| The Government of Iraq (GOI) steers Iraq’s economy, a legacy of decades of communist and autocratic decision-making, which to this day manifests itself in bloated ministries directing three-quarters of the economy. Oil exports serve as the foundation of Iraq’s GDP. Iraq’s GDP grew 7% in 2022, shrunk 2% in 2023, and is expected to grow moderately in 2024; headline inflation was 4.4% in 2022 and 4.0% in 2023 (all IMF data). Much of the non-state, non-oil economy is informal, cash-based, and vibrant. Investors will find opportunities from one extreme to the other: massive energy deals with ministries and importing brands to Iraqi kitchens. |
| SECURITY: Some militia groups mobilized in the fight against ISIS remain deployed, under only nominal GOI control, and influenced by Iran – as demonstrated by frequent attacks on Coalition and U.S. government installations October 2023 – February 2024. Notably, such violence did not target American businesses in Iraq, nor are U.S. businesses particularly targeted by criminal groups for being American. Militia groups were implicated in criminal activities, ranging from extortion to destruction of internet infrastructure to bombing energy infrastructure. |
| DUE DILIGENCE: Investors should complete due diligence on Iraqi partners before entering commitments. Iraq is an honour culture where relationships matter, but its courts are ill-equipped to sort out more dishonourable commercial issues that might arise between businesses. Iraq took a positive step in 2024 by signing the UN Singapore Convention on commercial mediation.
Companies could face long delays in getting paid if projects are tied to the federal Iraq budget, especially from GOI entities. |
| Difficulties with corruption, business registration, customs, taxes, selective application of regulations, dispute resolution, electricity shortages, and access to financing are common complaints for local and foreign companies in Iraq. |
| OPPORTUNITY: Despite these challenges, the Iraqi market offers potential for U.S. exporters. Iraq regularly imports U.S. rice and other agricultural commodities, machinery, consumer goods, aircraft, and defence articles. Iraq imported $950 million in goods from the United States in 2022 (most recent year available). Government contracts and tenders continued as the source of most commercial opportunities in all sectors. The GOI closed a giant $27 billion energy sector deal with France’s TotalEnergies in 2023. Other deals were in the works that could help Iraq produce additional gigawatts of electricity through improved efficiency, new natural gas-fired plants, and – once the electrical grid is modernized – solar. |
| Tenders for two mega-projects are expected at the end of 2024: rehabilitating Baghdad’s International Airport and building a north-south corridor of rail and roadways (the “Development Road”). Resolution of an oil dispute between the GOI and the IKR could also encourage additional hydrocarbon investment in the IKR. |
| IRAQI KURDISTAN REGION: While investors in the semi-autonomous IKR face many of the same challenges as investors elsewhere in Iraq, the IKR’s friendlier investment climate (as noted, allowing 100% foreign ownership of a business) and a more commercial-friendly legal framework appeal to many U.S. firms and franchises. |
| Yet, concerns also abounded in the IKR: disputes with the central government over oil revenues and the Iraq-Turkiye Pipeline, tensions between the IKR’s main political factions, domination of the economy by politically powerful families, significant non-payment or delays to foreign companies on government contracts, and reduced consumer demand when government salary payments are missed or delayed. Iran and Iran-aligned militia groups carried out dozens of missile attacks and drone strikes in the region, including lethal ones in Erbil and Khor Mor gas fields in January and April 2024. Turkiye also routinely bombed alleged terror targets in IKR, though this activity infrequently affects international companies. |
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| Iraq: GDP. |
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