World's Energy

BAGHDAD, June 9 (UPI) -- The crude oil market has political ramifications for the Iraqi government that prompt concern from U.S. advisers over development, official say. A U.S. Defense Department report in March says economic development of Iraq is linked to oil prices as Baghdad receives the majority of its funding from its energy sector. "Iraq's near-term economic development depends largely on its success in managing the oil and gas sector," the report states. Iraq earlier this year imposed a federal hiring freeze, slashed its budget and faced a backlash from government-funded paramilitary forces due to economic setbacks from declining oil prices. Meanwhile, Iraqi Oil Minister Hussain al-Shahristani faces criticism for his performance despite a modest opening of the Iraqi energy sector with Kurdish oil exports earlier this month. Despite recovery in oil prices following a $100 decline in 2008, U.S. commanders said the oil-linked budget crunch was troubling, the Pentagon said. "The reduced Iraqi budget has caused us to address some tough choices with our (Iraqi Interior Ministry) colleagues," said U.S. Army Maj. Gen. James Milano, a deputy commander working on transition issues. The hiring freeze inhibits national security as Baghdad cannot afford to hire additional police. Meanwhile, Washington has worked with Baghdad on a three-year plan to manage the current global recession and stagnant oil prices. "But again, it's the effective application of their available budget, their discretionary budget, and ours that we want to implement to get the biggest bang for the buck, if you will," Milano added.