Iraq, the ancient land that gave birth to the cradle of human civilization, once flourished in the Middle East region with abundant oil resources. However, from being an “oil rich country” to being deeply mired in an economic quagmire, its development process is full of twists and turns and difficulties. Currently, Iraq is facing multiple challenges such as power shortages, economic structural imbalances, social unrest, and political divisions. Its predicament is not accidental, but rather the result of a combination of historical legacy issues, colonial plunder, war trauma, resource curse, geopolitical games, and internal governance failures. This article deeply analyzes the core issues of Iraq’s development, combines specific cases and in-depth analysis, reveals the root causes of its predicament, and explores possible paths to break through.
1、 The Tragedy of History: Long term sequelae of colonial plunder and war trauma
The path of modernization in Iraq has always been shrouded in historical shadows, with the plundering development during the colonial period and the trauma left by years of war becoming the historical roots of its development dilemma.
1. Colonial period: the “resource plundering” model of energy development
Case: Predatory exploitation by Western colonizers
As early as the early 20th century, Western powers incorporated Iraq’s oil resources into their global interest system through oil companies and colonial rule. Colonizers only focus on maximizing short-term benefits, adopt extensive mining methods, and neglect infrastructure construction and local industrialization development. For example, in the operation of the Kirkuk oil field, BP only focused on oil exports and failed to establish supporting refining and processing facilities. This model of “only drawing blood without making blood” has led to Iraq’s domestic energy industry relying on external technology for a long time and weak independent capabilities.
Deep Analysis: The Sprout of Resource Curse
The plunder during the colonial period not only deprived Iraq of its resource benefits, but also distorted its economic structure, leading it into the trap of “abundant resources but fragile economy”. The control of oil wealth by a few interest groups has failed to translate into public welfare, but has instead given rise to corruption and wealth inequality, laying hidden dangers for subsequent social unrest.
2. War trauma: from the Iran Iraq War to the Gulf War and then to the US invasion
Case: Economic destruction during the Iran Iraq War (1980-1988)
The eight year long Iran Iraq War dealt a heavy blow to the Iraqi economy. Infrastructure has been extensively damaged, oil exports have been hindered, and national debt has skyrocketed. During the war, Iraq had to borrow heavily and even misappropriate oil revenues to maintain military spending, resulting in weak post-war economic reconstruction. In addition, war has led to a large number of people being displaced and a sharp decline in social productivity.
Case: The suffocation effect of the Gulf War (1990-1991) and subsequent sanctions
The Gulf War triggered by Iraq’s invasion of Kuwait not only resulted in hundreds of thousands of military and civilian casualties, but also suffered from more than ten years of economic sanctions imposed by the United Nations. During the sanctions period, Iraq’s oil exports were strictly restricted, foreign exchange earnings dried up, and livelihood areas such as healthcare, education, and infrastructure were paralyzed. For example, due to the shortage of drugs caused by sanctions, the child mortality rate in Iraq has significantly increased. During this period, the Iraqi economy regressed for decades and society fell into a comprehensive predicament.
Case: The 2003 US Invasion and the Collapse of Political Order
The United States invaded Iraq under the pretext of “counter-terrorism” and “overthrowing dictatorship”, completely destroying the original political structure. After the fall of Saddam’s regime, Iraq fell into a power vacuum, with sectarian conflicts and rampant terrorism, and the security situation continued to deteriorate. Long term wars have led to the loss of a large number of professional talents, the paralysis of government governance capabilities, and the difficulty of economic reconstruction.
Deep Analysis: The Structural Destruction of War on Development
Years of war not only consumed Iraq’s material wealth, but also destroyed its social order, institutional framework, and human capital. Political turmoil has led to a lack of policy coherence, corruption, and insufficient public investment, further exacerbating economic recession and social fragmentation.
2、 Economic difficulties: a vicious cycle of resource dependence and structural imbalance
The Iraqi economy is highly dependent on oil resources, and its single economic structure makes it highly susceptible to fluctuations in international oil prices. At the same time, the backwardness of industrialization and the decline of agriculture have exacerbated development difficulties.
The Curse of Oil Dependence
Case: The ultra-high proportion of oil in GDP and fiscal revenue
According to 2021 data, Iraq’s oil export revenue accounts for 75% of GDP, and over 90% of the government’s fiscal revenue relies on oil. This excessive dependence leads to extremely weak economic resilience to risks. For example, during the global oil price crash in 2020, Iraq’s finances were in a serious crisis, with a shortage of public service funds and a soaring unemployment rate.
Case: Hollow out of industrial system
Due to long-term dependence on oil exports, Iraq was unable to establish a diversified industrial system. The development of manufacturing and service industries lags behind, and the competitiveness of local enterprises is weak. For example, its manufacturing output accounts for only about 10% of GDP and is mainly concentrated in the low-end processing sector. The hollowing out of industry leads to a lack of employment opportunities and insufficient economic resilience.
Deep analysis: The vicious cycle of resource curse
The centralized distribution of oil wealth has given rise to a “rent-seeking economy”, and the government lacks the motivation to promote economic diversification. Meanwhile, the consumption habits and welfare dependence formed during the period of high oil prices have posed significant obstacles to economic transformation. When oil prices fall, the government is unable to make up for the income gap through other industries, and livelihood issues immediately erupt.
2. Agricultural decline and food security crisis
Case: Water scarcity and agricultural shrinkage
Iraq’s agriculture relies heavily on the irrigation of the Tigris River and the Euphrates River. However, in recent years, the dam construction in upstream countries (such as Türkiye and Syria) has led to the reduction of water volume in Iraq. In addition, droughts caused by climate change have further exacerbated the water resource crisis. For example, in the summer of 2025, several provinces in southern Iraq experienced a significant reduction in farmland production and food output due to water scarcity.
Case: Grain Import Dependence and Security Issues
Due to insufficient agricultural productivity, Iraq’s self-sufficiency rate for food is only about 30% and heavily relies on imports. But economic difficulties have led to a shortage of foreign exchange and limited grain import capacity. For example, in 2023, due to insufficient foreign exchange, the import volume of wheat in Iraq sharply decreased, causing a surge in domestic flour prices and intensifying social dissatisfaction.
Deep Analysis: The Chain Reaction of Agricultural Weakness
The decline of agriculture not only threatens food security, but also leads to a large migration of rural population to cities, exacerbating urban poverty and unemployment problems. Meanwhile, issues such as aging irrigation systems and land salinization have further worsened the agricultural production environment.
3、 Energy Pain: The vicious cycle of resource waste and power crisis
Iraq has abundant oil and natural gas resources, but is deeply mired in power shortages. Its energy management system has serious deficiencies, with prominent problems of resource waste and low efficiency.
1. The “black flame” of natural gas venting and burning
Case: Amazing data on associated gas combustion
Iraq’s oil fields generate a large amount of associated gas (natural gas) during the oil extraction process, but due to insufficient processing facilities, a large amount of associated gas is directly vented and burned. According to the World Bank’s 2024 report, the amount of associated gas released and burned in Iraq in 2023 exceeded 17.7 billion cubic meters, accounting for 12% of the global total and ranking among the top in the world. These burning torches not only waste resources, but also cause serious environmental pollution and health problems.
Case: Economic Losses and Power Generation Potential
Experts estimate that the economic losses caused by associated gas waste exceed $2 billion annually. If these associated gases are effectively recycled and utilized, it can increase the power generation capacity by at least 10 gigawatts, significantly alleviating power shortages. For example, although the associated gas processing plant in the Hafaya oilfield has been built, technical bottlenecks and operational issues still result in a utilization rate of less than 50%.
Deep Analysis: The Triangular Dilemma of Technology, Investment, and Corruption
The processing of associated gas requires significant investment and high-tech equipment, but Iraq lacks independent technological capabilities, and government corruption leads to inefficient bidding projects and loss of funds. Although international companies are interested in investing, their willingness to invest is limited due to the unstable security situation and government policies.
2. Livelihood crisis caused by power shortage
Case: Summer “Electricity Shortage” and Social Turbulence
The problem of power shortage in Iraq is particularly severe during the high temperature period every summer. For example, in the summer of 2025, daily power outages exceeding 12 hours in the capital city of Baghdad and other areas will trigger large-scale protests and even escalate into violent conflicts. Insufficient electricity leads to factory shutdowns, hospital equipment shutdowns, and paralysis of residents’ lives, posing a serious threat to social stability.
Case: Outage and theft of power infrastructure
Most of Iraq’s power infrastructure was built in the last century, with severe equipment aging and inadequate maintenance. At the same time, theft of power lines is rampant, with some criminals stealing and selling cables, further damaging the power supply system. For example, in 2024, a large-scale power outage occurred in the southern province of Basra due to cable theft, and thousands of residents took to the streets to protest.
Deep Analysis: The Lag of Management and Reform
The low management efficiency and widespread corruption in the power sector have led to the misappropriation of investment funds, making it difficult to implement reform measures. Although the government has promised to develop renewable energy such as photovoltaics and hydropower, the progress of projects is slow, and the installed capacity is far from meeting the standards, making it difficult to replace traditional energy in the short term.
4、 The political and social divide: sectarian conflicts, governance failures, and livelihood dilemmas
The political system in Iraq is deeply mired in sectarian and ethnic conflicts, with weak governance capabilities and prominent social and livelihood issues, further hindering the development process.
1. The tearing of sectarian and ethnic conflicts
Case: The Power Game between Sunni and Shia
Iraqi society is dominated by Shia Muslims (60%), Sunni Muslims (20%), and Kurds (15% -20%). After the 2003 regime change, the Shia dominated the government, causing dissatisfaction among the Sunni and leading to ongoing conflicts between the two sides. For example, the rise of the Islamic State (IS) has exploited the marginalized sentiment of Sunni Muslims, leading to large-scale terrorist attacks and social unrest.
Case: Autonomous and separatist risks in the Kurdish region
The Kurdish people have long sought a high degree of autonomy and even independence, which has led to numerous conflicts with the central government. For example, the Kurdish region controls some oil fields and export channels on its own, competing with the federal government for oil revenues, exacerbating fiscal fragmentation. In 2025, the Kurdish region will hold another independence referendum, triggering strong opposition from the central government and posing a challenge to regional stability.
Deep analysis: The erosion of identity politics on governance
The conflict between sects and ethnic groups often leads to policy formulation being hijacked by identity politics, making it difficult for the government to form a unified development plan. Resource allocation and job appointments often become bargaining chips in sectarian games, weakening the effectiveness of national governance.
2. Governance failure and persistent corruption
Case: Widespread corruption in the public sector
According to Transparency International’s Corruption Index, Iraq has long been among the most corrupt countries in the world. Public funds are being heavily misappropriated, infrastructure project bidding is being conducted in secret, and corruption among officials is widespread. For example, in the corruption case exposed in the power sector in 2023, hundreds of millions of dollars in procurement funds for power equipment were embezzled by officials, resulting in project delays.
Case: Government execution and reform obstacles
The lack of authority of the central government and the fragmentation of local forces have led to difficulties in policy implementation. For example, the nationwide power reform plan has been stalled due to obstruction from local interest groups, and the approval of land for photovoltaic projects has been delayed for several years.
Deep Analysis: Institutional Defects and Trust Crisis
Long term wars and political turmoil have disrupted the rule of law system, causing the public to lose trust in the government. Corruption and ineffective governance form a vicious cycle, weakening the credibility and execution of national development policies.
3. Livelihood difficulties and social dissatisfaction
Case: High unemployment rate and youth crisis
The youth unemployment rate in Iraq is over 30%, and a large number of graduates are unable to find jobs. For example, a survey conducted in 2025 showed that about 60% of college graduates are unemployed, leading to a surge in social dissatisfaction and even fueling extremist tendencies.
Case: Shortage of public services and exacerbation of poverty
Public services such as electricity, healthcare, and education are severely lacking. For example, only 50% of the country has stable power supply, and 20% of the population lacks safe drinking water. The poverty rate continues to rise, with 25% of the population living in poverty by 2024, particularly in the southern region.
Deep analysis: Unequal distribution of development achievements
The oil wealth has not been transformed into universal public services, resource benefits are monopolized by a few elite classes, and the lower class of people cannot share the development dividends, exacerbating social inequality.
5、 Geopolitical Dilemma: Survival in the Gap between Regional Gaming and External Intervention
Iraq is located in the core area of geopolitics in the Middle East, and its development is deeply influenced by great power games and regional conflicts. External intervention further exacerbates its internal contradictions.
1. The role of “chess pieces” in regional games
Case: Geopolitical Controversy between Iran and Saudi Arabia
Iraq has become a focal point of power struggle between Iran and Saudi Arabia in the two major regions. Iran infiltrates Iraqi politics by supporting Shia political parties and militia groups, while Saudi Arabia attempts to woo Sunni forces to balance Iran’s influence. For example, in the 2024 Iraqi parliamentary elections, the intense confrontation between the pro Iran camp and the pro Saudi camp led to a political stalemate.
Case: spillover of Türkiye and Kurdish issues
Türkiye frequently crossed the border to attack the Kurdish Workers’ Party (PKK) in Iraq, triggering a dispute over Iraq’s sovereignty. At the same time, Türkiye affects Iraq’s agriculture by controlling upstream water resources, exacerbating its economic predicament.
Deep Analysis: The Cost of Geopolitical Vulnerability
Iraq’s geographical location has made it a buffer zone for regional conflicts, and external intervention has exacerbated internal sectarian and ethnic conflicts, hindering the implementation of independent development policies.
2. The aftermath of the influence of the United States and the West
Case: Failure of institutional transplantation after regime change
After 2003, the United States attempted to transplant Western democratic systems into Iraq, but overlooked its social and cultural particularities. Hasty democratization reforms have led to political fragmentation, with numerous political parties lacking effective governance capabilities and social order chaotic.
Case: Economic Dependence and Debt Trap
The post-war reconstruction of Iraq heavily relies on international aid and loans, especially the “reconstruction plan” led by the United States. However, aid funds often come with political conditions and flow heavily into the pockets of Western contractors, with a limited proportion actually benefiting people’s livelihoods. Meanwhile, the debt burden has increased the financial pressure on the government.
Deep analysis: The double-edged sword effect of external intervention
Although international intervention has provided partial support in the short term, its accompanying geopolitical demands and institutional imposition have actually weakened Iraq’s ability to develop independently, plunging it into deeper structural difficulties.
6、 Breakthrough Strategy: Exploring the Path of Multidimensional Reform and Regional Cooperation
To solve Iraq’s development dilemma, a dual approach of internal reform and external cooperation is needed, breaking the resource curse, repairing the governance system, promoting economic diversification, and seeking regional peace.
1. Energy Reform: From Waste to Efficient Utilization
Path 1: Accelerate the construction of associated gas treatment facilities
The government should attract technologically advanced enterprises to invest in associated gas processing projects through international bidding, while simplifying the approval process, cracking down on corruption, and ensuring efficient project implementation. For example, cooperation with BP and Chinese companies needs to accelerate progress and prioritize the development of recovery facilities in key oil fields.
Path 2: Developing renewable energy alternatives
Utilize Iraq’s abundant solar and wind energy resources to promote large-scale photovoltaic and wind power projects. The government can establish special funds, provide subsidies and tax incentives, and encourage private sector participation. For example, building large-scale photovoltaic power plants in the southern desert region gradually reduces dependence on traditional energy sources.
Path Three: Power Management and Anti Corruption
Reform the power sector, introduce smart grid technology to improve efficiency, and crack down on cable theft and power corruption. Establish independent regulatory agencies to ensure transparent use of funds, while promoting market-oriented reforms in electricity prices to incentivize energy conservation and investment.
2. Economic diversification: getting rid of oil dependence
Path 1: Industrial Revitalization Plan
Attract foreign investment to develop the manufacturing industry, especially in downstream industries such as petrochemicals, textiles, and food processing, through measures such as tax incentives and industrial park construction. Establish an industrial development fund using oil revenue to support local enterprises in technological upgrading.
Path 2: Modernization of Agriculture
Invest in upgrading irrigation systems, promote water-saving agricultural technologies, strengthen cross-border water resources negotiations with Türkiye and other countries, and ensure agricultural water use. At the same time, subsidies are provided to encourage farmers to plant high value-added crops and develop the agricultural product processing industry.
Path Three: Exploring the Potential of the Tourism Industry
Restoring historical relics, developing tourism projects in ancient cities such as Babylon and Ur, and utilizing their cultural advantages to attract international tourists. Improve tourism infrastructure, train professional talents, and create a Middle East tourism destination.
3. Political and Social Restoration: Rebuilding Trust and Inclusive Development
Path 1: Reconciliation between sects and ethnic groups
Promote a power sharing mechanism to ensure the representation of various religious sects and ethnic groups in the government and parliament, and resolve differences through dialogue. For example, establishing a “National Reconciliation Committee” to address historical grievances and promote social integration.
Path 2: Anti corruption and Rule of Law Construction
Establish an independent anti-corruption agency, severely punish corrupt officials, and publicly disclose bidding and financial expenditure information. Strengthen the reform of the judicial system, enhance the credibility of the rule of law, and restore public trust in the government.
Path Three: Youth Employment and Social Investment
Establish a youth entrepreneurship fund to provide skills training and loan support, and encourage the development of the digital economy and small and medium-sized enterprises. Increase investment in education, improve the quality of higher education, and reduce talent loss.
4. Regional Cooperation and Diplomatic Autonomy: Balancing the Influence of Major Powers
Path 1: Promote regional economic integration
Carry out energy and trade cooperation with Iran, Saudi Arabia, Türkiye and other neighboring countries, such as participating in the power interconnection project of the Gulf Cooperation Council (GCC), sharing energy resources and alleviating power shortages.
Path 2: Diplomatic Diversification
Seeking balance among major powers such as the United States, Russia, and the European Union to avoid excessive reliance on a single external force. Utilize its energy advantages to strive for a more advantageous position in international energy negotiations.
Path Three: Resolving the Kurdish Issue
Through constitutional negotiations, granting greater autonomy to the Kurdish region while ensuring the central government’s control over security and finances, and avoiding the risk of division.
7、 Future Outlook: Coexistence of Challenges and Hope
The development path of Iraq is full of challenges, but not without hope. Its abundant resources, young population structure, and long-standing cultural heritage still provide the foundation for its recovery. The key lies in whether consensus can be gathered, internal and external obstacles can be overcome, and systematic reforms can be achieved.
The urgency of the reform window period
The current relatively stable international oil prices provide Iraq with an economic buffer period for reform, but it is necessary to seize the opportunity to accelerate transformation. If the window period is missed, the development dilemma will become even more severe as oil resources gradually deplete or new energy substitution accelerates.
The necessity of regional stability
The revival of Iraq requires a peaceful environment in the region. Promote reconciliation with countries such as Iran and Saudi Arabia, reduce external intervention, and create stable space for their development. At the same time, actively participate in security dialogues in the Middle East region to reduce the risk of conflict.
3. Opportunities for international cooperation
The global attention to energy transition has provided Iraq with opportunities for cooperation. At the same time, Iraq needs to actively connect with initiatives such as the “the Belt and Road” initiative to attract investment from emerging economies such as China and India.
Conclusion: Surpassing the resource curse and reshaping the development path
The development dilemma in Iraq is a historical tragedy compounded by multiple factors, and its solution lies in breaking the curse of the “resource curse”, shifting from exploitative development to sustainable development, from a single economy to a diverse structure, from sectarian division to social inclusion, and from external dependence to independent reform. This requires the government to push for systemic change with the determination of a brave warrior, while leveraging the power of international cooperation to fill the gaps in technology, funding, and governance. Only in this way can Iraq break free from the paradox of “abundant resources but lagging development” and regain the glory of the Mesopotamian region.
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