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A bleak picture of Iraq..a bloodbath and American concern over the flow of oil 2022-06-25 08:13 Shafaq News/ On Saturday, the American "Bloomberg" website painted a bleak picture of the Iraqi scene, considering that there is a possibility of a bloodbath in the country, and the return of demonstrations to the streets, while the administration of US President Joe Biden faces a "double risk" of losing Iraqi oil supplies in The global market, in addition to Iran's strengthening of Iraq at a time when Washington is seeking to negotiate a new nuclear agreement with it. And the American website considered, in a report translated by Shafaq News Agency, that the world must prepare to face the economic and security repercussions of what is happening in Iraq, which is facing a summer of discontent, after the Sadrist leader Muqtada al-Sadr withdrew his deputies from Parliament. The report suggested that the result of al-Sadr's withdrawal from the political process was likely to be the return of the violent protest demonstrations that struck the country in late 2019 and early 2020. blood in the streets He pointed out that the Sadrist demonstrators are more angry after al-Sadr was frustrated by his failure to form a government coalition, as al-Sadr and his supporters will feel that the political process has failed them, making public squares a single platform for them to show their strength. After the report pointed out that the Sadrists were still carrying weapons, it was considered that the Iraqis are facing bleak tidings of the possibility of bloodshed in their streets. However, he also pointed out that this Iraqi situation is a bad warning for the global economy, as at a time when oil prices are rising, the last thing one needs is the prolonged instability in the second largest producer in OPEC, reminding that the global market also suffers from a shortage. In supply from another Arab oil-producing country is Libya, which has been wracked by political chaos. The report continued; That oil buyers can hope that Al-Kazemi will be able to secure the oil infrastructure and keep the supply lines working in the event of sectarian fighting erupting in Iraq's southern governorates, which contain the majority of the country's oil reserves. Iraqi oil Therefore, the report considered that the Biden administration faces a "double risk", as it is clear that any loss of Iraqi supplies will impede efforts to calm the crude oil market and reduce gasoline prices at stations on the eve of the midterm elections next fall. No less important, Sadr's withdrawal strengthens Iran at a sensitive geopolitical moment as Biden simultaneously seeks to negotiate a nuclear deal and reassure its Arab neighbors that they have nothing to fear. Referring to Iran's benefit from the developments that took place in Iraq, the report clarified that according to Iraqi law, the parliamentary seats that al-Sadr gave up, went to the candidates who obtained the second largest number of votes, and in most cases, these were from parties supported by Iran, adding that the coordination framework is now in the strongest position to form a coalition government. Nouri al-Maliki This means, according to the report, that Nuri al-Maliki is returning to the premiership, recalling that his two previous terms in office, between 2006 and 2014, were distinguished by the fact that Iran obtained an open license in order to enhance its influence in Iraqi affairs, especially within the security forces. The Shiite militias that used it to launch attacks on US forces in Iraq and carry out missile strikes and drone attacks on Saudi Arabia. Al-Kazemi and the West As for Al-Kazemi, the report described him as "a pro-Western figure who has achieved only limited success in curbing the militias," while Al-Maliki will not make any attempt to do so, and may even use the state's security forces to suppress any uprising by his followers. the chest. The report concluded by noting that the formation of the new government may take weeks or months, but the non-Shiite parties are no longer as enthusiastic about the coordination framework as they were about the Sadrist movement. "Iran is not in a hurry," he added, explaining that if the nuclear negotiations fail, as the odds now indicate, Tehran would be able to use Iraq freely in order to stir up trouble for the United States and its allies in the Middle East. Also, if the internal Shiite fighting stops the flow of Iraqi oil to the world market, this will also be convenient for Iran, because higher prices will boost the flow of money for Iran's export earnings that are restricted by sanctions. Accordingly, the report concluded by saying that "for the United States, there are no good results: the political chaos in Baghdad is as bad as the existence of a proxy government for Iran." Translation: Shafak News Agency
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Iraq’s Leader Is Betting on a Hung Parliament to Retain Power By Bobby Ghosh | Bloomberg Today at 7:43 a.m. EDT 0 Days ahead of Iraq’s general election, Prime Minister Mustafa al-Kadhimi claims he has no skin in the game. Since he is keeping his pledge not to run for parliament, this will be the first time, Kadhimi boasted in a tweet, that a sitting prime minister will not be standing in the election. But this is no more than a piece of political kabuki. Kadhimi may not be a candidate for parliament but he is definitely running to remain prime minister. He’s counting on Sunday’s vote to produce yet another hung parliament, leading to a repetition of the last go-around, when none of the heads of the major blocs was able to stake a claim to leading the government. After a great deal of wrangling among themselves, they settled on a compromise candidate, the political lightweight Adel Abdul Mahdi. Two years later, after anti-government street protests forced Abdul Mahdi to resign, the grandees went through another pointless tug-of-war before elevating Kadhimi, a flyweight, to the role. This time, Kadhimi is signaling through his proxies, they should save themselves and the country a great deal of aggravation and simply keep him on. Most analysts agree a hung parliament is the likeliest outcome. So Kadhimi’s decision not to run may give the impression of crafty statesmanship. In truth, it is his only play. The prime minister has no political organization of his own, and has done little in the past two years to build a significant following among voters. Had he stood for election without the backing of a major coalition, there is a not-negligible chance he’d have lost. Staying out saves him that embarrassment, and staying neutral makes him acceptable to all blocs. For the dominant Shiite factions — one pro-Iranian the other Iraqi-nationalist — it may suffice that Kadhimi is from the majority sect. Sunni and Kurdish parties will take satisfaction from the fact that his outlook is for the most part secular. Kadhimi’s candidature will likely be endorsed by the main foreign actors in the theater of Iraqi politics. As prime minister, he has managed to maintain a balance between the U.S. and Iran. In recent weeks, he has made trips to Washington, where he and President Joe Biden agreed to a deal to end American combat operations in Iraq, and to Tehran, where he was the first foreign leader to meet the new president, Ebrahim Raisi. He has also made himself useful to the Gulf Arab states as an intermediary in their long-standing dispute with the Islamic Republic. By hosting Arab-Iranian talks in Baghdad, Kadhimi has earned brownie points with the leaders of Saudi Arabia and the United Arab Emirates, the crown princes Mohammed bin Salman and Mohammed bin Zayed, respectively. He has even managed to make nice with Turkey’s President Recep Tayyip Erdogan over their mutual concern about militant groups in Iraqi Kurdistan. These leaders, who will not be voting in Sunday’s election, will be satisfied with the outcome if Kadhimi stays in his job. But if things pan out the way Kadhimi hopes they will, those who do show up to the polling booth will have no say in who leads the next government. It is doubly a shame because there was some hope that this election might go differently from the five that went before. Thanks to a new electoral law, Iraqis will this time vote for individual candidates rather than party slates. Under the previous system, members of parliament were entirely beholden to their parties; the new rules are designed to make them responsible for specific constituencies and therefore answerable to those who elected them. That should also make it easier for non-aligned candidates to stand up to the might of the parties. Yet the country’s most prominent independent politician — its prime minister — doesn’t care to be answerable to voters, or dare to challenge the old order. Unsurprisingly, polls suggest voters are already deeply disillusioned with the process. Young Iraqis are especially pessimistic about the prospects of change, and may be inclined to heed calls for a boycott of the election. As a result, the turnout may not even match the 44% recorded five years ago. This may not matter much to the prime minister and those rooting for him from foreign capitals. But it augurs ill for Iraqi democracy. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Bobby Ghosh is a Bloomberg Opinion columnist. He writes on foreign affairs, with a special focus on the Middle East and Africa.
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Iraq Says It Exported More Than 1 Billion Barrels of Oil in 2015 Khalid Al-Ansary and Kadhim Ajrash January 1, 2016 — 7:03 AM PSTIraq said it exported 1.097 billion barrels of oil in 2015, generating $49.079 billion from sales, according to the oil ministry. It sold 99.7 million barrels of oil in December, generating $2.973 billion, after selling a record 100.9 million barrels in November, said oil ministry spokesman Asim Jihad. The country sold at an average price of $44.74 a barrel in 2015, Jihad said. Iraq, with the world’s fifth-biggest oil reserves, needs to keep increasing crude output because lower oil prices have curbed government revenue. Oil prices have slumped in the past year as the Organization of Petroleum Exporting Countries defended market share against production in the U.S. OPEC’s second-largest crude producer is facing a slowdown in investment due to lower oil prices while fighting a costly war on Islamist militants who seized a swath of the country’s northwest. The nation’s output will start to decline in 2018, Morgan Stanley said in a Sept. 2 report, reversing its forecast for higher production every year to 2020. http://www.bloomberg.com/news/articles/2016-01-01/iraq-says-it-exported-more-than-1-billion-barrels-of-oil-in-2015
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Iraq may get bond guarantees for $2b sale to trim cost The government cancelled a bond sale this year after potential investors demanded higher interest rates Published: 16:26 November 12, 2015Bloomberg Dubai: Iraq, reeling under the slump in oil prices and the war with Islamist militants, may receive bond guarantees from international institutions to reduce borrowing costs as Opec’s second-biggest producer plans a $2 billion (Dh7.3 billion) sale next year, the central bank chief said. The government plans to raise the money in the first or second quarter of 2016, Ali Mohsen Esmail said in an interview in Kuwait on Wednesday. Authorities are working on arrangements with the International Monetary Fund and other organisations to make it easier to cut borrowing costs, he said. The government cancelled a bond sale this year after potential investors demanded higher interest rates. “We could get international guarantees, we have promises,” Esmail said. Iraq’s oil revenue dropped as crude prices plummeted last year. Compounding the crisis is the war with Islamic State militants, who have taken control of major Iraqi cities in the west and north. The IMF estimates the government’s budget deficit will widen to 23 per cent of economic output this year from about 5 per cent in 2014. IMF agreement The Washington-based lender said in a statement Tuesday it had reached a staff-monitored agreement with Iraq that will “allow the Iraqi authorities to build a track record for a possible Fund financing arrangement”. Iraq’s reserves will also start to rise in 2017 and will reach $91 billion in 2020, Ismail said, citing IMF estimates. He said in a statement on Tuesday that reserves would total about $60 billion by the end of 2015. Gross foreign assets with the central bank stood at $58 billion at the end of September, according to official data. “Any engagement with the IMF will help raise investor confidence in Iraq’s fiscal sustainability,” said Raza Agha, chief economist for the Middle East and Africa at VTB Capital in London. “However, the size of their external financing needs suggests that they cannot rely exclusively on private creditors and capital markets,” he said, adding that he estimates that Iraq needs $20 billion annually in external financing. The yield on Iraq’s $2.7 billion Eurobonds due 2028 surged to the highest since 2009 last month. It was little changed on Wednesday at 9.533 per cent, according to data compiled by Bloomberg. Difficult year Ismail said Wednesday that 2016 will be “a difficult year” for Iraq’s finances, and predicted a gradual recovery in 2017. The IMF expects the budget deficit to fall to 17.7 per cent of GDP in 2016, from 23.1 per cent this year. Iraq is also in talks for a $2 billion loan from the World Bank, though the government will not list the facility as part of the package to finance the deficit until an agreement is certain, Esmail said.
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Oil Resumes Slide as Global Crude Oversupply Seen Persisting Oil declined for the first time in three days, trimming a weekly advance, amid speculation a global surplus of crude will be prolonged. Futures slid as much as 1 percent in New York. Output from Iraq, the second-biggest OPEC producer, exceeds 4 million barrels a day, Oil Minister Adel Abdul Mahdi said, according to Almada news website. U.S. crude stockpiles rose for a fifth week through Oct. 23, keeping supplies more than 100 million barrels above the five-year seasonal average, government data showed Wednesday. Oil failed to sustain a gain above $50 a barrel earlier this month amid speculation a global glut will persist. The Organization of Petroleum Exporting Countries continues to pump above its quota and the International Energy Agency estimates the surplus will remain until at least the middle of 2016. West Texas Intermediate for December delivery fell as much as 44 cents to $45.62 a barrel on the New York Mercantile Exchange and was at $45.64 at 10:07 a.m. Sydney time. The contract gained 12 cents to $46.06 on Thursday. The volume of all futures traded was about 63 percent below the 100-day average. Prices are up 2.4 percent this week and 1.3 percent higher for the month. Brent for December settlement dropped 25 cents, or 0.5 percent, to $48.80 a barrel on the London-based ICE Futures Europe exchange on Thursday. The European benchmark crude ended the session at a premium of $2.74 to WTI. http://www.bloomberg.com/news/articles/2015-10-29/oil-resumes-slide-as-global-crude-oversupply-seen-persisting
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Iraq Plans Unprecedented Pay Cuts as Financial Crisis Deepens Zaid Sabah ZaidSabah Caroline Alexander October 28, 2015 — 9:16 AM PDT Share on FacebookShare on Twitter Share on LinkedInShare on RedditShare on Google+E-mail Iraq is planning unprecedented salary cuts for senior civil servants, as a more than year-long war against Islamic State and the plunge in oil prices deepen the nation’s financial crisis. Iraqis increasingly sought security in state employment amid the turmoil that followed the 2003 U.S. invasion, and the government now provides jobs for 3 million people, or 20 percent of the workforce. The International Monetary Fund in 2009 advised Baghdad to revise salary laws but, fearing a backlash, officials put off a decision. This time, the government has to act, Prime Minister Haider al-Abadi said on Tuesday. “The drop in oil prices and the country’s involvement in a war that’s exhausting large amounts of money from the budget have put the government in financial difficulty,” he said. “Reforms have hurt some but we’ll reach a dead end if we don’t take such measures.” Widespread protest over the salary cuts would add to pressures on Abadi, who’s supported by the U.S. as the best hope of preventing Iraq’s permanent fracturing. His administration is already facing mounting anger over corruption, and sectarian tensions sparked by the role of Iran-backed militias in the fight against Islamic State. The jihadist group controls about a third of Iraq, and in areas recaptured by the army, the slow pace at which services are restored is also stirring dissatisfaction. Protesting Professors Iraq says the conflict is costing it about $10 million a day. Add to that the slump in oil prices and the result, the IMF says, is a likely budget deficit of about 23 percent of economic output this year. The government spends about $40 billion a year on the salaries of state employees, much of it for soldiers and police officers. Another $10 billion goes on the pensions of two million retirees. “How can we spend on war, health, education, agriculture, services and the poor?” Abadi told a group of university professors, who have staged demonstrations against the planned pay cuts. He promised to look for ways to soften the impact, for example by reducing interest rates for those who have taken out loans. “We have already seen several departments of public-sector employees protest against the new scales, and I think these will continue and expand if the plans are not revised,” said Sajad Jiyad, an analyst at the Baghdad-based Iraqi Institute for Economic Reform. “It’s a major challenge.” The government estimates the changes will save at least $3 billion. Of that, $1 billion will be used to reduce the deficit, which it says currently stands at about $19 billion. The government says workers at the lower end of the civil-service pay scale will receive slight increases, making the salary structure fairer. That could also help limit unrest. Parliament Approval? It isn’t yet clear if the salary changes require a vote in parliament, where Abadi could face opposition. Mudher Saleh, an economic adviser to the premier, said by phone that Abadi’s broader reform package has already been approved so a new vote might not be necessary. Still, the pay plan is up for discussion by lawmakers on Thursday. “It’s the first time since 2003 that we will carry out such deep, sweeping cuts to salaries,” Saleh said, referring to changes made after the removal of Saddam Hussein. Civil servants at the top of Iraq’s 10-tier scale make about $5,000 a month, while junior employees earn as little as $400 to $500, said Jabbar al-Abadi, a member of parliament’s finance committee. The new law will add about $40 a month to the salaries of those at the lower end, while employees nearer the top will lose about $834 a month. Grand Ayatollah Ali al-Sistani, who has endorsed Abadi’s reform program since it began in August, on Friday backed the salary changes as a way to achieve social justice. There’s been stinging criticism from politicians, including former Prime Minister Nuri al-Maliki, as well as from officials in the pro-reform movement. Salim al-Jabouri, the parliamentary speaker, said the cuts could result in more skilled Iraqis leaving the country. Noura Salim, a lawmaker and member of parliament’s economic committee, described the legislation as a knee-jerk reaction to the financial crisis. “The new law will directly impact the middle class and make them part of the poor class,” Salim said, adding that the government’s focus should be on tackling corruption. http://www.bloomberg.com/news/articles/2015-10-28/iraq-plans-unprecedented-pay-cuts-as-financial-crisis-deepens
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We watched the reserves grow for many years and we were happy. And now their reserves contract, and faster than they ever grew. I personally think this is not smoke and this is really happening. No major conspiracy going on IMHO Currency Troubles Pile on the Misery for Iraq Low oil prices could lead to devaluation of the dinar Any currency crisis usually comes with dire consequences for a country, and the threat of one in Iraq shows how the impact can go beyond the economy and markets. A foreign-exchange crunch because of a drop in oil prices could force a devaluation of the dinar and risk making the fight against self-proclaimed Islamic State militants even tougher. The nation, currently OPEC’s biggest producer after Saudi Arabia, is dependent on oil revenue to fund its operations on the battlefield and quell growing unrest over the economy. Dollar reserves tumbled about 20 per cent to $59 billion as of 23 July since the fighting escalated a year before, and the losses are accelerating. In the first 25 days of August, the central bank sold $4.6 billion of currency to keep the dinar at a pegged rate, a daily outflow of about $184 million, data compiled by Bloomberg show. “Iraq’s perfect storm means the country will continue to lose reserves until the government of Iraq decides to devalue the dinar,” says Frank Gunter, author of The Political Economy of Iraq. The currency could weaken as much as 20 per cent over the next year, he says. It raises the prospect of Iraq joining other developing nations in a new wave of devaluations as emerging markets, led by China, take a hammering. The Iraqi dinar is one of those most at risk in the Middle East from that happening, though the current exchange-rate regime is likely to remain, according to research published on 25 August by Emirates NBD, the biggest bank in Dubai. Saudi Arabia’s central bank last month said it’s committed to the riyal’s dollar peg, the Saudi-owned Al Arabiya television reported, amid speculation the country would devalue its currency after the plunge in oil prices. In Iraq, market forces are complicating Prime Minister Haidar al-Abadi’s efforts to win back territory from the so-called Islamic State, also known as ISIS. Military success has been piecemeal as the government has struggled to enlist support from mainly Sunni communities in parts of the country ravaged by attacks. The US and its allies have sent arms to the Kurds in northern Iraq and President Barack Obama’s administration plans to spend another $700 million in 2016 on support for the military. The government in Baghdad, though, pays for the bulk of the operations from its budget since the Americans pulled out their troops in 2011. A collapse in the value of the dinar would raise the cost of living for Iraqis already protesting against government corruption, power cuts and water shortages. “The policy now is to meet the demand for dollars,” says Waleed Eedi, a director general at the Central Bank of Iraq. The reserves won’t be depleted because of oil sales and the dinar won’t devalue, he says. The Iraqi central bank’s fixes the dinar’s exchange rate at 1,166 per dollar and there’s pressure on the peg. As a result, Iraq’s foreign-currency reserves may drop to about $45 billion by the end of 2016, according to Exotix Partners, a London-based investment firm specialising in frontier markets. “The authorities will try to hold on to the peg as long as possible, but may be forced to devalue if pressures continue,” says Jakob Christensen, a director at Exotix. The central bank has so far resisted government pressure to print money to meet an estimated $30 billion budget deficit. It announced plans for a $6 billion bond programme last month, which follows about $1.2 billion from the International Monetary Fund, though neither is big enough to plug the shortfall. That leaves the Finance Ministry with few easy choices. The government is seeking to cut spending and tackle corruption. Other options include borrowing domestically from public banks or even forcing the central bank to buy dollar-denominated bonds from the Finance Ministry, says Gunter. “Iraq will be able to finance its 2015 deficit, but if the battle against Islamic State and low oil prices continues, Iraq will then hit a wall,” he says. Bloomberg News http://www.businessweekme.com/Bloomberg/newsmid/190/newsid/1151/Currency-Troubles-Pile-on-the-Misery-for-Iraq
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Iraqi Central Banker Sees Limited Risk of Devaluation Amid War Ahmed Feteha Alaa Shahine September 14, 2015 — 2:16 AM PDTUpdated on September 14, 2015 — 4:40 AM PDT Central bank Governor Ali Mohsen Ismail said Iraq has enough foreign reserves to maintain its currency peg but didn’t rule out a minor devaluation to shore up government revenue hurt by the slump in oil prices and the war on Islamic State militants. Reserves are enough to cover more than six months of imports, higher than what is typically needed to maintain the exchange-rate, Ismail said in an interview in Cairo on Sunday. This year’s budget deficit will likely be lower than the 25.4 trillion dinars ($20.9 billion) originally planned because the finance ministry is already cutting spending, he said. “There is no fear for the dinar,” the governor said. However, if “the pressure remains, we could marginally change the exchange rate to increase revenues of the finance ministry,” he said. “This is just an option that needs to be carefully studied because we don’t want to give away what we have achieved in terms of the inflation rate, which is perfect now.” Consumer prices rose 2.6 percent in July, according to official data. Bond SaleIsmail’s comments come as OPEC’s second-biggest producer plans to raise $6 billion in bonds to fund the budget shortfall, which the International Monetary Fund expects to widen to 17.4 percent this year from 5 percent in 2014. The IMF, which extended $1.24 billion in emergency aid to Iraq in July, described the peg as a “key anchor to the economy” in a report last month. The nation is engulfed in armed conflict with Islamic State militants who took control of major Iraqi cities, and a surge in inflation would increase discontent among Iraqis already complaining about chronic shortages in water and electricity. Military success against Islamic State militants has been piecemeal, as the government has struggled to enlist support from mainly Sunni communities in parts of the country ravaged by attacks. “Iraq has suffered a tremendous dual shock from low oil prices and war on IS," said Jean-Michel Saliba, a London-based economist at Bank of America Merrill Lynch, using an abbreviation for Islamic State. Government efforts to cut spending have not resulted in a major drop in the deficit, he said. Authorities “have few options, one of them is to get the central bank to devalue to boost revenues," Saliba said. "We don’t see an immediate devaluation but we see more pressure on the peg the longer the situation continues as buffers get eroded.” Concerns that oil-dependent economies may abandon their pegs intensified after Kazakhstan allowed its currency to float following China’s surprise move to revalue the yuan. Saudi Arabia, the world’s biggest oil producer, said it was committed to maintaining the riyal’s peg to the dollar. At RiskIn the Middle East, the Iraqi dinar is among the most at risk, though the current exchange-rate regime is likely to remain, according to Emirates NBD, the biggest bank in Dubai. The war, as well as the 50 percent plunge in oil prices, has shaken investor confidence, with the yield on Iraq’s $2.7 billion Eurobonds due 2028 surging 1.7 percentage points this year to 9.588 percent, the highest since 2009. The central bank, in an attempt to ease pressure on government finances, has allowed local banks to use as much as 50 percent of their reserves at the regulator to buy treasury bills. “Most banks have used that advantage,” Ismail said. http://www.bloomberg.com/news/articles/2015-09-14/iraqi-central-banker-sees-limited-risk-of-devaluation-amid-war
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Iraqi Bonds Struggle to Attract Investors Arif Sharif and Lyubov Pronina | 07-09-2015, 07:56 AM | Iraq | Conflict and low oil prices may drive down prices Iraq’s effort to enlist bond investors in its fight against the self-proclaimed Islamic State and a collapse in the price of crude won’t come cheap. The Gulf nation’s first trial in the Eurobond market in almost a decade means it may have to pay “double-digit” interest to lure investors, says Morten Bugge, who helps manage about $2.5 billion of emerging-market debt at Kolding, Denmark-based Global Evolution. Iraq announced a $6 billion bond programme on 18 August and may hold sales meetings with international investors as soon as this month, people familiar with the matter say. “It’s an oil exporter with ISIS in their backyard which weighs negatively on the bond sale,” Bugge, Global Evolution’s chief investment officer, says. Iraq has been struggling to contain the expansion of the Islamic State’s foothold a year after the radical Sunni group took the nation’s biggest northern city, Mosul, and captured Ramadi, the capital of Anbar province, three months ago. The government is borrowing to close a budget shortfall as “I am sure Iraq would wish for better timing” the fight against terrorism and oil’s decline by around 50 per cent in the past year sap government finances. Compounding risks for investors is a selloff in commodity-exporting nations following mid-August’s yuan devaluation, while the Federal Reserve prepares to raise interest rates from near zero, Bugge says. Middle East and North African countries are issuing bonds this year at the slowest pace since 2011, according to data compiled by Bloomberg. “I am sure Iraq would wish for better timing,” Bugge says. The yield on Iraq’s only international bond jumped to a new high for the year on 20 August, climbing 19 basis points to 8.73 per cent. The country had to seek $1.24 billion of emergency financing from the International Monetary Fund in July after oil prices slumped to their lowest in six years. Crude contributes about 40 per cent of economic output. “Iraq’s rating is very good in the current circumstances,” Majid Al-Souri, a board member of the Central Bank of Iraq said on 19 August. “It has huge fortunes of oil and gas and it can’t go bankrupt,” which will reassure investors, he said. Fitch Ratings expects the country’s fiscal deficit to top 10 per cent of gross domestic product for 2015 because of lower crude prices, higher military spending and costs associated with the civil unrest. Islamic State’s presence has put political risk in Iraq at the highest among any sovereigns it rates, Fitch said in August after it assigned the country’s bonds a speculative grade of B-. The assessment is on par with Cyprus and Jamaica and two levels above Greece and Ukraine. The country’s foreign-currency reserves may drop to about $45 billion by the end of 2016, according to estimates by Exotix Partners. “Iraq is probably the most oil-dependent country in the world, so falling oil prices, really, really hurt this country,” Jakob Christensen, a London-based director at Exotix, says. Reserves “could drop significantly over the next two years if oil prices stay low and they don’t adjust,” he says. - See more at: http://www.businessweekme.com/Bloomberg/newsmid/190/newsid/1067/Iraqi-Bonds-Just-Arent-That-Attractive#sthash.63lLGmnd.dpuf Iraqi Bonds Struggle to Attract Investors Arif Sharif and Lyubov Pronina | 07-09-2015, 07:56 AM | Iraq |
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Iraqi Oil Output Declining as of 2018 in Morgan Stanley's View Iraq’s crude production will start to decline in 2018 because of a slowdown in investment due to lower oil prices and a costly war on Islamist militants, according to Morgan Stanley. OPEC’s second-largest crude producer will pump 4.18 million barrels a day in 2017, with output then falling to 4.132 million in 2018 and to 4.127 million by 2020, Haythem Rashed, a Morgan Stanley analyst in London, said in a Sept. 2 report. The bank had previously forecast rising output every year to 4.6 million barrels by 2020. Iraq’s production has climbed 1 million barrels a day by July from a year earlier, becoming the strongest contributor to global supply, Morgan Stanley said. The removal of export constraints in the south, increased pipeline capacity in the semi-autonomous Kurdish region and the separation of heavy and light crude streams all contributed to growth, according to the report. “With these infrastructure and crude marketing tailwinds now largely played out, we see limited prospects for further production growth,” Rashed said in the report. Islamist MilitantsIraq, with the world’s fifth-biggest oil reserves, has been rebuilding its energy industry after decades of war and sanctions, while fighting a costly war against Islamic State militants who seized a swathe of the country’s northwest. The nation needs to keep increasing crude output because lower oil prices have curbed government revenue. Oil prices slumped since last year as the Organization of Petroleum Exporting Countries defended market share against booming production in the U.S. With oil prices down 41 percent in the past year amid fighting Islamic State militants, the Iraqi government’s finances face “significant pressure,” Morgan Stanley said, citing an International Monetary Fund estimate that its foreign reserves will drop by more than 50 percent by the end of next year. The number of Iraq’s oil-directed rigs has declined 50 percent in the past year, and some of Iraq’s largest oil fields cut capital expenditure spending by about 30 percent, the bank said in the report. The Persian Gulf country had been ramping up production and exports with the help of companies such as BP Plc, Exxon Mobil Corp. and Royal Dutch Shell Plc. Morgan Stanley raised its estimate for production this year by 119,000 barrels to 3.88 million, and for next year by 79,000 barrels to 4.17 million. “We understand from meetings with majors, service companies and energy lawyers that the government has asked operators to reduce activity on oil fields in order to moderate the cost recovery burden,” Morgan Stanley said. http://www.bloomberg.com/news/articles/2015-09-03/iraqi-oil-output-declining-as-of-2018-in-morgan-stanley-s-view
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Iraq Hires Banks Including Citigroup for $6 Billion Sale Iraq hired banks to help raise $6 billion in bonds as the country seeks to plug a widening fiscal deficit with its first international debt sale in almost a decade. The government appointed Citigroup Inc., Deutsche Bank AG and JPMorgan Chase & Co. to arrange the bond program in tranches, Muneer Mohammed Omran, director general of the central bank’s investor department in Baghdad, said in a telephone interview Tuesday. The first sale will take place this year, he said. Spokesmen for the banks declined to comment. Iraq, holder of the world’s fifth-largest oil reserves, is selling bonds to bolster its financial position amid civil conflict and a global slump in oil prices. Fitch Ratings issued its first rating on Iraqi debt this month, assigning it the fifth-worst junk grade, and said it expects a double-digit fiscal deficit for 2015 because of lower crude prices, higher military spending and costs associated with civil unrest. The country’s most recent bond sale was a $2.7 billion issue in 2006, according to data compiled by Bloomberg. The yield on those notes due January 2028 rose 66 basis points this year, to 8.55 percent today. Islamic State Iraq has struggled to emerge from violence after the U.S.- led occupation, with the army now trying to recapture large areas of the country from Islamic State in a campaign backed by the U.S. Increased oil production has coincided with a market slump, and the International Monetary Fund approved $1.24 billion of emergency financing in July. Government debt may equal 51 percent of Iraq’s gross domestic product by the end of 2015, with the ratio forecast to increase next year, Fitch said. Savings built up over years of high oil prices have largely been eroded, the ratings firm said. Iraq’s crude production climbed to an all-time high of nearly 4.2 million barrels a day in July with record exports from southern terminals mostly unscathed by Islamic State militants. http://www.bloomberg.com/news/articles/2015-08-18/iraq-hires-banks-including-citigroup-for-6-billion-sale
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Reform Plan Could Tear Iraq Apart Aug 12, 2015 5:12 PM EDTBy Noah Feldman It must be good news that Iraq’s parliament passed Prime Minister Haidar Al-Abadi’s anti-corruption reforms this week -- right? As with most things in Iraq, the answer isn’t as simple as it appears on the surface. In the abstract, it’s a nice idea for Iraq to stop dividing the spoils of government office among its denominational and ethnic factions. But that structure, with all its obvious flaws and faults, was built into the DNA of the Iraqi constitution for a reason: to help quell Sunni Arab fears that the Shiite majority, in collusion with the Kurdish minority, would dominate the Sunnis in perpetuity and refuse to share oil revenue. Today, with much of Sunni Arab Iraq under control of Islamic State, Sunnis have a much reduced say in Baghdad politics. Under these new circumstances, protesters, for the most part Shiite, have been objecting to the government’s old way of doing business. The leading Shiite religious figure in the country, Ayatollah Ali Al Sistani, reviewed and endorsed Abadi’s plan before it was publicly announced. Abadi told the public the reforms were inspired by the Shiite religious establishment. The upshot is that the reform plan shows the Shiites' willingness to abandon the technique used to try to guarantee Sunnis some stake in the country’s future. For the moment, at least, there is no indication of what will substitute for it. The centerpiece of the reform eliminates the offices of vice presidents and three deputy prime ministers. None of these posts were precisely as envisioned in the original Iraqi constitution. That document (I consulted on an earlier version) created a largely symbolic “presidency council” consisting of a figurehead president and two figurehead vice presidents. The idea was to make sure that there would be at least one Sunni Arab, one Kurd and one Shiite close to the symbolic head of state. In practice, three vice presidents were in office until Tuesday, all of whom are now out of a job. They included one Sunni Arab, Usama al-Nujaifi; one Shiite, Ayad Allawi, whose party mostly represents Sunnis; and one Shiite, Nouri al-Maliki, who was the powerful former prime minister ousted to make room for Abadi and still competitive with him. (The symbolic president, Fuad Masum, is a Kurd, and he’ll stay in office). The three deputy prime ministers weren’t mentioned in the constitution at all. But, again, the structure was designed to produce inclusiveness. One of them, Saleh al-Mutlaq, is one of the most important Sunni politicians in the country, a one-time Baathist originally from Fallujah who strove to represent Sunni Arab interests in the cabinet. To be fair to Abadi, there’s a strong argument that it’s wise for Iraq to eliminate these offices, together with the expensive security protection and many perquisites enjoyed by those who held them. Sectarian politics tend to perpetuate sectarian divisions. To make matters worse, the positions haven’t successfully fulfilled their function of helping to hold the country together. After the U.S. withdrew from Iraq in 2007 and lost leverage over the Baghdad government, the Iraqi government reneged on promises made to Sunnis as part of the effort to end the Sunni insurgency. Disillusionment with Baghdad is one reason at least some Iraqi Sunnis are participating in Islamic State or at least tolerating its rule in the Sunni-majority parts of the country. Meanwhile Iraqi Kurdistan has taken advantage of the rise of Islamic State and the weakening of the Iraqi state to expand its territory in contravention of the constitution. The important development here has been the Kurdish takeover of Kirkuk: It is (or was) an ethnically mixed city whose character and control were explicitly reserved by the constitution because the Kurds wanted it and Iraq’s beleaguered Turkmen minority feared it would lose its position there. Today, Kirkuk has become Kurdish, and it’s totally unrealistic to think that will ever change. The point is that the existing constitutional and governmental structures designed to produce power-sharing have largely failed. Getting rid of them therefore seems superficially plausible. The problem is that there’s no plan to substitute some new guarantor of national cohesion or at least something less than civil war. With Sunni Arabs largely out of the political picture in Baghdad, and the Kurds satisfied for the moment with their de facto autonomy and gradual expansion, there’s no one to tell the Shiite majority that it better find some way to bring the country together again. One possibility is that, at this point, the Shiites just don’t care. The area controlled by Islamic State doesn’t have significant oil reserves. For the moment, the militant group isn’t immediately threatening Baghdad. From the Shiite perspective, the status quo perhaps doesn’t look so bad. A Shiite statelet in the rump of the former Iraq would include Baghdad as well as the Persian Gulf refineries and ports. But if Abadi is thinking that he doesn’t need to give Iraqi Sunnis any incentive to take part in a unified Iraq, he’s making a big mistake. Islamic State won’t be satisfied in the long run with a desert enclave. It’ll eventually make a play for Baghdad, with its significant Sunni population. If Baghdad’s Sunnis see no future in a Shiite Iraq, they’ll side with Islamic State when that day comes. That could turn Baghdad into Beirut circa 1975. Abadi’s reforms should therefore be met with a warning: Make sure you have some strategy for keeping the country together. Patronage has more or less failed. But it may have been better than nothing. http://www.bloombergview.com/articles/2015-08-12/reform-plan-could-tear-iraq-apart
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Baghdad Mansions Sell for $1 Million With Islamic State at Gates By Jack Fairweather, Aziz Alwan and Zaid SabahNov 3, 2014 10:00 AM PT Islamic State militants may be at the approaches to Baghdad yet members of Iraq’s Shiite Muslim elite are offering cash for $1 million homes in the capital’s sought-after Zayouna neighborhood. Gilded mansions with jacuzzis in Italian-marble bathrooms and armored vehicles parked in the drive are replacing the humbler dwellings of the former middle-class Sunni, Shiite and Christian inhabitants, according to real-estate agents. House prices in the district, they say, have risen threefold since 2005. “Wealthy government officials and military officers are buying houses in cash, tearing them down and building mansions,” said Abu Rana al-Zubaidy, a realtor who has witnessed the neighborhood’s transition from backwater to power center. With Sunni jihadists seizing territory less than an hour’s drive from the city, “there’s caution, but everyone still has plenty of money,” he said by phone. The conspicuous displays of Shiite affluence in Zayouna are testament to the shift in political power since U.S. forces ended decades of Sunni dominance under Saddam Hussein, according to Andrew Bowen, Middle East scholar at the Baker Institute for Public Policy in Houston. “Sunnis complain that they are being excluded from power,” said Bowen, adding that the reversal in fortunes is fueling resentment and blocking efforts to unite the nation against the Islamist militants. “There is a strong perception that the new Shiite elite is using the state for their own ends.” Army CampWhile wealth in Shiite-dominated provinces and Baghdad neighborhoods has held steady or increased, according to World Bank data, the opposite is happening in some Sunni areas. Poverty rose by more than half in the five years to 2012 in Nineveh, where Islamic State -- backed by some Sunni tribes -- seized the city of Mosul in June. In Zayouna, an influx of army officers has turned a once quiet neighborhood into a heavily fortified cantonment, with patrols and security cameras keeping watch, said longtime resident Abu Mariam al-Dulaimi. “There’s an increasing feel of living in a military camp,” he said. Realtors in the area say that homeowners include army general and media celebrity Mohammed al-Quraishi, who in 2004 featured in a television series called “The Grip of Justice.” The show followed Quraishi’s Wolf Brigade police commandos as they rounded up suspected insurgents. The brigade, which also fought alongside U.S. forces in Iraq, was accused by the Sunni-controlled Muslim Scholars Association of torturing prisoners and pursuing a sectarian agenda. The brigade’s leaders denied the allegations. Corruption ClaimsQuraishi, who was in charge of Iraqi forces routed by Islamic State at Tal Afar in August, was one of a band of loyal, mainly Shiite army officers whose support had buttressed the rule of former Prime Minister Nouri al-Maliki. He didn’t answer repeated calls to his mobile phone seeking comment. It wasn’t possible to obtain a title deed for the property. The majority of the houses on one street in Zayouna have been sold to newcomers since 2005, when Iraq voted for its first Shiite-led government, according to Hassanain Taghi, a resident, with the number of sales to Shiite families accelerating in recent years. His neighbors, Dulaimi said, have been approached with cash offers of a million dollars. The steady accumulation of wealth by establishment Shiites has also been accompanied by an ever louder chorus of corruption allegations. Since taking office in August, Prime Minister Haidar al-Abadi has sought to win back Sunni loyalty by making his government more inclusive and said he would address the issue of graft. Cash OffersSunni anger over corruption has been a factor in driving some tribes to support Islamic State, Nihat Ali Ozcan, an analyst at the Ankara-based Economic Policy Research Foundation said by phone. “One way to reduce support for the militants is to do more to address corruption.” Previous Iraqi governments have promised action against graft, without always delivering. The Commission of Integrity, an anti-corruption agency, in 2012 accused 14 generals and Defense Ministry officials of taking kickbacks in an arms deal with Russia worth $4.2 billion. All the men denied the allegations; one resigned. Haitham al-Jubory, a lawmaker with the Shiite Dawa party, said the Abadi government’s assault on graft was just beginning. Fighting “corruption in the police and army” would be an important part of restoring security, he said. With Islamic State militants in control of much of Anbar province neighboring Baghdad and near-daily bombings in the capital, concerns are growing in the city of a return to the sectarian violence that followed the 2003 U.S.-led overthrow of Saddam. In the meantime, business is still brisk in the Zayouna housing market, according to the realtors. One junior military officer this year paid $750,000 for a 300 square-meter (3,230 square feet) house, said Dulaimi, the resident. http://www.bloomberg.com/news/2014-11-03/baghdad-mansions-sell-for-1-million-with-islamic-state-at-gates.html