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Brief Iraq economic history

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The Ba'thist regime engages in extensive central planning and management of industrial production and foreign trade while leaving some small-scale industry and services and most agriculture to private enterprise.

The economy has been dominated by the oil sector, which has traditionally provided about 95 percent of foreign exchange earnings.

In the 1980s, financial problems, caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran, led the government to implement austerity measures and to borrow heavily and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war.

After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Agricultural development remained hampered by labor shortages, salinization, and dislocations caused by previous land reform and collectivization programs.

The industrial sector, although accorded high priority by the government, also was under financial constraints.

Iraq's seizure of Kuwait in August 1990, subsequent international economic embargoes, and military action by an international coalition beginning in January 1991 drastically changed the economic picture. Industrial and transportation facilities, which suffered severe damage, have been partially restored.

Oil exports are at 25 percent of the prewar level following the implementation of UN Security Council Resolution 986 in December 1996. Shortages of spare parts continue. The United Nations-sponsored economic embargo has reduced exports and imports and has contributed to the sharp rise in prices.

The Iraqi Government has been unwilling to abide by UN resolutions so the economic embargo could be removed. The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime have exacerbated shortages.

In accord with a UN resolution, Iraq agreed to an oil-for-food deal in 1996, under which it would export $2 billion worth of oil in exchange for badly needed food and medicine.


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