IRAQ’S officially proven oil reserves are approaching 115 billion barrels. In 2013 the Iraqi Ministry of Oil reported an increase to 143 billion barrels. If this is correct, Iraq is the fifth biggest producer in the world.

Most of the oil is in the Shi’i south – Iraq is led by Shi’i Prime Minister Nouri al-Maliki, who seems irresponsive to the grievances of his country’s Sunni population as it edges slowly towards a civil war.

In the Kurdish autonomy in the north of the country, where Western companies are signing deals, proven oil reserves are estimated at 11 billion barrels.

In 2012 Iraq’s oil production was around three million barrels per day (b/d), some 75 per cent of which came from the south. However, by the end of 2012 production had reached 3.2 million b/d, the highest since the early 1980s.

By the end of 2013 Iraqi Kurdistan will probably produce 400,000 b/d; by 2015 Kurdish leaders promise to bring production to one million b/d and that will be doubled by 2019. By 2012 oil represented between 93-95 per cent of total government revenue. However, development is slow.

ExxonMobil decided in 2012 to give up its contract over the huge West Qurna field in the south in favour of developing oil fields in the Kurdish autonomy.

Kurdistan’s infrastructure is healthy, electricity supply is adequate and there is little corruption involved in signing contracts.

If Iraq repairs all or even most of its oil pipelines and prevents sabotage it will be able to market much larger quantities than it does today.

Between late April and early July 2013, the Iraqi dinar lost about 10 per cent of its value because of the sharp spike in sectarian violence. Otherwise inflation is low.

Iraq’s oil revenues are substantial even now. According to a UN Joint Analysis Policy Unit (JAPU) report in January 2013 the annual budget for 2013, approved in March and based almost entirely on the expected oil revenues, is US$118.5 billion (ID 138 trillion).

The expenditure of the central government in Baghdad – defence, the central bureaucracy etc – is US$34.6 billion or about 30 per cent of the total budget. The regions are demanding a higher share, but provision of funds is already quite high. The problem is that the spending rate for provincial development is low and most provinces cannot spend all the cash allotted to them by Baghdad.

One reason for that is the deterioration in security that slowed economic activities, including those of foreign companies.

There are also local inefficiencies. As a result, in 2011 less than 60 per cent of the substantial allocated provincial budgets was used.

The infrastructure development needs are very high. Some 32 per cent of households still lack safe drinking water and 25 per cent receive less than 12 hours of uninterrupted electricity per day from public networks.

Education, too, is in poor shape – 23 per cent of the population is illiterate and although 90 per cent of school-age children are enrolled in primary schools, the figure for secondary schools is only 49 per cent.

Iraq is a rich country. This, however, is not benefiting most Iraqis, whose income – the equivalent of US$3,900 a year in 2011 – and standard of living, are low because of a slow rate of development.

Foreign entrepreneurs will find attractive opportunities in Iraq. Official corruption can be circumvented if entrepreneurs approach the provincial authorities and local sheikhs (elders). If they can employ local workers, the regional leaders will use their electoral power to get the needed approval from Baghdad. Substantial funds are available.