picked up golf and men’s softball to rekindle the glory days.

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