The war is getting closer to the pockets of Iraqis… Can the state protect salaries and the dinar?
The war is getting closer to the pockets of Iraqis… Can the state protect salaries and the dinar?
5-21-2026
Researcher Shatha Khalil*
Iraq fears not only war, but also the day when salaries could become a national crisis. The conflict raging around Iran and the Gulf is not just about missile strikes; it’s about striking at the very heart of the Iraqi economy: oil, dollars, and government spending.
The real danger doesn’t begin on the battlefield, but at the port. Iraq sells its oil in dollars, pays salaries in dinars, and imports most of its food, medicine, and other goods. Therefore, any disruption to oil exports quickly translates into pressure on the dollar, then into price hikes, and finally into public anxiety about salaries.
In 2025, the Iraqi budget was heavily dependent on oil, with oil revenues accounting for about 88% of federal revenues, according to data from the Iraqi Ministry of Finance published in March 2026. This means that the state does not have a wide margin if oil exports are subjected to a major shock.
The problem isn’t just the price of oil, but also the ability to export it. According to SOMO and the Ministry of Oil, Iraq’s exports in late 2025 were around 3.4 to 3.45 million barrels per day. However, with the disruption in the Strait of Hormuz, this figure is threatened, as the maritime route is the primary artery for southern Iraqi exports.
Herein lies the greatest danger: salaries. The Iraqi state not only funds its ministries, but also the livelihoods of millions of employees, retirees, and those covered by social welfare. Economic estimates indicate that Iraq spends tens of billions annually on salaries, pensions, and social transfers, meaning that any decline in oil prices transforms into a domestic financial crisis, not merely a trade crisis.
If exports decline, the flow of dollars into the country decreases. If the dollar weakens, pressure on the dinar increases. If the dinar weakens, the prices of food, medicine, and imported goods rise. The crisis then extends beyond the Ministry of Oil, impacting the market, the home of the employee, the pension of the retiree, and the citizen’s ability to purchase basic necessities.
The most dangerous scenario is that the tension continues for several months. In this case, the government may be forced to use reserves, borrow, postpone projects, or reduce investment spending. It may try to protect salaries first, but protecting salaries alone is not enough if prices rise and salaries lose a significant portion of their purchasing power.
However, if a prolonged disruption to maritime traffic occurs, the crisis could deepen. Recent reports have indicated a sharp decline in shipping traffic through the Strait of Hormuz and an increase in maritime navigation risks, demonstrating that the problem is no longer theoretical but is linked to global energy security as a whole.
The economic lesson is clear: Iraq needs not only more oil, but also a less war-prone economy. A country dependent solely on oil remains vulnerable to military decisions, maritime straits, or regional crises.
Therefore, the real solution is not just to wait for the war to end, but to build internal protection for the economy: diversifying export outlets, running industry, supporting agriculture, reducing imports, fighting corruption, and expanding non-oil revenues.
In conclusion: The most dangerous thing about the war is not the sound of missiles, but the question that has begun to approach the Iraqi street: If the oil stops, who will protect the salaries?
Economic Studies Unit / North America Office,
Links Center for Research and Strategic Studies
rawabetcenter.com
