Falling Oil Prices May Cause Iraq to Cut Back on Military Spending

[Alexander]

Released 2 hrs. ago by the AP.

BAGHDAD – Falling oil prices will force Iraq to cut back on military spending, leaving questions about whether it can handle tasks such as protecting oil platforms in the Gulf once the American pullout is complete, a top U.S. commander said.

Iraq's leaders now have to decide where the cuts will be deepest: arms, patrol boats or air power — all of which the country needs to create a fully functioning security force.

"It's a matter of capability and how much risk they are willing to take to spread that capability out ... because the money is so tight," Lt. Gen. Frank Helmick, commander of Multi-National Security Transition Command, told The Associated Press on Saturday.

Read more here: http://news.yahoo.com/s/ap/20090301/...q_oil_and_arms

The bottom line?

"'When oil was $120 a barrel, this wasn't a problem. When we could give them money, it wasn't a problem,' Helmick said. 'Oil is not $120 a barrel and there is not an appetite (in the United States) to give the Iraqis large sums of money.'

The Iraqi government has purchased nearly $5 billion in military items from the U.S. since 2006. But it needs billions more in equipment, parts and service contract.

Iraq recently asked to buy another $3.8 billion from the U.S. in military-grade purchases, but has not been able to fund the request. The American government requires money be deposited with the federal reserve before any foreign military sales can be finalized and equipment handed over.

That $3.8 billion request includes patrol boats, support ships, parts and service for its tanks and other armored vehicles and helicopters.

'If they don't purchase patrol boats and patrol ships, they might not be able to provide the security for their (oil) platforms when they think the could be able to,' Helmick said. 'That's a significant issue that needs to be addressed.'"

This might make an interesting situation with the coming U.S. pullout even more interesting...

Regards,
Alex

[GCoyote]

Well that puts them in a very similiar fix to some other countries dependent on oil exports and not sporting the trillion $ of cash reserves the Saudis have socked away.

I agree this will likely have an impact on the US troop withdrawl which may turn out to be less of a departure than many were hoping for.