University of Montana ScholarWorks at University of Montana Graduate Student Theses, Dissertations, & Professional Papers Graduate School 1963 Petroleum and economic development of Iraq Taha Hussain al-Sabea The University of Montana Follow this and additional works at: https://scholarworks.umt.edu/etd Let us know how access to this document benefits ou.y Recommended Citation al-Sabea, Taha Hussain, "Petroleum and economic development of Iraq" (1963). Graduate Student Theses, Dissertations, & Professional Papers. 8661. https://scholarworks.umt.edu/etd/8661 This Thesis is brought to you for free and open access by the Graduate School at ScholarWorks at University of Montana. It has been accepted for inclusion in Graduate Student Theses, Dissertations, & Professional Papers by an authorized administrator of ScholarWorks at University of Montana. For more information, please contact [email protected]. PETROLEUM AND ECONOMIC DEVELOPMENT OF IRAQ by TARA H. AL-SABEA B.A. Baghdad University, I960 Presented in partial fulfillment of the requirements for the degree of Master of Arts MONTANA STATE UNIVERSITY 1963 Approved ctiaarman, B dard/ofsx^lners Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: EP39462 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI* OisMTtation Publkhing UMI EP39462 Published by ProQuest LLC (2013). Copyright in the Dissertation held by the Author, Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106 -1346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ACKNOICEDOÎENTS The author would like to take this opportunity to ex­ press his gratitude to Professors R. E, Shannon, B, Gordon, and R. Wallace of Montana State University, for their guidance and critical advice, and especially Dr. Shannon, the thesis director, whose questions and criticisms were very helpful. He is also deeply indebted to Dr. A. M. Wahab of Loyola University, Los Angeles, California, for his comments and suggestions. The author wishes to thank Mr. Aziz A. Kelidar for his help in securing valuable source materials from Iraq. Also, ny appreciation to Mrs. Mary A. %lson for her contributions in typing the thesis. i i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. PREFACE The aim of this thesis is to study and analyse the evolution of the petroleum industry and the role of petroleum revenue in the develop­ ment of modern Iraq. I have focused this study upon Iraq because I am a citizen of that country, therefore starting with the assets of some knowledge of its history and language. The limited source of materials available in the United States on some subjects has been supplemented by Iraqi sources, which I have translated, when necessary, from Arabic. I worked for the Government of Iraq in Baghdad Refinery for five years (therefore, I believe that I am well acquainted with the petroleum in­ dustry in Iraq). I also studied petroleum economy for a full year at the University of Baghdad, when I attended the College of Economics and Commerce th e re . Iraq is an underdeveloped country which is trying to utilize its petroleum revenues to develop its economy and, in turn, its people and their standard of living. The importance of Iraq, as the seventh oil- producing country in the world, plays a great role in stimulating ray desire to study this topic. Above all, it is ny duty as a student of Economics and as an Iraqi, to serve both Economics and Iraq when I de­ vote ny time to study this particular subject. I hope I wrill be suc­ cessful in dealing scientifically with the aim of this thesis. i i i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS Page PREFACE ..............................................................................................................111 LIST OF TABLES.................................................................................................................. v i l LIST OF FIGURES........................................................................................................ ix LIST OF MAPS................................................................................................... X PART I . THE IRAQI ECONOMï IN GENERAL, CHARACTERISTICS AND TRENDS CHAPTER I . INTRODUCTION..................................................................................................... 2 The Pteople of Iraq Government and Political ^rstem Education Agriculture S o il Water C a p ital Land Tenure ^stem Industry- Natural Resources I I . THE ECONOMÏ AS OF 19#2............................................................................... 17 National Income of Iraq Productivity of Labor Force Industrial Productivity iv Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Chapter Page Domestic and Foreign Trade Agricultural Productivity I I I . OBSTACLES TO ECONOMIC DEVELOPMENT IN 1 9 ^ 2 ....................................... Limitation on Investment Capital Technological Factors The Weakness of the Taxation System The Scale of the Domestic Market Internal Factors Affecting Capital Formation in Iraq Exportation of Domestic Capital The Exodus of the Jews Investment and Incentives BLRT I I . THE ROLE OF PETROLEUM AS A RESOURCE FOR ECONOMIC DEVELOPMENT IV. EVOLUTION AND HISTORICAL REVIEW OF THE PETROLEUM INDUSTRY IN IRAQ..................... 59 The Struggle for Petroleum Concession during the Ottoman Empire Reign in Iraq The San Remo Agreement The Red Line Agreement Petroleum Companies in Iraq The 1952 Agreement Pipelines Projects Petroleum Production R e fin e rie s Petroleum Industry and Labor Relations in Iraq Effect of the Petroleum Revenue on the Iraqi Balance of Payments Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. VI Chapter Page The International Transaction of Iraw and the Role of Petroleum Internal Spending and Its Effects on the Local Economy - Employment Direct Payment by the Oil Companies and Financial Help to Ira q 7 . OVERALL ECONOMIC DEVELOPMENT, 19^2-1960 ........................................ 103 The Development Board and Its Program Structure and Function of the Development Board Finance of the Development Board Development Board Planning Implementation of the Agricultural and Irrigation Program Implementation of State Manufacturing The Economic Situation in I960 as Contrasted with 1952 The Overall Economic Plan and Aims VI. CRITICAL EVALUATION AND CONCLUSION..................................................... lU9 BIBLIOGRAPHY.................................................................................................................. l6 ? Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIST OF TABLES Table Page 1. Dr. Fenelon’s Estimate of the Iraqi National Income, 1956. 17 2. Dr, Fenelon’s Estimate of the National Products, 1956. 18 3. Per Capita Income, 1953-1956 ................................................................. 18 li. Percentage Sector of Iraqi National Income for the Year I960 19 5. Haseeb’s Estimate of Iraqi National Income, 1953-1956. 20 6. Non-Agricultural Labor Force ................................................................. 23 7. Size Distribution of Industrial Establishment, 195L .................. 30 8. Value of Iraq’s Principal Imports (Excluding imports by- oil companies) ............................................................................................ 33 9. B arl^ Exports, 1953-1960 .......................................................................... 35 10. Date Exports, 1953-1960 ..................... 36 11. Live Animals ................................................................................................ 37 12. Cotton Exports ................................................................................................ 37 13 . Wool E x p o r ts ....................................................................................... 38 lli. Total of Imports, Exports and Transits of the Iraqi Foreign Trade f o r th e Y ears 1950-1960.............................................................. 39 1 5 . Land Use: Ir a q , 1956 .................................................................................. Ul 16 . Percentage of Land Surveyed and Omership of Land for the Year 1951 .......................................................................................................... Ul 17 . Distribution of Holdings by Size in Iraq ....................................... U2 1 8. Percentage Distribution of Government R eceipts .......................... 52 19. Oil Production and Oil Revenue for the Years 1928^.1960 . 77 20. Export, Import-excluding petroleum-and Balance of Payments . 92 v i i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. V X X l Table Page 21. International Transactions—Iraq ........................................................