Geopolitics is once again driving oil prices, and after a pause this summer, tension and unrest could be back at the top of the agenda.
Last week, rioters burned down several buildings in Basra, a major city in Southern Iraq and home to most of the country’s oil production. Despite its oil riches, southern Iraq remains deeply unequal, which has fueled resentment and anger among the neglected populace even as international companies continue to ramp up production from Basra’s vast oil fields. Unemployment, poor public services, electricity outages (at the height of summer heat) and even contaminated water has stoked outrage.
The protests in Basra have been going on in one form or another for months, culminating last week in the burning of the headquarters of Iraqi political parties and even the Iranian consulate. The central government dispatched troops to the city and a curfew was put in place, restoring calm.
But the violence adds Iraq to the growing list of unstable OPEC countries that has rattled the oil market. “This is a dangerous escalation in a critical time period in an unstable region,” said Sunni lawmaker Salah al-Jubbouri, according to the Wall Street Journal.
Oil production has not been affected, and the powerful players that wield influence in Iraq – namely, Iran and the United States – both have an interest in not seeing the situation deteriorate. Yet, Basra suddenly looks unstable. And that is all the more notable because Iraq’s southern oil regions had avoided the ravages of war that plagued Iraq’s north after the advance of ISIS beginning in 2014.