Economic Structures in Contrast: Iraq, the Levant, and the Arabian Peninsula
The economic structures of Iraq, the Levant, and the Arabian Peninsula differ significantly due to variations in resource dependency, investment capacity, and policy direction. This article analyzes the distinctive features of Iraq’s rentier economy and compares them to the more diversified Gulf economies and the conflict-affected economies of the Levant.
1. Iraq’s Rentier and Mono-Sectoral Economy
Iraq represents a classic case of a rentier, oil-dependent economy. Over 90% of its public revenues and about 98% of its exports rely on oil. Between 2003 and 2014, oil revenues constituted 97% of total state income, making Iraq’s economy one of the least diversified in the region.
This dependency has distorted the economic structure, reinforcing its vulnerability to external shocks and global oil price fluctuations. Iraq also ranks low on the Economic Complexity Index, reflecting a limited capacity for industrial and technological diversification.
Public debt reached approximately USD 122 billion by 2015, highlighting the country’s fiscal fragility and dependence on oil markets for budgetary stability.
2. Comparison with the Arabian Peninsula (Gulf Cooperation Council Countries)
The Gulf states, while also historically reliant on oil, have adopted strategic diversification agendas — particularly under Saudi Arabia’s Vision 2030. These countries are investing heavily in non-oil sectors such as tourism, logistics, renewable energy, and digital services.
In contrast, Iraq’s investment-to-GDP ratio averaged only 19% between 2004 and 2014, compared to nearly 30% in countries like Jordan and the United Arab Emirates.
GCC states have also deepened economic cooperation with Iraq through joint projects in energy, infrastructure, and trade. The UAE pledged USD 3 billion for Iraq’s reconstruction, while Saudi Arabia invested in electricity interconnection projects, reflecting Iraq’s growing role in regional integration despite its internal constraints.
Expected growth in the GCC region is increasingly driven by non-oil sectors, while Iraq’s short-term growth still relies primarily on the oil sector rebound projected for 2025.
3. Comparison with the Levant
The Levant region, comprising countries such as Jordan, Lebanon, and Syria, faces a different economic reality. Most are oil-importing nations with limited natural resources and chronic fiscal pressures.
Some have implemented fiscal reforms like the introduction of value-added tax (Jordan in 2001, Lebanon in 2002, Tunisia earlier in 1988), diversifying government revenue sources. Iraq, however, continues to rely almost exclusively on oil revenues, with limited progress toward tax-based financing.
Moreover, several Levantine economies, particularly Syria and the Palestinian territories, suffer from severe geopolitical instability, conflict, and high inflation, constraining growth prospects.
Despite Iraq’s own instability, its abundant natural resources and strategic location position it as a potential hub for regional projects such as the Development Road initiative connecting the Gulf to Europe.
4. Key Findings
The most striking difference lies in Iraq’s continued dependence on a single, low-complexity export commodity — crude oil — and its slow progress toward structural reform.
While the GCC countries have leveraged oil wealth to diversify their economies, Iraq remains trapped in a rentier model marked by administrative inefficiency and corruption.
Levant economies, on the other hand, are constrained by limited resources and political instability rather than resource dependence. This dynamic places Iraq in a unique intermediate position — resource-rich yet structurally fragile.
Conclusion
Iraq’s economic challenge lies not in its lack of resources but in the institutional and structural rigidity that prevents diversification. As neighboring economies in the Gulf and Levant pursue reforms or face external constraints, Iraq’s future growth depends on its ability to shift from rentier dependency toward a diversified, innovation-driven model that integrates more effectively into regional and global markets.