Thread: Archive News - Iraqi Dinar Think Tank - 28/03/10 - 21/06/10

Political risks to watch in Iraq

Iraq faces lengthy coalition talks after last month's parliamentary election, with the jury still out on whether the divided nation is heading for stability and reconstruction or renewed sectarian conflict.

The political horse-trading will be crucial in determining whether Iraq can capitalise on its great oil wealth, revive a moribund economy and recover from years of war and sanctions. Iraq, which has the world's third largest oil reserves, has signed contracts with energy majors such as Royal Dutch Shell and Lukoil, but needs to broaden investment to create jobs and prevent renewed insurgent activity.

Investors, understandably, are wary.

Iraq remains largely isolated from world financial markets. Only a few years ago, local banks were so cut off that the only way to transfer money across borders was in cash-stuffed bags. Today, Iraq has an extremely tight credit market. Only a few dozen companies trade on the local stock market. The Iraqi dinar is lightly traded.

Below are some of the major risks facing Iraq seven years after U.S. troops toppled Saddam Hussein.

HORSE-TRADING, POWER VACUUM

Because no single bloc won a majority in Iraq's 325-member parliament, coalition talks have begun.

It is not yet clear even who will get first shot at forming a government. The Iraqiya bloc led by former Prime Minister Iyad Allawi, a secular Shi'ite with wide support among Iraq's Sunni minority, took 91 seats, two more than Prime Minister Nuri al-Maliki's State of Law bloc, according to preliminary results.

Maliki, a Shi'ite who built his reputation on rescuing Iraq from civil war, has formally challenged those results.

The Iraqi National Alliance, a Shi'ite bloc which includes anti-American cleric Moqtada al-Sadr, took 70 seats, while a Kurdish alliance picked up 43. Sadr's faction, which wants U.S. troops to leave faster, is well-placed to join a new government.

Any prolonged failure to form a workable coalition could undermine security and create a dangerous power vacuum just as U.S. troops accelerate their departure.

U.S. President Barack Obama, focused on a growing conflict in Afghanistan, plans to cut U.S. troop numbers in Iraq to 50,000 by August ahead of a full pullout by the end of 2011.

What to watch:

-- Sectarian or political violence flares, as it did during the five months it took to form a government after 2005 parliamentary polls. While this may not derail oil investment already clinched, it could scare away potential investors in other sectors such as housing, industry and agriculture.

-- Parliament, which cannot function without a government, fails to pass investment legislation already delayed by years of political squabbling, sending a poor signal to firms interested in Iraq but worried about legal risks and an opaque bureaucracy.

A RETURN TO MAJOR VIOLENCE

Iraq is far less violent than when sectarian killing peaked in 2006-07. Maliki takes credit for security gains, but a U.S. troop rise and Sunni militia cooperation also played a big part.

Yet Sunni Islamist insurgents, who the government says are in cahoots with allies of Saddam's now-banned Baath party, still stage attacks. Since August, they have killed hundreds of people in suicide bombings at ministries and other state targets.

Political feuds, Sunni discontent or an attack on a holy site or a clerical leader could all spark renewed violence, as could any Israeli strike on Iran's nuclear facilities. Such an attack might prompt mostly dormant Shi'ite militias to retaliate against U.S. forces in Iraq. A bilateral security pact requires American troops to leave by end-2011, but it might be revised. Any major violence will push up prices on global oil markets, especially if it appears set to persist.

What to watch:

-- Attacks on oil facilities or staff. As Iraq takes steps to secure global investment, attacks on foreigners could derail plans to use foreign cash to rebuild the economy.

Such violence may affect investment unevenly. Since Iraq began to reopen its oil sector to foreign investment two years ago, state-owned Chinese firms have been the first to sign contracts. Chinese, Malaysian and Senegalese firms were the big winners in Iraq's most recent energy auction, suggesting they have a higher risk appetite than U.S. or European competitors.

-- Signs that U.S. forces are delaying or changing withdrawal plans. If security were to deteriorate markedly, the Obama administration might be forced to reconsider its plans despite pressing military commitments in Afghanistan.

Washington might reconfigure its remaining force structure to focus on unstable parts of northern Iraq, perhaps signalling readiness to keep troops deployed beyond the 2012 deadline.

-- Challenges for Iraqi security forces as they take over from U.S. troops. Local forces are vulnerable to infiltration and some key ministries are still politicised. Iraq is only slowly reequipping its military and still relies on American troops for air support, logistics and forensic investigation.

KURD-ARAB CONFLICT

Democracy in Iraq has yet to ease tensions between Arabs and minority Kurds, who have enjoyed virtual autonomy in their northern enclave for almost 20 years. Kurds suffered massacres in Saddam's era, but have gained unprecedented influence since 2003 and hope to reclaim areas they deem historically Kurdish.

Others in disputed areas complain Kurds have exploited their newfound prominence at the expenses of Arabs and Turkmen. At the heart of the impasse is Kirkuk, the northern province that sits on an estimated 4 percent of world oil reserves. [ID:nLD***L0ON] The feud has destabilised areas dotting the border of Iraqi Kurdistan and given a foothold to al Qaeda insurgents.

What to watch: -- Confrontation between the Iraqi army and Kurdish Peshmerga forces. A U.S. initiative is promoting cooperation between them, but new joint patrols have not erased rivalry.

-- Any breakthrough on oil. Oil officials in Kurdistan, which estimates its oil reserves at 45 billion barrels, have signed development deals with foreign firms -- contracts which the Iraqi Oil Ministry labels illegal.

-- Any resumed exports from Kurdish fields, halted because of that dispute, would be a positive sign. Officials on both sides hint at detente, but this has yet to materialise.

-- Passage of oil legislation. A package of proposed laws to set a new framework for oil investment has been held up for years because of the Kurd-Arab feud.

The delay has not deterred oil majors from signing deals, but potential investors in other sectors view the legislation as an indicator of Iraq's stability and friendliness to business.

A NEW AUTHORITARIANISM

Iraq's democratic experiment is important in a region where leaders often lose power only in a "coffin or coup", but the country is still trying to define its future as it emerges from decades of military rule and, more recently, a bloody civil war.

Many Iraqis believe their country needs a strong ruler. Western powers would be unlikely to stand by if a military coup installed a leader hostile to their interests.

What to watch:

-- Any constitutional changes that would allow leaders to amass power or remain in office, raising investor concerns about the continuity of Iraq's legal and regulatory environment.

-- Re-nationalisation. Saddam threw global oil firms out of Iraq in the 1970s when he nationalised the oil industry.

http://www.alertnet.org/thenews/newsdesk/LDE62T0MR.htm

BP spends $500 million in Iraq on Schlumberger, Weatherford

BP Plc, which vies with Royal Dutch Shell Plc as Europe’s biggest oil company, awarded $500 million of oilfield services contracts for the Rumaila field in Iraq, holder of the world’s third-largest reserves.

A partnership between Schlumberger Ltd. and the state-run Iraqi Drilling Co. will set up three rigs. China’s Daqing Drilling also received a contract for three rigs, and Weatherford International Ltd. will construct one rig, BP said today in a press release in London. About 70 wells will be drilled at Rumaila this year, it said.

BP is moving ahead with plans to ramp up output in Iraq even as the results of this month’s election are being contested. While Iraq hasn’t yet agreed on a law for distributing oil revenues, BP E.xecutive Andy Inglis has said that Rumaila, run in partnership with China National Petroleum Corp., could become the second-largest producing field in the world by 2015.

“We are pleased to announce these contracts at competitive market rates and meeting the highest technical specifications,” Michael Townshend, president of BP Iraq, said in the statement. “We are confident that all of the companies will bring the operational and safety standards which will help us achieve our production targets in Iraq for 2010 and beyond.”

BP closed little changed at 623.40 pence in London today. The stock has gained 32 percent in the past year.

Two more contracts worth about $100 million in total have been awarded to Centrilift and Al-Khorayef Petroleum for electrical submersible pumps, BP said.

Iraqi Prime Minister Nouri al-Maliki this week appealed the results of the March 7 election after former Prime Minister Ayad Allawi finished with 91 seats to al-Maliki’s 89 in the 325-seat parliament. After the December 2005 elections, it took six months for parties to build a coalition with a 163-majority and form a government.

Iraq has been seeking foreign investment to develop its crude oil facilities after the damage inflicted by seven years of war and earlier sanctions. Production is expected to grow under 10 contracts the government has signed and an upgrade of oil export facilities, according to Iraqi Oil Minister Hussain al-Shahristani.

Iraq produces 2.4 million barrels of crude oil a day and exports 1.9 million. It is among the top 10 exporters of crude to the U.S., sending more than 200,000 barrels every day.

http://www.chron.com/disp/story.mpl/...y/6937527.html

Iraq oil output goals unlikely to be met - report

(Reuters) - Iraq's ambitious plans to boost crude oil production to as much as 12 million barrels per day in coming years is not likely to be met due to a myriad of challenges, IHS Cambridge Energy Research Associates said in a report on Wednesday. These "highly ambitious plans ... are unlikely to be fully realized given political, security, operational and infrastructure challenges," noted IHS CERA, an energy sector advisory firm based in Cambridge, Massachusetts.

"Though Iraq is unlikely to meet its 'very stretch target" of elevating its capacity to 12 mbd in six to seven years, the expansion of its production capacity still represents a significant increase with strong implications for OPEC and the regional balance," the report added.

"Achieving levels around half that in the next decade would be more likely and would still constitute 'a significant expansion,'" the report emphasized.

Earlier this month, Iraqi Oil Minister Hussain al-Shahristani indicated Baghdad would consider OPEC output curbs that may keep supply well short of ambitious capacity targets. The comments raised questions over his country's planned energy expansion, analysts believe. Iraq -- which is not currently a party to the production quota system of the Organization of Petroleum Exporting Countries -- produces around 2.5 million bpd now. IHS CERA's current outlook for Iraq is reaching an output level of 4.3 million bpd in 2015 and 6.5 million bpd in 2020, which it said were "still big growth numbers."

Iraq's rich oil resources have suffered from underinvestment and underdevelopment for decades, but the new expansion timetable dwarfs the most rapid buildups recently seen in places such as Russia and Saudi Arabia, said Bhushan Bahree, IHS CERA's Senior Middle East Director.

"The political, security, operational and infrastructure challenges in the country, along with a likely shortage of skilled personnel, are likely to hamper progress towards such an unprecedented achievement," Bahree said.

Iraq's recent elections and current efforts to form a new government could exac.erbate existing sectarian and other tensions in the country and it is unclear what approach a new government could take regarding oil contracts, the report said. Security will also remain a concern as foreign workers and oil company operations expand in areas that have been prone to violence in the past, the report says, it added. Iraq's plans for providing a "complex network of capital-intensive infrastructure" like ports, roads and power crucial for operations in synchronization with developing oil fields are not known -- a major potential bottleneck, it said. Citing an example, he said, it took key OPEC producer Saudi Arabia, which has significant security and infrastructure advantages over Iraq, between four and five years to expand its net output capacity by some 2 million barrels per day.

"Iraq will certainly be challenged to match this pace, much less exceed it," Bahree added.

http://uk.reuters.com/article/idUKN3...*Channel=11700

Iraq: The Wrong Type of Sand

On the very long and expensive list of materials that the American military had to ship to Iraq since 2003, and is now shipping out many of them again, one might not have expected to find sand.

Yet there it is.

This might seem strange for a country that is 10 parts sand to 1 part water, 1 part oil and 0.1 parts electricity. Counterintuitive. Absurd, even.

However, American commanders overseeing the drawdown of forces and equipment currently under way from Iraq confirm that Iraqi sand was deemed inadequate for the blast walls that have become perhaps the defining visual feature of post-invasion Baghdad and other cities, stretching for mile upon mile around government ministries, airports, military bases and other important buildings.

So, at no little cost, boatloads of more resilient desert had to be floated in from other countries — namely the United Arab Emirates and Qatar. And not just for blast walls.

“When you start to ask why does it cost what it cost for this war, you are like: ‘Hey, when we build a wall in the United States it only costs you about $1,500 dollars, why are you paying $3,500 or $5,000?’ ” said Maj. Gen. Phillip E. McGhee, director of resource management for the U.S. Third Army during an interview at Camp Arifjan last month. “And so we were going, ‘Well, that’s a great question.’”

“And then you look to see that based on the specs that we have for blast walls, it takes a particular grain and quality of sand. That sand is not in Iraq, so you have to bring the sand in. So that sand actually has to get on barges down in U.A.E., down in Qatar, has to come all the way up here, gets processed through there. You can either do one of two things, you can make the concrete, or you can just bring the sand up into Iraq.”

It’s the same story on bottled water for troops in Afghanistan, he pointed out, because of the lack of capacity to bottle water locally. The water has to be shipped into Pakistan via the port of Karachi and then spends 17 days on the road to Afghanistan. “We pay 45 cents for a bottle of water in Iraq,” he said. “We pay $2.50 for that same bottle of water in Afghanistan.”

That water was also imported to Iraq – the Land of the Two Rivers – after the 2003 invasion is old news to anyone who has seen the crates of Kuwaiti and Saudi mineral water in Iraqi shops.

Even gasoline had to be imported to the nation sitting atop some of the world’s biggest oil reserves, because of the perilous state of security, and Iraq’s oil industry in the years immediately following the war.

But sand?

General McGhee provides the engineering rationale: “This isn’t a wall that you would just put on an interstate some place. These are blast walls, so they have to be reinforced steel. They are real specific about what type of concrete, and the strength of the concrete. And the sand that is up there did not meet the specs for those blast walls, so you have to find the sand elsewhere.”

His colleague Brig. Gen. John O’Connor, the Third Army’s director of logistics, said the problem went beyond vertical concrete slabs.
“The same goes for laying in airstrips, the same goes for laying down roads,” he said. “It has to meet certain standards.

“Our engineers, they go in and do all of the tests, they sample the soil and the sand in order to make a certain composition, so that it will sustain the weight and requirements of whatever it is that we have to do, whether it is put a wall up to protect a soldier in his living quarters, to laying a runway down for an aircraft to land on, or to traverse using vehicles. There are certain regulations that say it has to meet a requirement of protection.”

Whatever the cost of manufacturing the blast walls in the first place, the planners say there is now little point in moving them to Afghanistan or elsewhere, because of the prohibitive transportation costs.

A 15-ton blast wall, said General McGhee, costs around $3,500 to build. But to move it elsewhere in the region “could cost us, transportation-wise, about $15,000,” making it probably more cost-effective to leave it in place and buy another one elsewhere. The same goes for shipping containers, he said.

“Depending what port you move that same container out of, it could cost you $3,000 or it could cost you $15,000,” he said.

“Everyday we have to make a determination of what port you are going to move it out of, and by the way, do you move it out by air? Air is going to be much more expensive to do.

“That would depend on where the war fighter needs it, and when he needs that piece of equipment. If it can be 30 days, then we will probably go ahead and put it up either by rail or by truck, and then put it up by ship and get it up there. If it has got to be there in the next 24-48 hours, then it is going to have to go by air. But when you do that you really quadruple the amount of cost to get that piece of equipment in there.”

http://atwar.blogs.nytimes.com/2010/...-type-of-sand/

Lebanon as a model for Iraq
As post-election horse-trading looms, we might look to Lebanon to understand the potential direction for politics in the new Iraq

Following the Iraqi elections earlier this month, the foreign secretary David Miliband announced that "the Iraqi people, voting in their millions, have made clear they want an effective, accountable and inclusive government".

Yet initial analysis of the elections has been confined to the over-simplistic dichotomy of failure (Fawaz Gerges's view) or success (Ranj Alaaldin's view).

However, there is another direction that Iraqi politics might take – and for that we should be looking at Beirut in order to understand Baghdad.

Lebanon is an example of institutionalised sectarian power sharing, where the current government of "national unity" includes both pro-Syria Hezbollah ministers and anti-Syrian March 14 ministers.

Putting all parties under one tent is a laborious process. Following the Iraqi national elections in December 2005 it took 156 days for a government to be formed, and roughly the same amount of time following last year's Lebanese elections.

In Lebanon, the elections led to a political merry-go-round where the various key players engaged in endless rounds of meetings between themselves and their respective external patrons. For Lebanon, major questions concerned the balance of power in the country and in particular the assignments of seats within the cabinet itself.

In Iraq, despite the constitution denying a sectarian quota system or identity-based institutionalised access to power, Nadim Shehadi of Chatham House is clear that "Iraq is sharing the Lebanese model: power sharing with a local flavour".

To speak of Lebanon as a "model" is not to say that this is a positive idea or even a matter of choice. Examining this model is also not a matter of exact political science that seeks a one-size-fits-all framework to force on to Iraq. Instead, the history and the dynamics of Lebanon's political system should act as a touchstone to understanding the fledging body-politic emerging in Iraq.

Both Lebanon and Iraq are weak states that have experienced the collapse of central institutions and have a history of internal conflict and the prominent involvement of external powers.

Syria and Iran in particular are old hands at operating within Lebanon, a country regularly referred to as "a house of many mansions", or "paradise divided". In Iraq, Syria has used its hosting of the largest expatriate Iraqi community (including former regime elements and tribal connections) to ensure that it has a continued role influencing events. Iran, meanwhile, has had a direct hand in the formation of many of the previously exiled groups that now make up the government.

There are numerous complex connections between the Iran and sub-state groups in Iraq. While the Mahdi army has attempted a welfare-and-guns approach to controlling Sadr city similar to that of Hezbollah in the south of Beirut, the Supreme Islamic Council of Iraq (SICI) has looked to go further and create a semi-autonomous super-region incorporating all nine provinces of the oil-rich south.

Iraq's largest non-state militia is the Kurdish Peshmerga, which – unlike Hezbollah – has been haphazardly incorporated into the Iraqi security forces. Yet a recent Rand report provided a reminder that the Peshmerga are "a capable army by regional standards, and their heavy equipment holdings could grow".

The most important comparison with Lebanon, though, is the inability of politicians to deliver. The massive investment in top-heavy institutions of democracy in Iraq, which are connected to a federated and weak state system, has created instant political elites whose original ties and lineage may be tracked back through sectarian/ethnic ties, but whose real interests increasingly lie in their manoeuvrings in the murky waters of court politics.

In a country where 90% of government income is from oil, this has led to the "new Iraq" quickly establishing itself on the bottom rungs of Transparency International's corruption index. The emergence of the Kurdish Goran ("change") movement and the decrease in voter turnout from 76% in 2005 to 62% today are just two symptoms of the increasing dissatisfaction with the mainstream parties.

The International Crisis Group's Iraq expert, Joost Hiltermann, has demonstrated how despite huge levels of politicisation around the issue of Kirkurk, where every election "turns into a census and quasi-referendum rolled into one", Iraq's politicians have been unable to make a dent into providing significant services for the city. Hiltermann goes on to remind people that in Kirkuk "there are urgent needs for the creation of modern infrastructure, including schools, hospitals, roads, power plants and a service-based economic system".

The key question is therefore how suitable such a political structure is for dealing with the massive issues faced by Iraq today. The huge variety of horse-trading in upcoming coalition building may leave little practical possibility for consistency in a future government, meaning that dealing effectively with issues such as the oil law, national reconciliation and federal powers could be virtually impossible.

http://www.guardian.co.uk/commentisf...-lebanon-model

Iraq oil law a priority, PM hopeful Allawi says
(Reuters) - Former Iraqi Prime Minister Iyad Allawi said on Wednesday he would honour deals signed with global oil majors in recent months and would move quickly to pass a new hydrocarbons law if his bloc forms the government.

But Allawi, whose cross-sectarian Iraqiya bloc won the greatest number of seats in Iraq's March 7 parliamentary election, said the deals might need some minor adjustments and he wanted to see more competition in Iraq's energy sector.

"We are going to honour all contracts. We are going to honour all agreements because we believe this is very important," Allawi told Reuters in an interview.

Iraq awarded contracts to oil majors to refurbish its dilapidated oil fields after years of neglect and war with the goal of expanding production capacity to 12 million barrels per day (bpd) in about six years from about 2.5 mln bpd now. The contracts could catapult Iraq into the top ranks of global producers.

Companies involved in the deals include U.S. giant Exxon Mobil; Royal Dutch Shell, Europe's largest oil company; Russia's Lukoil; China's CNPC.

Allawi said he would move quickly to put a long-delayed hydrocarbons law before parliament to govern the industry.

"It will definitely be a priority," Allawi said. "It won't take us long."

http://www.reuters.com/article/idUSL...pe=marketsNews

CBI concludes DIFC Week 153 million dollars

Close the Iraqi Central Bank on Thursday The fifth session entered its third fiscal ten for buying and selling foreign currency and the dollar up a simple The level of sales of the dollar had hit 153 million and 947 thousand dollars after dropping its previous investigators 148 مليون and 695 thousand dollars and a stable exchange rate was 1170 dinars per dollar.

The Information Office of the Bank's bulletin received ( News Agency Iraqi media / conscious ) A copy of the grand total for sales of the bank مليون ranged between 6 and 580 thousand dollars in cash transactions for cash at a bank shot for a stable exchange rate was 1183 dinars per dollar, including a $ 13 bank fee dinars per dollar.

The amounts transferred out of the country $ 147 million and 367 الف Dollars in cash and bank shot at a stable conversion reached 1173 dinars per dollar, including the World Bank commission of $ 3 dinars per dollar.
Did not make the 13 banks participating in the auction of any offers to buy Dollar, note that the Central Bank of Iraq Itqdy commission of $ (13) dinars per dollar with a discount (8) dinars per Short of the amount purchased.

The central bank held five meetings during the Iraqi DIFC Week for the sale and purchase of foreign currencies and the dollar

http://al-iraqnews.net/new/iconomi/60809.html

Electoral Commission: Monday next deadline for receipt of appeals

Announced the official spokesman for Iraq's election commission Qasim Abboudi, next Monday will be the last date for receipt of appeals in the outcome of parliamentary elections held in the seventh month of March.

Aboudi said in a press statement today Talga "The Electoral Commission has not received any official letter for the six candidates winning elections, declared by the Authority Accountability and justice. "Some of the media has reported the names of several members of the Iraqi list They Mojtthon by the body.

http://al-iraqnews.net/new/siaysiah/60862.html

Meeting of the lists Kurdish Saturday to break a unified stance on the formation of next government

The Presidency of the Kurdistan region of Iraq, Thursday, it will host the meeting next Saturday with representatives of the Kurdish lists winners in the parliamentary elections to unite the Kurds in the forthcoming negotiations to form a government, expected the meeting would yield the formation of a Kurdish delegation of all the lists to negotiate this matter.

The Chief of Staff Fuad Hussein, the Kurdistan region in an interview with "Alsumaria News", "President Massoud Barzani will meet with leaders of the Kurdish lists of winning elections with the aim to reach an agreement of a unified Kurdish bases form the next government in Iraq," stressing that it "will not be announced a joint venture between them, but will be unified positions on sensitive issues of concern to the interest of the Kurdish people. "

The lists of the Kurdistan Alliance and change, and the Islamic Union of Kurdistan and the Islamic group won parliamentary elections in Iraq Kmthleein about the Kurds and got 57 seats.

Hussein pointed out that "the majority of axes meeting will focus on two main points to define the general to negotiate with other blocs to form the next government, as well as setting priorities for the Kurdish alliance and vision of the future."

He expected the President of the Court of the Territory to "leave the meeting several resolutions of the most important of the names of the Kurdish delegation consolidated Sevaod blocks on the other alliances," pointing out that "real negotiations to draw up frameworks for future alliances has not started yet."

The winning lists in the elections, a coalition of law and the Iraqi List and the National Coalition and the Kurdistan Alliance, held several meetings to discuss the mechanisms of formation of the Iraqi government depends on the term partnership.

http://www.alsumarianews.com/ar/1/48...4;ة.html

Iranian Foreign Ministry: Do not interfere in the internal affairs of Iraq!

Iran on Thursday noted that "respect for sovereignty and non-interference in internal affairs and the development of bilateral cooperation based on mutual interests المشترکة, is one of the established principles of foreign policy of the Islamic Republic of Iran with other countries, especially neighboring countries", in replying to the accusations launched by the Iraqi political blocs recently against the authorities in Tehran by jumping on the national will and the political process back to square lineups sectarian and partisan.

Was quoted by official news agency (IRNA) the spokesman of the Ministry of emerging Iranian Ramin Mhmanbrst noted that "some political currents يمکنها that do not reach their targets via the mechanisms of electoral democracy, is trying, by raising suspicion of outside intervention to create a climate of mistrust and tension towards the other competitors and parties the political. " "The coalition of parties and political trends in Iraq for the next تشکيل الحکومة in Iraq is an internal issue, it is obvious that the parties do so to their goals, on the basis of their election programs without regard to external considerations," according to IRNA.

http://www.uragency.net/index.php?aa=news&id22=6078