Middle East Post

Still, a senior administration official said the United States was confident that the cumulative oil surpluses would allow it to weather the immediate storm. “The overall trend is still moving in a reasonable direction even if they’re not able to do quite as much as anticipated,” the official said.

Identifying the roots of the crisis here is much simpler than it is in many places in the world. In Iraq, there is not much of a credit market to dry up nor are there mortgages to default on. Oil accounts for roughly 90 percent of government revenue. When oil prices drop, as they have to below $40 a barrel from a high last summer of nearly $150, there are few other options for collecting revenue.

Finance and Oil Ministry officials in Iraq maintain that oil prices will rise again by the end of the year. After years of conservative budgeting, the proposed 2009 budget is based on an optimistic projection that oil will be selling at $50 a barrel, and that Iraq will be exporting two million barrels a day, about 100,000 barrels more than Iraq exported per day in January.

Critics of the budget say that the projections are unrealistically rosy and that the deficit will be even larger than the one planned.

The timing is particularly bad for the new leaders who emerged from January’s provincial council elections. Many blamed incumbents for failing to deliver services and improvements, but they will have to make good on their promises with much less money.

“Reasonable people will understand, but the common people will not accept it,” said Baqir al-Shaalan, who won in the southern Iraqi province of Diwaniya on promises of a refurbished irrigation system, new housing and government jobs for unemployed youths. “They will tell us: ‘You’ve been justifying the lack of services with the security situation. Now the security situation has improved.’ ”

Then again, the provincial councils have such a dismal record of spending the money they have been allocated that, American officials say, they could actually spend more money this year even if their budgets are more austere.

There is a bright side: the crisis could finally force the Iraqi government to build up its agricultural and industrial sectors, and create a thriving private sector. Some Iraqi officials have been pushing for these moves for years.

“If the Iraqi government knew about the big depression, it would have done a lot of things differently,” Mr. Haruty, the lawmaker, said. “Same as the American government, I think.”

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International Concerns, Middle East Journalism