# **Introduction**

Iraq was plunged into two simultaneous crises in the second half of 2014, one driven by a sharp decline in oil prices, the other, by the war against the Islamic State. Since June 2014, crude oil prices per barrel have fallen from around 112 USD to 97 USD in September and 62 USD by December (Figure 1). Given Iraq’s heavy dependence on oil as a share of GDP and exports, and a source of government revenues, this decline in prices alone would have hit Iraq’s fragile economy hard.

In addition, since June 2014, Islamic State (IS) or Da’ash militants extended their influence from Syria into Iraq’s northern and western provinces of Anbar, Nineveh, Salahadin, and to a lesser extent, Kirkuk and Diyala. A total of 354,000 families were internally displaced between June and December of 2014 which represents about 2.1 million individuals;<sup>3</sup> and those left behind have been cut off from the rest of the country. The internally displaced persons (IDPs) have sought refuge across Iraq and about half of those who have crossed governorate boundaries were settled in Iraqi Kurdistan.<sup>4</sup> Civilian casualties in Iraq have increased to close to 2007 levels (Iraq Body Count) as a result of the ongoing violence (Figure 2). The prevailing insecurity has severely affected oil exports from the north, adversely impacted trade and investment, led to the destruction of infrastructure and impeded the flow of goods and services across the country, leading to a sharp contraction in oil and non‐oil GDP (World Bank, Iraq Macro‐Poverty Outlook (Internal Use Only), Spring 2015).

The twin crises are likely to have impacted households across Iraq through different transmission channels. Even for households directly affected by the war against IS, the welfare of those displaced, their hosting communities, and those left behind will all be affected differently.

On one hand, the consumption of IDPs could have been reduced by a decrease in the quality or flow of services received from housing as well as the loss of immobile durable goods and assets. Additionally, among the displaced, those previously employed in the private sector will have almost certainly lost their jobs and livelihoods. In contrast, IDPs who held public sector jobs have in general continued to receive their salaries and pensions.

For families left behind and still living in the IS‐ affected governorates of Anbar, Nineveh, and Salahadin, anecdotal evidence and discussions in country suggest that their access to services, Public Distribution System (PDS) and other public transfers has been disrupted, and that distorted markets have led to a local increase in prices. Moreover, their labor income might have also been reduced because of the economic disruptions, the security situation, and because of ‘taxation’ by Islamic State. All of these households including the IDPs could also have suffered from a reduction in their private transfers

> 3 Source: IOM‐OIM DTM Data January to December 25, 2014.

> 4 Kurdistan region comprises of the three governorates of Erbil, Sulaimaniya and Duhouk. Based on official governorate boundaries, approximately 800,000 IDPs have moved to KR‐I. If districts under de facto KR‐I administration are included (in particular the IDP camps in Nineveh administered by the Duhouk governorate), the number increases to 1 million. This influx represents a significant addition to Kurdistan’s 5 million people.

2