Thread: Archive Latest News - Think Tank - 16/08/07 - 03/11/07

Kurds in Iraq strike 4 new oil deals, angering Baghdad

SULAIMANIYA, Iraq: Worsening a deep divide with Iraqi leaders, the Kurdish regional government has struck four new oil exploration deals over the strong objections of the Baghdad central government. The deals are the latest effort by the Kurds to jump-start their oil industry as national oil legislation languishes in Parliament.

The new deals follow an agreement last month between the Kurds and Hunt Oil Co. of Dallas that was criticized as illegal by the Iraqi oil minister, Hussain al-Shahristani. Kurdish officials, who have said they want to be producing at least one million barrels of new oil daily within five years, say all the deals are consistent with the Iraqi Constitution.

But the deals have aggravated tensions with the Arabs who dominate the national government, calling into question whether Iraqi politicians will ever be able to work out differences on how to develop the huge petroleum reserves.

The Kurds want the Iraqi Parliament to pass draft legislation governing new oil exploration and the allocation of oil revenue between the country's Kurdish, Sunni and Shiite regions. But many in Parliament object to the version favored by the Kurds, and it is unclear how the Kurds' own regional oil law, approved in August, will conform with whatever might ultimately be approved by the central government.

In particular, many Sunni Arab leaders object to the production-sharing agreements being negotiated by the Kurds, which call for companies to invest large sums to find and produce oil and then award the companies a portion of the profits later generated by the oil fields.

The Kurds' new oil and gas exploration production-sharing contracts were signed with Heritage Oil Corp., a publicly traded Canadian concern, and Perenco SA, a privately held French company. The total initial amount invested is expected to be $500 million, the regional government said, and two other deals with "experienced international companies" will be announced soon.

Heritage was awarded an exploration license for a 1,015-square-kilometer, or 392-square-mile, area in the Sulaimaniya Province of Iraqi Kurdistan. Perenco was awarded a license for 2,358 square kilometers along Iraq's northern border with Turkey.

If the exploration leads to oil production, Kurdish officials said that in rough terms the deals call for the companies to recover their costs and split profits, with about 15 percent going to the companies and 85 percent to the government. A Kurdish official said it is expected to take three to five years before any oil is produced.

In addition, the Kurdish government announced plans to complete, within two years, two refineries that are each capable of processing 20,000 barrels a day, or enough to meet 30 percent to 40 percent of the current demand in Iraqi Kurdistan for gasoline and other refined products - easing reliance on imports from Turkey and Iran. "We are desperate for fuel and fuel products," a Kurdish official said.

In Baghdad, a spokesman for the Oil Ministry criticized the new oil production contracts and warned companies not to sign deals without the blessing of the national government.

"Any contracts signed before the approval of the oil law will be ignored or considered illegal," said the spokesman, Assim Jihad. He added that the ministry would take "rigid steps against those who ignore its orders."

A senior State Department official in Baghdad has also criticized the oil contracts with the Kurds as having "needlessly elevated tensions" between the Kurds and Baghdad.

A Kurdish official defended the deals, saying that the eventual revenue would be shared with all Iraqi regions and that any delays in signing exploration pacts would only increase the time it will take to get money for the country's treasury.

A Western executive involved in negotiations with the Kurds said the regional government appeared to be trying to "create a fait accompli" by signing so many deals with foreign companies that the central government has to eventually accept the provisions sought by the Kurds.

"They are trying to increase the pressure to get the draft oil bill out of" the Iraqi Parliament, said the executive, who agreed to speak without his name being used because he was not authorized to discuss negotiations. "Some of these are relatively marginal deals in the sense that they are not huge deals with major international oil companies. But if they get enough of them they feel they can put more pressure on the federal government to get the law unstuck."

Kurds in Iraq strike 4 new oil deals, angering Baghdad - International Herald Tribune

U.S. still focused on Iraq oil law

U.S. officials continue to focus on Iraq's national oil law after the Kurdish region unilaterally approved four more controversial oil deals with foreign firms.

The Kurdistan Regional Government announced Tuesday it had signed two production-sharing contracts with a subsidiary of the Canadian firm Heritage Oil and Gas and a subsidiary of the French firm Perenco S.A. The KRG statement said the two other deals would be signed soon, and more deals are in the pipeline.

The Iraqi federal government has been unable to reach agreement on a national oil law that would govern the vast Iraqi oil sector, determining the role of the federal/regional/provincial governments as well as the extent the private sector would be allowed to invest. That law is stuck in Parliament.

White House spokeswoman Dana Perino said Wednesday she hadn't heard about the KRG deals but stressed "we obviously want the (federal) oil law to be passed."

U.S. State Department spokesman Sean McCormack said Secretary of State Condoleezza Rice urged Baghdad to make progress on the oil law during a meeting with visiting President Jalal Talabani.

A separate revenue-sharing law, which would decide how the revenues from oil sales are collected and redistributed, has not even been passed by the Council of Ministers, before heading to Parliament.

The KRG, controlling a relatively peaceful region in the north, has little of Iraq's proven reserves, but experts say there are plenty to be found. Eager to develop, the KRG had already signed a handful of contracts with small, independent oil firms.

The world's largest oil firms are waiting for the federal government to pass legislation before they attempt to sign deals to explore and develop the oil.

In August the KRG approved its own regional oil law. Last month it signed a deal with Dallas-based Hunt Oil. Baghdad immediately decried the moves as illegal and stepping outside the national government framework.

http://www.earthtimes.org/articles/show/118351.html

Earlier the better in Iraq KRG oil deals

Oil firms eying the Iraqi Kurdish region are likely to get the best exploration blocks the earlier they sign deals, according to a leading industry expert.

The Kurdistan Regional Government announced Tuesday it had approved four production-sharing contracts and signed two of them with foreign, independent oil firms. The other two are to be signed soon, a KRG statement said.

"We anticipate more partnerships as companies who have been studying the area for a while make their move," said Bob Fryklund, vice president of industry relations for the global energy consultants IHS.

This comes less than a month after signing a deal with Dallas-based Hunt Oil, the first Iraq oil contract with a U.S. company since the war and the first KRG deal since it approved its own regional oil law the month prior.

This put it at odds with the federal Iraqi government, which is at a political impasse on a national hydrocarbons law. The federal government has criticized the recent moves, as well as the handful of contracts the KRG signed over the past two years. The Oil Ministry calls all but the first four illegal.

Iraq has the largest pool of proven oil reserves aside from Saudi Arabia and Iran, and expectations of up to twice as much in potential reserves once the country is fully explored.

All of the global oil firms want in on Iraq's sector, though a decision as to the extent of denationalization of the sector has not been agreed upon. That, along with the roles of the federal/regional/provincial governments is holding up the national law.

While the world's largest oil firms are waiting on Baghdad, since nearly all of the proven and most of the probable reserves are located outside the KRG, smaller, independent companies are courting the northern region.

The deals announced Tuesday, with a subsidiary of the Canadian firm Heritage Oil and Gas and a subsidiary of the French firm Perenco S.A., are just the latest.

"The independents are focused on KRG, while the majors are focused on the existing major fields in the south and central Iraq," Fryklund said. "Thus, continued signature of new blocks in the north by companies like Perenco and Heritage is not unexpected.

"The independents are looking for a foothold in high potential exploration plays and most know that in plays which are immature the first companies usually get the better position. ... Big fields are found by the first in," Fryklund said.

http://www.earthtimes.org/articles/show/118365.html

Iran’s way to meddle in Iraqi affairs

The arrest of an Iranian businessman last month in the Kurdish city of Sulaimaniya has raised many question marks, most prominent among them are those relating to the way the concerned parties have reacted to the event.

But most bewildering among the reactions has been the fury and anger expressed by Iran. Though U.S. troops arrested this businessman, the Iranians have poured their wrath on the Kurdish enclave by closing down the five border crossings with the region.

So the Iranians have moved to punish the party that has nothing to do with the incarceration of the Iranian national on Iraqi soil. The Kurds are paying a heavy price for an action taken by the world’s only superpower.

Everyone knows Iraqi authorities, courts, and jurisdiction, troops and police have no right to question this superpower’s operations or activities in Iraq.

The Kurds are in a dilemma. The closure of the border crossings has shown how fragile their economy is and the extent of its dependence on neighboring states which loathe the idea of even a semi-independent neighboring Kurdish region.

Perhaps the Kurds did not think Iran would take such a drastic decision as the region’s livelihood and particularly that of Sulaimaniya relies heavily on bilateral trade with Tehran.

As a result the Kurds have moved quickly to denounce the U.S. move saying the Iranian businessman was on an official visit to the region.

The Kurdish regional government is pressing its American friends to have him released. But for the U.S. this businessman is none but Brigadier Mahmoud Farhad, a representative of the Iranian Revolutionary Guards in Iraq.

Farhad had escaped at least two U.S. attempts to have him arrested and there are reports saying the Kurds themselves helped U.S. troops to get him.

The other big question mark concerns the Kurdish authorities who did not utter a word of protest when nearly two months ago Iranian artillery shells forced Kurdish villagers close to the border to flee.

Kurdish officials, including President Jalal Talabani, a Kurd, are working as hard as they can to produce some form of evidence that Farhad is really a businessman and not a commissioned Revolutionary Guards officer.

There is a lot of duplicity in the way the Kurds have dealt with Farhad’s case. They rallied in Farhad’s support but did not even ask Iran to stop its shelling of Kurdish villages.

Even the central government has come to Farhad’s defense. The Kurds for sure are not putting Iraqi national interests ahead of their narrow regional ones. This has been their tragic mistake which they have repeatedly committed in recent history and for which they have paid dearly.

They naively think that neighbors like Iran, Turkey and Syria with sizeable Kurdish minorities would support their path to an independent state. They quickly forget the tragic moments they experienced when their so-called friends, particularly the U.S. and Iran, decided to dump them for some strategic gain.

The free flow of trade with Iran along five border crossings has made the Kurdish enclave much more reliant on Tehran than any time before to the extent that all their achievements along the path of nationhood have their base in states unfriendly to them and to their own country Iraq.

The Kurds adamantly adhere to a proposition which history has proven wrong: the further they are from Baghdad and closer to its enemies the better.

http://www.azzaman.com/english/index.asp?fname=news\2007-10-03\kurd.htm

US law could cover Iraq crimes

Dubai: The House of Representatives is expected to vote on legislation that could see US government contractors who commit felonies in Iraq and Afghanistan being prosecuted in US federal courts, a human rights activist said yesterday.

"It's time to close the legal loopholes that allow contractors in Iraq and Afghanistan to commit crimes with impunity," Jennifer Daskal, senior counterterrorism counsel at Human Rights Watch told Gulf News.

Under regulations originally imposed by the US government an estimated 180,000 private contractors working in Iraq are immune from local criminal prosecution. A US-Afghanistan agreement means thousands more have immunity in Afghanistan.

The legislation, if passed, will extend the reach of a federal law, called the Military Extraterritorial Jurisdiction Act (MEJA), to cover all US contractors overseas. Currently, only Department of Defence (DOD) contractors and other contractors supporting US forces are explicitly covered by the law.

Under Iraqi law, initially imposed by US occupation authorities in 2004, all non-Iraqi contractors are immune from prosecution in Iraqi courts. Because the Blackwater employees were contracted by the State Department - not DOD - prosecutors must first establish that they are acting in support of DOD in order to bring a case under MEJA.

Gulfnews: US law could cover Iraq crimes

Iraq insurgents form front under ex-Saddam aide-TV

Several Iraqi insurgent groups have formed a front led by Izzat Ibrahim al-Douri, the most senior member of the past regime still at large, Al Arabiya television reported on Wednesday.

The U.S. military has accused Ibrahim, who was vice-chairman of Iraq's Revolutionary Command Council, of helping lead the Sunni Arab-led insurgency which erupted after the 2003 U.S.-led invasion of Iraq that toppled Saddam Hussein.

The television station said the main group in the new front was the Army of the Men of the Naqshbandi Order, one of the smaller insurgent groups. It did not name the other groups.

"The meeting unanimously elected the sheikh of the Mujahideen ... Izzat Ibrahim, as the top leader of the High Command for Jihad and Liberation," said a militant, his face blurred, on a video aired by the network.

The television did not say where it obtained the video and its authenticity could not be independently verified.

Ibrahim ranked sixth on the U.S. military's list of 55 most-wanted Iraqis, with a $10 million reward offered for his capture.

CORRECTED: Iraq insurgents form front under ex-Saddam aide-TV - Yahoo! News UK

Iraq PM says 'unfit' Blackwater must go

Iraqi Prime Minister Nuri al-Maliki said on Wednesday that Blackwater should leave the country because of the mountain of evidence against the under-fire US security firm.

His comments came amid growing anger among Iraqis that "above-the-law" security contractors are continuing to operate in Iraq while Blackwater is being probed over a deadly shooting 17 days ago.

"I believe the abundance of evidence against it makes it unfit to stay in Iraq," Maliki told a televised press conference in Baghdad.

A New York Times report on Wednesday citing witnesses, Iraqi investigators and a US official said that as many as 17 people were killed and 24 wounded when Blackwater employees opened fire in central Baghdad on September 16.

Blackwater maintains its men were legitimately responding to an ambush while protecting a US State Department convoy but they are accused of firing into crowded Nisoor Square indiscriminately.

Immediately after the incident, in which at least 10 people were confirmed killed, Maliki said Washington should replace Blackwater forthwith.

He later backed down and agreed to await the outcome of investigations.

A member of the Shiite ruling coalition, Amira al-Baldawi, told AFP: "Some foreign companies believe they are above the Iraqi law."

Baghdad lawyer Hassan Shaaban said the firm should have been shut down at least until investigators had finished their work.

"This company should halt its work until investigations are over," he said. "There should have been an investigation into the Nisoor Square event before a decision was taken to say if they should continue working in Iraq or not."

Three investigations have been called by the US State Department, whose staff Blackwater was protecting during the shootings, and US Secretary of State Condoleezza Rice has called for a "360-degree" look at the events.

The US Defence Department, which also employs hired guns from Blackwater to protect a number of its personnel, has launched a fourth inquiry.

"As far as the law is concerned, if the probes prove they are responsible for the incident they should be expelled in accordance with Iraqi law," said Hassan.

"They are not an army neither US armed forces. They merely present company services and consequently any violation on the land of Iraq should be subject to the Iraqi judiciary."

Blackwater boss, ex-Navy SEAL Erik Prince, denied at a hearing before Congress on Tuesday that his staff ran riot like "cowboys" after a Congressional report suggested the company's security teams in Iraq are out of control.

A committee report found that Blackwater, which protects US diplomats and visiting dignitaries, had been involved in nearly 200 shootings in Iraq since 2005, and accused it of covering up fatal shootings involving its staff.

In one incident cited by the committee, a drunken Blackwater employee shot and killed a guard of Iraqi Vice President Adel Abdel Mahdi.

Iraq PM says 'unfit' Blackwater must go - Yahoo! News UK

Iraq's bonds hint at chance of postwar recovery

While the Iraq war continues to drain lives and resources, the political debate within the US has quietened, out of despair and exhaustion on the Democratic side and a dissipation of even empty expressions of optimism on the part of the administration and its supporters.

There has, though, been a rally in the price of Iraq's traded international debt. Since mid-August, the price of the 5.8 per cent Iraqi bonds of 2028 has risen from its all-time low of 55 to a level of about 60. That brings the yield to maturity down to a still high 10.7 per cent, a bit lower than Ecuador's. And that is on significant volume, particularly for an issue that is not rated by the ratings agencies. The most recent numbers for turnover of the 2028s are for the second quarter of this year, during which $779m changed hands through bond dealers. The bid/ask spread is about 1 point, which indicates that dealers do not have much inventory, but is considerably lower than Ecuador's 2 to 3 points per trade. According to Mr Market, Iraq is a lot safer than Ecuador.

Also, weirdly, Iraq's currency has been steadily gaining on the dollar as the central bank manages an upward float on the billions flowing in from oil and US spending.

Since November 2004, when Iraq's creditors granted it relief of about 80 per cent of the net present value of its prewar debt, I have been optimistic about the long-term prospects for the country's bonds, even as the military, political, and especially humanitarian situation has worsened. Until 2011, cash debt service is minimal, about $160m annually. After then, principal repayments begin on the country's official debt.

But even that official debt continues to decline with successive stages of debt relief. Right now, there is a little over $56bn of outstanding government debt, down from $131bn before the 2004 settlements. Pieces are still being whittled away from that burden. Right now, Iraqi officials are negotiating with Chinese bureaucrats over consolidating and writing down old credits extended by state entities. The big prospective reductions should come from the various Gulf states, who hold a lot of defaulted paper. They have frozen settlement discussions to press the sectarian Shia-dominated Iraqi government into doing better by the country's Sunni minority. By the end of next year, Iraq's total external debt should be down to $32bn, or a little over 45 per cent of gross domestic product. There is little domestic debt. Presently, forex reserves with the central bank are about $18bn. There are alsolarge amounts of foreign currency in private hands within Iraq, and in the offshore accounts of Iraqi citizens.

Typically, countries come out of wars in a state of financial collapse, with worthless currencies and an unserviceable state debt burden. That will not be the case with Iraq. Also, there are large, easily produced, readily marketable known oil reserves, a much more visible path to prosperity than was evident in other postwar countries.

This is a long way from saying, as a ridiculous American CNBC television host did a few months ago, that "Iraq is booming". While Iraq's finances are not bad and getting better, the population, which is the base of the real economy, is in a far worse state than before the war. More than a quarter of the country's children suffer from malnutrition. The public distribution system for food rations is collapsing, a rather more immediate threat to the Iraqis than their government's failure to pass unenforceable laws. Most doctors have left the country, and the ho****als do not have most necessary supplies. The government has high cash balances thanks not only to high oil prices but also to its inability to administer the repair of vital public works, including water and electrical systems. There are 2m refugees outside the country, and possibly 2m within the country. The long-term hope for getting out of this disaster, when the war finally sputters down, is in the rapid development of the oil reserves and the reconstruction of what had been a fairly advanced infrastructure. That will be a capital-intensive process, and one that cannot be financed from internal resources. The $160m paid out every year now, and the modest principal repayment schedule that starts in a few years, is, in effect, a cheap call option premium payment on access to funds from international capital markets.

The Iraqis recognise this. Their ancestors did, after all, invent banking. For all the internal fighting, there is no serious disagreement among the political parties or sectarian groups about the need to maintain the country's international debt service on the terms agreed three years ago. The only real threat to the serviceability of the national debt would be a violent, non-consensual partition. Outside of Iraqi Kurdistan, it seems that support for a strong central government is growing. The governments of Iraq's neighbouring states have no interest in sectarian partition, which would only lead to questions about the legitimacy of their own borders.

The Iraqi civil war may have a violent peak soon. But the price of the country's bonds indicates there is hope for its longer-term prospects.

FT.com / Companies / Financial services - Iraq's bonds hint at chance of postwar recovery

Is the reval coming before the ist of the year or will it be a very long wait

I think gradual - just an opinion.