Iraq faces financial crisis as oil exports drop 97% due to Iran blockade

Iraq is facing a severe financial crisis as delays in government salaries escalate due to a blockade of the Strait of Hormuz. Many public sector employees, including teachers and doctors, report that their paychecks have been arriving later than usual, causing widespread anxiety. The situation has worsened over the past three months, as the Iraqi government struggles to export oil, which is crucial for funding public salaries.

The current crisis is rooted in geopolitical tensions following U.S. and Israeli military actions against Iran in late February. Iran has responded by blocking the Strait of Hormuz, a vital shipping route through which Iraq exports 80% to 90% of its oil. As a result, Iraq's oil exports plummeted by 83% in March and reached a staggering 97% decline by May. With oil revenue accounting for 85% to 90% of the national budget, the government is running out of cash, leaving many public sector workers in limbo.

Public frustration is mounting, with protests erupting in recent weeks from university staff and Ministry of Electricity employees demanding timely payments. Iraqi officials have indicated that monthly salary needs range from $6.5 billion to $8.2 billion, while the government's income has dwindled to around $2 billion to $2.3 billion in recent months. This has led to rampant speculation among the populace about potentially extended payment schedules, with rumors circulating that salaries could be paid every 45 days instead of monthly.

In response, the Iraqi government has sought to reassure citizens, stating it has $83 billion in reserves alongside gold holdings and other non-oil income. Officials maintain that these resources will sustain salary payments for the immediate future. However, the ongoing blockade and dwindling oil exports highlight a precarious situation for Iraq, raising questions about the long-term stability of its economy and the livelihoods of millions reliant on public sector employment.