EITI: Iraq Scores Fairly Low in Oil Business Transparency

The EITI Board concluded that Iraq has achieved a score of 55.5 points (fairly low) in EITI implementation.

The country has shown a commitment to public disclosure of extractives data - particularly in oil sales, where it stands out in the region. Validation highlighted how its vast and complex petroleum sector continues to present both challenges and opportunities for strengthening transparency. Key areas for strengthening disclosures include contracts, oil-backed loans and the transfers of oil revenues.

"I commend Iraq for its dedication to EITI implementation," EITI Board Chair Helen Clark said. "The government and citizens of Iraq depend heavily on revenues from the oil sector. Iraq EITI's recent efforts to inform the public about the infrastructure agreement under China's Belt and Road Initiative are welcome. Moving forward, Iraq EITI should strengthen its disclosures, notably contracts with international oil companies as they contain key terms that determine revenues at the project level."

Since joining the EITI in 2010, Iraq has expanded the scope and detail of its disclosures on government oil sales, which account for 99% of the country's oil and gas revenues. In support of the government's economic diversification strategy, Iraq EITI has also begun covering mining activities and providing information on refined petroleum products, contributing to a broader understanding of value creation in the sector.

Enhancing transparency in oil sales

Iraq is unique among EITI implementing countries in retaining ownership of its oil and gas until the point of sale. The State Organization for Marketing of Oil (SOMO), a state-owned enterprise, plays a central role in managing oil and gas trades, which generate the bulk of government revenues. Given this structure, detailed disclosures on oil sales are critical for tracking revenue flows.

SOMO publishes aggregate export data on its website, which is complemented by Iraq EITI's more disaggregated disclosures, also available on eiti.org. Since the insertion of a transparency clause in SOMO's template sales agreement in 2013, trading companies agree that their purchases are made public. To further strengthen these disclosures, SOMO could routinely disclose the disaggregated sales data on an ongoing basis. In turn, Iraq EITI could strengthen its revenue tracking by resuming its past practice of reviewing financial statements for the Development Fund for Iraq (DFI), which receives the country's proceeds of oil sales.

Knowing the terms in service contracts

Iraq's oil and gas sector operates under a service contract regime, where international oil companies (IOCs) extract oil under contracts with state-owned enterprises and are reimbursed in kind. While model contracts are available, the specific terms of signed service contracts remain largely undisclosed, limiting public understanding of revenues at the project level. Publishing these contracts would enable public understanding of project terms and enhance oversight and accountability.

There are also opportunities to improve the accuracy of Iraq's public register of service contract holders and to build on past efforts to identify the beneficial owners of supplier companies working with these contract holders.

Strengthening implementation through full government engagement

Iraq has continued EITI implementation despite political turnover, as well as challenges during the COVID-19 pandemic. However, civic space has narrowed during the period under review, and EITI implementation has faced setbacks. These include reduced government, only partial participation in reporting by government and companies, and delays in renewing the civil society constituency.

Rebuilding trust between stakeholders and revitalising leadership will be critical to ensuring that Iraq fully benefits from EITI implementation. Sustained engagement from all parties will be essential in strengthening transparency and accountability in the extractive sector, as well as ensuring that the EITI process contributes to Iraq's anti-corruption and domestic revenue mobilisation objectives.