Cheap oil hampering Iraq reconstruction

BAGHDAD, Dec. 17 (UPI) -- Falling oil prices are imperiling Iraq's reconstruction plans and could produce a budget deficit next year, U.S. and Iraqi officials say.

With crude oil prices down 70 percent since July, and with Iraq deriving 90 percent of its revenue from oil sales, the country is slowing some of its rebuilding plans at a time when an expanding economy is sorely needed to help solidify U.S. reconstruction efforts, USA Today reported Wednesday.

"We're in a situation where Iraq is … potentially going to be in a deficit mode next year," Paul Brinkley, who leads U.S. Defense Department efforts to aid Iraq's economy, told the newspaper. "The long-term stability of the country heavily depends on a vibrant economy."

"For next year, with the oil prices going down, we're going to have a problem," Samir Sumaidaie, Iraq's ambassador to the United States, said in a Tuesday speech, adding that if prices continue to decline after that, "it's not even going to be enough to pay salaries, never mind reconstruction of the infrastructure."

The drying up of Iraq's tax revenues would probably also heighten tensions between sectarian groups, said Anthony Cordesman, an Iraq analyst at the Center for Strategic and International Studies.