The armed insurgency in Iraq is showing signs of developing into a major regional and international crisis as the fighting between government forces and Sunni Islamic militants is escalating.
The United States and neighboring countries like Iran and Syria are stepping into the conflict between government forces and the insurgents, which also unnerves such neighboring countries as Saudi Arabia and Turkey.
As things stand, the crisis, which began as what seemed to be a religious war between Iraqi Sunnis and Shiites, has the potential to become a prolonged one, which would have huge impact on international geopolitics and the global economy.
The lone fact that Iraq produces 3.3 million barrels of oil a day, which makes it the second-largest producer after Saudi Arabia among the Organization of Petroleum Exporting Countries members, points to the possible repercussions the unfolding crisis could have on the global economy. The violence in Iraq has already pushed up international oil prices, and experts say it could rise further unless the unrest comes to an end soon.
Korea would suffer a lot from an increase in oil prices. Iraq is the fifth-largest supplier of crude oil to Korea, after Saudi Arabia, Kuwait, the United Arab Emirates and Qatar.
Iraqi oil accounts for less than 10 percent of Korean imports, but some companies ― like GS Caltex, which relies on Iraq for 20 to 25 percent of its crude oil supply ― must brace for an unfavorable development.
Higher oil prices are destined to cut the current account surplus, raise import prices and dent the competitiveness of exporters, who have been already struggling with the appreciation of the Korean currency. Higher oil prices will also further squeeze domestic demand, which has already been suppressed by the Sewol ferry disaster two months ago.
Korean officials said so far that there had not been any disruption in oil supply from Iraq because the country’s main oil fields and seaports are located in the south, which is relatively safe from the unrest.
But on Thursday, the Sunni insurgents attacked the biggest oil refinery in northern Iraq, raising concerns about the possibility of a disrupted oil supply.
Korea needs to establish contingency plans for the worst possible economic fallout ― a major impediment to oil supplies and a surge in international oil prices.
The seemingly ever-present volatility in the Middle East also should remind officials of the need to further diversify sources of energy imports.
One more reason to watch the developments in Iraq closely is the massive presence of Korean firms and workers there. About 80 firms with more than 1,300 employees are engaged in energy-related projects and infrastructure construction in Iraq.
Iraq is the biggest source of overseas orders for Korean builders, with local firms receiving orders worth $8 billion from the country in the first five months of the year. Nearby Kuwait agreed orders worth more than $7 billion with Korean firms. The stability in the region is vital to Korean energy and construction companies doing business there.
Another important task is to ensure the safety of the Korean workers in Iraq. Under government advice, some firms have already evacuated their workers from dangerous areas. Related government agencies need to be put on emergency footing and establish fail-safe evacuation plans.
It is hoped that the current crisis, the worst since the United States invaded Iraq in 2003, be contained without damaging the regional stability and international oil prices. But we should always be ready to encounter the worst.