Iraq struggles to pay public salaries as Strait of Hormuz crisis deepens

Many Iraqi public employees have not received their July salaries due to an ongoing oil export crisis caused by the continued closure of the Strait of Hormuz. Iraq spends approximately $6.5 billion monthly on public sector salaries and welfare. A senior Finance Ministry official stated, “if the export disruption continues, we will not be able to pay salaries in time from now on,” with plans to potentially pay salaries every 45 days. Iraq’s oil exports plummeted from 100 million barrels in February to about 32 million in May and June. The country's economy is heavily reliant on oil, which constitutes 90% of government revenue. Despite an agreement with Turkey to maintain exports through the Iraq-Turkey pipeline, Iraq faces a significant revenue shortfall. To mitigate the impact, Iraq is offering discounts of nearly $30 a barrel on Basra crude to attract buyers, with an oil expert noting that “the size of the discount moves in line with the level of risk, not with the existence of a permanent production surplus.”