Iraq looks to local and foreign investment to build its economy

Iraq looks to local and foreign investment to

build its economy

Nation’s stock exchange runs unlike any other

BY CRAIG & MARC KIELBURGER, SPECIAL TO THE SUNFEBRUARY 22, 2010

Trading floors are known for being volatile. Those who think they’re tough should try navigating the Iraq Stock Exchange.

On Jan. 12, the Tuesday trading session was cancelled. Intelligence reports pointed to a planned suicide attack somewhere in the capital. As a precaution, authorities ordered a strict curfew on Baghdad.

“The stock exchange has called off its session on Tuesday because of the inability of its employees to reach their workplace,” a source told the Aswat al-Iraq news agency in a bit of an understatement.

And New York City investors thought midtown traffic was inconvenient.

This isn’t the first time Shwan Taha, CEO of Rabee Securities, one of Baghdad’s oldest and largest brokerage firms, has seen trading suspended. Of course, it’s nothing compared to 2006 when it lasted for months during what the United Nations called a “civil warlike situation.”

Today, Taha sees that relatively more security in the streets means the same for his investments.

“On the exchange, the largest sector is by far the banks,” he explains while e-mailing stock reports over a problematic Internet connection. On this day, the Bank of Baghdad closed at 1.98 Iraqi Dinars -less than a penny US.

“Then there is the tourism sector,” he says. “But, that’s really more real estate when you get into it.”

Taha knows the intricacies of this market. After all, he has traded shares in Baghdad since its first exchange opened in 1992. Back then it was the Baghdad Stock Exchange. Under the rule of Saddam Hussein, it provided a prosperous living.

“It operated well until the invasion at which point it was closed. Then squatters moved in for a year,” says Taha. “The U.S. tried to reopen it. But, reopening was a fanciful thing. They couldn’t manage it. They were incompetent.”

Without a formal system of trading, brokerages set about creating their own private exchange. In June 2004, the Iraq Stock Exchange opened with 15 listings. Today it has about 90 companies and recently moved to electronic trading.

“It’s the same system that the NASDAQ uses,” says Taha. Although, he acknowledges it can’t rely on the country’s battered power grid that leaves Baghdad in the dark unexpectedly and for long periods of time. “You have to factor in that the computer system and servers can’t go off. So, the exchange runs on generators. Trading only happens for two hours a day.”

As a backup, the old system remains in place -white-boards and dry-erase markers. Throughout the exchange building, a former restaurant in the heart of Baghdad, hanging boards represent each company listed. Traders, mobile phones pressed to their ears, crowd these boards, writing and erasing notes to buy and sell.

It’s a definite skill that requires a fast hand and a shrewd eye. Now though, investors can verify their trades on the spot rather than waiting two weeks for certificates. That’s something Taha hopes will bring in new investors.

“We definitely cater towards foreign investment. We’ve seen an uptick, especially frontier funds,” he says. “But, the global custodians of the economy have not been to Iraq yet.”

Iraq is still tiny compared to established markets in London and New York. By the end of 2008, the ISX had traded only $270 million compared to the NYSE’s $16.7 trillion. But, in spite of the non-market volatility, many hope local and foreign investment will boost the nation’s economy.

On the last day of January, despite the delay earlier in the month, the index was up 1.16 per cent. As Taha predicted, the banks dominated the trading. But, Tourist Village of Mosul (HTVM) represented one of the biggest gains, up 10 per cent on the day.

For people like Taha, this only proves there’s money to be made at the ISX. Of course, the investment may be a little more high-risk than usual.

Craig and Marc Kielburger co-founded Free the Children. The goal of the organization is to free children from poverty and exploitation through education.

© Copyright (c) The Vancouver Sun

Iraq’s Oil Industry Poised to Re-enter World Stage

February 15, 2010
Special Report

Iraq’s Oil Industry Poised to Re-enter World Stage

By TOM HUNDLEY

DUBAI – When coordinated bomb blasts killed more than 120 people in Baghdad in December, days before a scheduled auction of Iraqi oil field development rights, the carnage raised fears that major oil companies might be deterred from showing up for the bidding.

An earlier auction attempt, in June, the first since Iraq nationalized its oil production in 1972, had already fizzled when the majors balked at Iraq’s tough bargaining stance.
Yet, amid extraordinarily tight security, they did show up: and more important, they were in a mood to gamble. The two-day event turned into the biggest oil field auction in history.

“The terrorists tried to send a message to the oil companies through the bombings,” the oil minister, Hussain al-Shahristani, declared on Iraqi television. “But this message was not delivered.”  After three decades of decline, sanctions and war, Iraq’s oil industry now appears poised to recover its place among the world’s leading producers – and perhaps even to challenge Saudi Arabia for the top spot by the end of the decade.

If all the companies participating in the industry’s revival “are reasonably successful in delivering on the commitments we’ve made, it is quite likely we will see Iraq increase its production to around 10 million barrels per day within about 10 years,” Tony Hayward, chief executive of BP, told the World Economic Forum at Davos, Switzerland, last month. Iraq now produces about 2.4 million barrels a day and ranks below the top dozen producers.

Saudi Arabia produced about 10.7 million barrels a day in 2008, but reduced output slightly in 2009. It has a capacity of about 12.5 million barrels a day, but could increase that to 15 million.

The Saudis, with 266 billion barrels in proven reserves, have far more oil than anyone. Iraq ranks fourth, behind Canada and Iran, with 115 billion proven barrels: but that figure dates from the 1970s. Most oil experts believe that, with new technology, it has a lot more oil to be found and that these reserves will not be particularly difficult to develop.

Absent unforeseen political events, “the resources there are relatively easy to bring on-stream,” Mr. Hayward said.  That, industry analysts say, is the main reason that oil companies decided to take their chances and meet Iraq’s asking price.

Royal Dutch Shell and the state-run company Petronas in Malaysia were among the biggest apparent winners. They will jointly develop the giant Majnoon field, with proven reserves of 12.5 billion barrels and are expected to increase daily output to 1.8 million barrels, from 46,000 barrels now. Lukoil, of Russia, and Statoil, of Norway, will develop the similarly sized West Qurna 2, with reserves of 13 billion barrels. Other companies that came away with major prizes included Gazprom, of Russia, China National Petroleum, Sonangol, of Angola, and Total, of France.

The successful bidders will sign service contracts that will pay them a fee ranging from $5.00 to $1.15 a barrel for each barrel they produce above an agreed minimum.
U.S. companies went home from the December auction empty-handed, although they were somewhat more successful in the June bidding, when Exxon Mobil, after protracted negotiations, eventually won the right to develop the West Qurna 1 field in a partnership with Shell. The only other U.S. company that will be producing oil in Iraq is Occidental Petroleum, as junior partner in a deal with Eni, of Italy, and Korea Gas, of South Korea, to develop the Zubair field.

Still, in the oil-services sector, U.S companies are likely to do better. The success of the auction in December “implies a huge amount of service activity over the next two or three years,” Andrew Gould, chief executive of Schlumberger, the oil field services giant, said during a conference call from Houston.

Halliburton, Schlumberger and Bechtel are among U.S. companies in line to win contracts worth billions of dollars to repair pipelines, rebuild terminals and upgrade other infrastructure so that Iraq will be able to bring its crude oil to market, industry analysts say.

A revitalized Iraqi oil sector would challenge the pecking order in OPEC and weaken Saudi dominance as the world’s “swing producer” – the single mega-producer that in the past has been able to tweak the global price of oil by adjusting the spigot of its own production.

It would also put Iraq on course to pass its perennial rival Iran as the Gulf’s second-largest producer – a development that would imply a significant realignment of power in the region. While Iran would remain the dominant power in the Gulf, even if its oil production slipped behind Iraq’s, Tehran could feel an even greater urgency to develop its nuclear capability in order to maintain that dominance.

“A lot of things have to happen before Iraq gets up to six or seven million barrels a day and passes Iran, so this won’t have an immediate impact” on Iran’s nuclear strategy, said Christian Koch, a security expert at the Gulf Research Center, in Dubai. “But over the long term, it will certainly be a factor.”

Still, as Mr. Koch noted, Iraq has a long way to go before it can cash in on the bounty of the auction in December. Security remains a major worry, and the weak and highly factionalized central government will have to find some way to deliver stability and continuity.

One big concern for the oil companies is the lack of a comprehensive national law to guarantee that contracts will be honored by future governments. Already, some opposition lawmakers have challenged the legality of those signed by Mr. Shahristani.
Another problem is the dispute over control of reserves in the semiautonomous Kurdish region. Baghdad says contracts signed by more than two dozen foreign oil companies with the Kurdistan Regional Government are illegal.

The national elections due to be held in March will be watched carefully by the oil industry.  Handing over so much control of the nation’s oil wealth to foreign companies is something that “runs against the grain” of many Iraqis, warned Tariq Shafiq, a founding director in the 1960s of the Iraqi National Oil Co.  Mr. Shafiq, writing in January in The Iraq Oil Report, questioned whether the next government would be so eager to court foreign oil companies.

March elections offer Iraq chance to move beyond conflict to development

March elections offer Iraq chance to move beyond conflict to development, Ban says

12 February 2010 – Next month’s elections offer Iraqis the chance to move beyond the bloody conflict of the past seven years towards long-term political and economic stability, but armed groups may repeat their recent high-profile attacks to disrupt the process, Secretary-General Ban Ki-moon warns in his latest report on the country.

“I appeal to the people of Iraq not to be deterred, in the face of these and other criminal acts, from exercising their democratic rights,” he says, citing among other attacks the coordinated series of suicide bombings in Baghdad in December in which scores of civilians were killed and injured immediately after the successful adoption of the electoral law.

“I also urge the Government of Iraq and its security forces to redouble efforts in the lead-up to the elections to ensure that the elections are as peaceful as possible,” he adds, stressing that every effort must be made to ensure that the poll is broadly participatory and as inclusive as possible.
“A credible election process will greatly contribute to national reconciliation and give Iraqi leaders a new impetus to work together in a spirit of national unity to rebuild their country after years of conflict. It will also serve to strengthen Iraq’s sovereignty and independence at this key juncture in Iraq’s history as the United States prepares to draw down its military presence.”

Mr. Ban pledges the full support of the UN Assistance Mission in Iraq (UNAMI), which has already helped in three previous polls, for the success of the 7 March elections in providing strong technical assistance to the Independent High Electoral Commission and helping to ensure that the results are widely accepted by the Iraqi people.

Referring to the controversy over the possible disqualification of hundreds of candidates considered to have been closely linked to the Baath party of ousted, and later hanged, President Saddam Hussein, he calls for a transparent and non-discriminatory review, and appeals to all sided to use the mechanisms in place to submit complaints and abide by the final results once they are certified by the Federal Supreme Court.

“I also hope that, once the new government is formed, the focus will shift gradually to accelerating the country’s reconstruction and development,” he writes, calling on those newly elected to resolve political and constitutional matters that could hinder Iraq’s long-term political and economic stability, by adopting a viable revenue-sharing arrangement, a hydrocarbon law and settling the issue of disputed territories between the regions.

“In this regard, the Iraqi people will expect to see greater efficiency, accountability and transparency on the part of their elected officials. If ordinary Iraqis witness an improvement in their daily lives, they will begin to feel that their votes made a difference,” he says, highlighting the support of the entire UN system for a steady shift of focus from humanitarian response to longer-term development.

He notes that 18.9 million voters have been allocated to some 50,000 polling stations in an election which will see 6,600 candidates nominated from 86 political entities or coalitions. The UN Office for Project Services (UNOPS) has funded an initiative to train over 29,000 domestic observers to monitor the polls.

UNAMI has helped develop key procedures for a range of polling and counting processes, including those for regular polling and counting in polling stations on election day, absentee voting for internally displaced persons (IDPs) registered to vote for their governorate of origin, and special voting using either the voter list or a conditional ballot for several categories of voters unable to cast ballots in regular polling stations on election day.

UNAMI electoral advisers have also trained Electoral Commission staff on best practices, and this staff will now train 360 governorate trainers over a two-week period. This will be followed by a cascade training programme that will ultimately ensure that approximately 300,000 polling station staff are able to conduct polling and counting processes.  “UNAMI is supporting the Electoral Commission in developing a robust and timely complaints mechanism to ensure that the credibility of the results is not eroded by a delay in the adjudication of complaints,” Mr. Ban adds.

Reviewing the past three months since his last report, Mr. Ban cites continuing ethnic political disagreements in the Ninewa Governorate between Kurds, Arabs and others as “a matter of concern,” while noting the agreement of the Government of Iraq and the Kurdistan Regional Government set up joint security structures in Kirkuk, Ninewa and Diyala to ease tensions.
He calls on both governments to protect the rights of minorities and end forced displacement of minorities. “During the past year, hundreds of civilians have reportedly been killed in attacks that have targeted the Christian, Shabak, Turkmen and Yazidi communities,” he writes.

Among humanitarian priorities for the coming year, he includes the impact of drought, mine action, protection for IDPs, refugees and returnees, and supporting critical social safety nets.  “The protection of civilians, particularly women, children and minority groups, remains a serious concern, as do the ongoing constraints due to lack of access and security that continue to hinder the ability of humanitarian organizations to effectively assess and respond to unmet needs,” he says. “I again thank the donor community for its support in addressing humanitarian issues throughout this period and encourage continued engagement.”

News Tracker: past stories on this issue

Source: United Nations Press Release

Al Maliki: Chaos in Iraq has come to an end

Friday, February 12, 2010 08:33 GMT

Iraqi Prime Minister Nuri Al Maliki held a meeting with dignitaries from Al Shaab District in the presence of Cabinet spokesman Ali Al Dabbagh.  Al Maliki stated that chaos has come to an end and stressed that the State, the law, the Army and the Police are all today in service of the Iraqi people.

Iraqi Prime Minister stressed the necessity to support the government and help the nation through elections.  The country is still targeted; Al Maliki added urging all Iraqis to cast their ballot while confirming the people’s attachment to national principles.

Iraq says can be top global oil producer in 6-7 years

REUTERS

Iraq says can be top global oil producer in 6-7 years

Sat, Jan 30 2010

BAGHDAD (Reuters) – Iraqi Oil Minister Hussain al-Shahristani said on Saturday he expected Iraq to become the world’s top oil producer in six to seven years, and that OPEC should take into account Iraq’s need to rebuild its economy.  Emerging from the shadow of war and keen to generate petrodollars to rebuild, Baghdad looks set to lift capacity to 12 million barrels per day in six or seven years, strengthening its hand for future negotiations on output quotas with OPEC.

“We can’t find a reason to prevent Iraqi production becoming higher than any other OPEC state or even states outside OPEC. We expect that to happen in the next six to seven years with coordination and agreement with other OPEC producers,” he said.
Iraq has signed a series of oilfield development deals with global oil firms — which bid on prime fields at two energy auctions last year — in a nation with the world’s third largest crude reserves, emerging from years of conflict and sanctions.

Unlike OPEC’s 11 other members, Baghdad is not subject to the output targets the group uses to set supply levels. OPEC exempted Iraq in the 1990s, when it was under sanctions.

“Iraq has been deprived of having a fair export level over the last years, during which we were not able to produce or export oil while other states got benefit from this and were able to export at higher levels,” Shahristani told reporters.  “OPEC should put into consideration Iraq’s need for oil revenues to rebuild its economy and country. Iraq has a definite need for these revenues.”

Iraq said last week it expected to present to OPEC partners in 2011 ideas for guidelines on new quotas when Baghdad’s plans to boost production capacity take shape.
The OPEC oil producers group is likely to try to get Iraq to curb output rather than pump all its extra capacity onto the market, analysts say.  “We are not interested to flood the market with oil. Our future policy is to get higher revenues for Iraq rather than higher production and flooding the market,” Shahristani said.

(Reporting by Ahmed Rasheed; Writing by Jack Kimball; Editing by William Hardy)

© Thomson Reuters 2010. All rights reserved.

Use of US dollar to be eliminated in Iraq

By 13th Sustainment Command (Expeditionary) Public Affairs
Jan 30, 2010 – 5:44:41 PM

Iraqi dinar to protect Soldiers, stimulate local economy

Pfc. Scott A. LeBert, cashier with the 368th Finance Management Company, out of Wichita, Kan., 36th Sustainment Brigade, 13th Sustainment Command (Expeditionary), and a Lake Charles, La., native, assists two Soldiers with a transaction Jan. 27 at the finance office at Contingency Operating Location Basra, Iraq. (U.S. Army photo by: Pfc. Lisa A. Cope)

CONTINGENCY OPERATING LOCATION BASRA, Iraq – United States currency may soon become difficult to find in Iraq as part of an effort to protect Soldiers and increase the value of the Iraqi dinar.

Sgt. Brittany A. Raimer, a dispersing manager with the 368th Finance Management Company, out of Wichita, Kan., 36th Sustainment Brigade, 13th Sustainment Command (Expeditionary), said eliminating the use of U.S. currency on the battlefield will help to stimulate the economy of Iraq.

“One of the main focuses of finance is to ultimately eliminate U.S. currency from the battlefield,” said Raimer, a Lake Charles, La., native. “Our government is implementing the use of the Iraqi dinar, to both undermine the dependency the Iraqi nationals have on American currency and to back the Dinar, greatly increasing its weight on the market.”

The use of electronic fund transfers to pay vendors and contractors, and urging service members to rely on the Eagle Cash Card, rather than cash, are two major changes that have been implemented in Iraq to eliminate the use of cash, said Raimer.

“The Eagle Cash Card enables personnel to have a direct link to the bank account without the hassle of hard cash,” said Raimer. “The stored value card has been instrumental in effectively moving toward a cashless battlefield.”

Sgt. Toni M. Guillery, a dispersing agent with the 368th FM Co., and a Lake Charles, La., native, said the Eagle Cash Card is designed to help prevent service members from losing money or being robbed while in country.

“Carrying a single card is better than carrying a wad of money in your pocket, but one concern that I do have is … on the kiosks, you have to use a pin number in order to access the money, but when you go to vendors, you do not,” said Guillery. “If you (fill the card) up to the max, and you lose that card, and somebody picks it up and finds it and they are a dishonest person, they can go and spend that money.”

Guillery said the unit only disburses U.S. cash to service members who are about to go on mid-tour leave or re-deploy.

Guillery said the unit disburses less than $10,000 in U.S. cash per month, but disburses more than 351,000,000(IQD), the equivalent of roughly $300,000, per month.

The current exchange rate is 1,170 to $1, said Guillery.

Raimer said the transition away from the U.S. dollar has aided the progression of the banking industry in Iraq.

Raimer said, “The progression (away from U.S. currency) has greatly supported the modernization of the banking system, thus improving and instilling trust in the local economy.”

ADDITIONAL PHOTOS:

Spc. Steven M. Buck, a budget analyst with the 368th Finance Management Company, out of Wichita, Kan., 36th Sustainment Brigade, 13th Sustainment Command (Expeditionary), and a Wellington, Kan., native, assists Sgt. Rojan C. Woolridge, a human resources noncommissioned officer for the 3rd Battalion, 58th Aviation Regiment out of Illesheim, Germany, and a Washington native, do the distribution of finance for his unit Jan. 27 at the finance office at Contingency Operating Location Basra, Iraq. (U.S. Army photo by: Pfc. Lisa A. Cope)

The contents of the cash drawer Jan. 27 at the finance office at Contingency Operating Location Basra, Iraq illustrates how the use of U.S. cash is being eliminated in Iraq. (U.S. Army photo by: Pfc. Lisa A. Cope)