100 Days of Trump: What it means for Iraq
As Donald Trump completes his first 100 days in as US President, what effect have his policies had on the Iraqi economy?
Firstly, it's worth noting that the main implications of Trump's policies for Iraq have been the indirect results of decisions not directly targeted at Iraq. Increased tariffs and the resultant drop in oil prices, the slashing of foreign aid across the board, and Trump's 'maximum pressure' policy towards Iran have been the three biggest consequences for Iraq since the change of regime in Washington on 20th January.
Tariffs and Oil Prices
While the United States applied an additional duty rate of 39 percent to imports from Iraq from 5th April, as part of its wider 'reciprocal tariffs' (sic) policy, the new rate does not apply to US imports of oil, which account for almost all of Iraq's exports to the US.
However, Trump's approach to tariffs in general, combined with his unpredictable nature, has led to fears of a significant slow-down in international trade, and undermined the confidence of investors and consumers worldwide. As a result, the price of Brent crude has fallen from around $75 at the start of the month to $65 today; in mid-2024 it was as high as $85.
These drops imply reduced oil revenue for Iraq. Iraq's National Development Plan 2024-2028 , launched last summer, but withheld from the public until late December, assumes a price of $74 this year, for example.
(Source: National Development Plan 2024-2028)
But as our Expert Blogger Ahmed Tabaqchali notes, Iraq has the capacity to support its spending plans by selling government debt, and this in turn can help develop the country's bond market, contributing to the evolution of the capital markets in Iraq. So while reduced oil revenue is a negative for Iraq, many expect short-to-medium-term development to continue as planned.
Foreign Aid
By some estimates, more than half of the humanitarian plans in Iraq were funded by the United States, so it should be no surprise that Trump's freezing of foreign aid and shutting down of the United States Agency for International Development (USAID) would have a major impact on a wide range of valuable initiatives throughout the country.
According to the Washington-based Enabling Peace in Iraq Center (EPIC) , " in fiscal year 2023, U.S. assistance to Iraq amounted to $592.7 million. " It says the halt in funding and the stop-work order for USAID has already disrupted lifesaving programs in Iraq.
Our Tenders page on Iraq Business News has seen only a small drop in activity, as many international NGOs have been able to continue with their work, but many programs have been cancelled or scaled back.
Sanctions on Iran
The removal of Iraq's waiver from US sanctions on Iranian energy imports has created immediate economic strain, but it has also accelerated efforts to reduce dependence on Iran. The sudden change of policy risks widespread blackouts, particularly during the extremely hot summer months, but it should also be noted that Iran was already expected to have difficulty supplying Iraq this summer, as it struggles to meet domestic energy demand.
To mitigate the effects of this decision, Iraq has prioritised alternative supply projects, including a gas deal with Turkmenistan, increased electricity imports from Turkiye, and the creation of a floating platform for LNG imports. Iraq also plans to have completely stopped the flaring of associated gas by early-2028.
While the cancellation of the waiver will undoubtedly cause hardship over the coming months, the import of gas and electricity from Iran was always regarded as a temporary solution, and pulling forward projects to replace Iranian supply could be considered a worthwhile investment.
Trump withdrew the US from the Joint Comprehensive Plan of Action (JCPOA) in 2018. Discussions continue regarding a possible new deal between US and Iran, and the final shape of any such deal will have implications for Iraq's economy and politics.
Iraqi dinar
Finally, for the benefit of those who've bought Iraqi dinars (IQD) in the hope of stratospheric upward revaluations, it should be mentioned that has, of course, not happened.
There has been a noticeable increase in interest in this " dinar RV " theory since Trump was elected in November, but not a shred of evidence to support the idea, and no indication from the President that he has any interest in the topic.
In an entirely unscientific online survey we ran in January, more than half of respondents said they expected the Iraqi dinar to revalue by at least 1,000x in the first 100 days of Trump's term, as if this was something that the President could magically bring about, even if he wanted to.
Doubtless the adherents to this theory will find a way to explain why it has not happened as they hoped, consider it a 'delay', and focus on some future timeframe when their faith will be rewarded.
© Iraq Business News
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