The petrodollar is defined as the surplus of oil revenues equal to the dollar of oil-producing countries, that is, the remaining oil sales funds following the payment of the production. The term was first used at the end of the 1970s with rising oil prices by Henry Kissinger–U.S. National Security Advisor and later became the Secretary of State– linked the dollar with oil to maintain its market value, thereby strengthening America’s position as an unrivaled economic power.
The reason for the timely rise in oil prices is the accumulation of funds by producing States; This project was the most important guarantor for the recycling of these amounts from producing to consuming countries, by once again pumping these funds into Western banks and markets, “reversing the economic cycle” the evolution of the project was the core of what is now known as “sovereign funds.” the most important of these funds are: Qatar Investment Authority, Saudi Public Investment Fund, and Abu Dhabi Investment Authority.
It is a legal article that is “totally different from the global concept of the term and similar to it by name, which was intended to fund oil governorates with funds that are continuous and outside budget allocations to support their development projects.” It was included in the budget in 2010, under which the Ministry of Finance is obliged to allocate $5 per barrel produced or refined in oil governorates, later adjusted to 5% of the price per barrel, to be paid to oil-producing provinces instead of $5.
This law has become a means of attacking successive Governments because of the reluctance of the Ministry of Finance to implement it on the grounds of high fiscal deficits and limited oil revenues, as well as the cost of the war on terrorism, which has strained Iraq’s financial and economic structure; The Iraqi Petrodollar Project has thus become a major obstacle to the reconstruction process in those provinces – particularly in the south of Iraq – through which it was intended to operate. The indebtedness of the Ministry of Finance of those provinces until 2019 was about 25 trillion Iraqi dinars, 15% of which were for Basra province alone, which produces approximately 85% of Iraq’s oil.
To avoid this repetitive scenario, the House of Representatives amended the Act in the budget for the current year (2021). Deputy Sadiq Al-Sulaiti, a member of the Parliamentary Energy Committee, declared to a conscious agency that “the 2021 budget has established a new mechanism that differs from its predecessor, and this mechanism has imposed on the Ministry of Finance the creation of special petrodollar funds. ”
China: The new variant in Iraqi petrodollar
The rate of trade between Iraq and China reached $30 billion in 2020, both Iraq and Saudi Arabia are competing for first place for China’s crude oil exporters within OPEC.
Moreover, there was the tangible desire of Chinese companies to operate inside Iraq. The Ambassador of China in Baghdad said that “all Chinese companies in Iraq have maintained their business without the crisis of covid-19.” In a statement quoted by the Anadolu agency, the Chinese ambassador declared Beijing’s readiness to provide military support to Baghdad should the Americans withdraw, Despite all the pressure on Iraq to ease the momentum of the relationship with China, the Iraqi Parliament had succeeded in including in the 2021 budget paragraphs of the Chinese Convention, the most important of which was the project to build “100 schools” with Chinese companies, as well as the financing of Nasiriyah Airport and other projects. The experience of American-Chinese friction on Iraqi soil must mark the beginning of a balanced and reasonable course for the ruling class in Baghdad to ensure continued political, security, and development support for the country and to keep it away from entering the middle of the world. According to the outcome of the G21 summit, the conflict between the Europeans and the Chinese is on course to escalate at a higher pace than before.