Iraq struggles to pay public salaries as Strait of Hormuz crisis deepens

What Happened

Iraq is facing a salary payment crisis as oil exports have plummeted due to the continued closure of the Strait of Hormuz, according to Arab media reports. A senior Finance Ministry official told The National that the government may not be able to pay public-sector salaries on time if the export disruption persists, with plans being considered to stretch payment cycles to every 45 days. Iraq spends approximately $6.5 billion monthly on salaries, pensions, and social welfare. Oil export volumes dropped from 100 million barrels in February to around 32 million barrels in May and June, according to figures shown to The National by the Oil Ministry. The crisis is linked to Iranian actions in the strait: in mid-March, Iranian drone boats entered Iraqi waters and attacked the Marshall Islands-flagged Safesea Vishnu and the Malta-flagged Zefyros, both carrying Iraqi fuel cargoes. In response, Iraq has agreed with Turkey to maintain exports via the Iraq-Turkey pipeline at a daily capacity of 750,000 barrels, and is offering discounts of up to $30 per barrel on Basra crude to offset heightened shipping risks.

Key Actors

Why It Matters

The Strait of Hormuz disruption, driven by Iran's regional actions, is directly destabilizing Iraq's economy, which relies on oil for 90% of government revenue. Delayed public salaries risk igniting domestic unrest in a country still recovering from years of conflict. The crisis illustrates how Iranian pressure tactics can cascade into severe economic consequences for neighboring states, potentially undermining recent poverty reduction gains and straining Iraq's political stability.

Watch For

Monitor whether Iraq's salary delays trigger protests or strikes among public-sector workers. Track the effectiveness of the Turkish pipeline agreement and whether discounted Basra crude attracts enough buyers to close the revenue gap. Watch for any further Iranian attacks on vessels in or near Iraqi waters and any diplomatic efforts to reopen the Strait of Hormuz.