Iraq ‘lost fight against Arbil’

[SocalDinar]

Iraq ‘lost fight against Arbil’

ISTANBUL - Anatolia News Agency

The central government in Baghdad has lost its energy fight against the regional administration in Arbil, says Mehmet Sepil, the chief executive of Genel Energy, which is active in the lucrative northern Iraqi oil field

The northern Iraqi oil fields have proven their potential, while the slow action in southern Iraq is pushing energy firms toward the north, according to Mehmet Sepil (inset) of Ankara-based Genel Energy. Hürriyet photos

The central Iraqi government in Baghdad has lost its energy struggle against the rapidly developing Kurdistan Regional Government (KRG), which controls the autonomous north, according to Mehmet Sepil, the chief executive of Genel Energy, one of the most influential companies operating there.

The lingering problems between Baghdad and Arbil over opening the northern oil and gas fields to international companies has been solved “de facto,” Sepil told Anatolia news agency in an interview.

“Baghdad has lost its oil and natural gas fight against northern Iraq,” Sepil said. “Let’s take a look at companies operating there currently: Exxon, Chevron, Total and Gazprom. These are some of the largest oil companies in the world. What’s more, Exxon, Total and Gazprom are also working in Baghdad [oilfields]. Baghdad says it will put those who operate in northern Iraq on a blacklist, but the largest companies in the world are working there. This issue is over. In addition, Baghdad operates too slowly, so the oil companies are escaping from there and moving to the north. The energy fight is over today. The important question is when Baghdad will admit this.”

Ankara-based Genel recently bought 21 percent of U.S.-based Hawler Energy’s share in the Bina Bawi field, raising its share there to 44 percent, Sepil saidd.

“The region will see a large consolidation. The number of [oil]companies in northern Iraq, which is between 40 and 50 today, will fall to between 10 and 15 in two or three years,” Sepil said, adding that the region has already proved its potential. What is happening in northern Iraq is typical, according to Sepil. “First the small companies penetrate, they find the oil, and sell [the field] after benefiting from it. Now this is the process taking place in northern Iraq.”

Genel to transport Kurdish gas and oil to Turkey

The company’s goal is to bring Kurdish gas and oil to Turkey. Sepil estimates that northern Iraq’s oil production will be at 1 million barrels per day by 2015. “Turkey may be able to buy twice what it currently needs from northern Iraq soon. It may also buy some 10-15 billion cubic meters of natural gas from there.”

Turkey’s natural gas demand has increased by some 2 million cubic meters annually due to rapid growth. The only way for Turkey to cut costs will be to diversify its current supplies from Russia, Azerbaijan and Iran.

Genel Energy was formed by the merger of Vallares and Genel Energy International in November 2011. Vallares was a fund founded by former BP CEO Hayward, British financier Nat Rothschild, banker Julian Metherell and investment manager Tom Daniel. Genel Energy International was owned by Mehmet Emin Karamehmet, a Turkish tycoon. The merged company trades on the London Stock Exchange.

After the merger, Genel had capital worth $3 billion, Sepil said, noting that the company is determined to take its place in the consolidation in northern Iraq with its current potential of $1.4 billion. The company’s investment plans also include Africa. Genel is the largest producer in northern Iraq currently, Sepil said.

The Bina Bawi field has great potential, as does the Taq Taq field, where Genel is also active, Sepil said. “Currently OVM runs operations there, but with the acquisition we became the holder of the majority shares. Bina Bawi’s potential is equivalent to half a billion barrels, we believe. The capacity might even be higher.”

The company is also willing to take part in other regional projects, as it is already working a shorter-term project to take Taq Taq oil to the Kirkuk-Ceyhan line, the major pipe between Iraq and Turkey.

http://www.hurriyetdailynews.com/iraq-lost-fight-against-arbil.aspx?pageID=238&nid=27479&NewsCatID=348

[Alexyn1006]

Very good read. Thank you. You'd think So. Iraq would get it's s**t in order.

[MovieMaker]

OOh! Thanks for sharing.

[wpsmit]

Yep, if M and his henchmen don't get on the stick, and pass/implement the Arbil agreement, they are going to wake up to find that the new country of Arbil has become one of the richest countries in the world, and that their poverty stricken neighbor Iraq has still not appointed a minister of defense!

[magawatt]

So Miliki can fume and bluster all he wants but until he works out a deal, the Kurds will keep

going on their merry way?

If the Kurds ceceded from Iraq, could/would Iraq still RV?

[Dalite]

Industry and advancement usually take a path to where civilization is, and away from squalor and turmoil.

No inverstor wants their venture absorbed by civil war.

The prospect of security, stability and profit is better represented in the Kurdistan area, than any of the rest of Iraq.

Maliki has already squandered much of the benefit from the attempt at Democracy.

[yota691]

Thanks SocialDinar, +1 to all the above!!

[SocalDinar]

Thanks Yota back at you.

Have you had a chance to read that ME Policy report posted by Mrs Mortgagewiz.?

Interesting read. look at the reference to Dutch Disease ( some weird economic term )

[gregp]

Industry and advancement usually take a path to where civilization is, and away from squalor and turmoil.

No inverstor wants their venture absorbed by civil war.

The prospect of security, stability and profit is better represented in the Kurdistan area, than any of the rest of Iraq.

Maliki has already squandered much of the benefit from the attempt at Democracy.

[sourpuss]

Am I correct in believing that Arbil may be resolved and pending signatures?? southern iraq lost, northern won and now we need signatures on an agreement?

[yota691]

Thanks Yota back at you.

Have you had a chance to read that ME Policy report posted by Mrs Mortgagewiz.?

Interesting read. look at the reference to Dutch Disease ( some weird economic term )

Yes I did Thanks Mrs Mortgagewiz. and SocalDinar, alot good info. I'm surprise it didn't get more attention!!

[zigmeister]

Dutch disease in economic terms.

My link

In economics, the Dutch disease is a concept that explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The mechanism is that an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive. While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".[1]

The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959.[2]

The “Core Model”

The classic economic model describing Dutch Disease was developed by the economists W. Max Corden and J. Peter Neary in 1982. In the model, there is the non-traded good sector (this includes services) and two traded good sectors: the booming sector, and the lagging sector, also called the non-booming tradable sector. The booming sector is usually the extraction of oil or natural gas, but can also be the mining of gold, copper, diamonds or bauxite, or the production of crops, such as coffee or cocoa. The lagging sector generally refers to manufacturing, but can also refer to agriculture.

A resource boom will affect this economy in two ways. In the "resource movement effect", the resource boom will increase the demand for labor, which will cause production to shift toward the booming sector, away from the lagging sector. This shift in labor from the lagging sector to the booming sector is called direct-deindustrialization. However, this effect can be negligible, since the hydrocarbon and mineral sectors generally employ few people.[3] The "spending effect" occurs as a result of the extra revenue brought in by the resource boom. It increases the demand for labor in the non-tradable, shifting labor away from the lagging sector. This shift from the lagging sector to the non-tradable sector is called indirect-deindustrialization.[3] As a result of the increased demand for non-traded goods, the price of these goods will increase. However, prices in the traded good sector are set internationally, so they cannot change. This is an increase of the real exchange rate.[4]

[edit]Resource-based international trade

In a model of international trade based on resource endowments as the Heckscher–Ohlin/Heckscher–Ohlin-Vanek, the Dutch disease can be explain by the Rybczynski theorem

[edit]Effects

In simple trade models, a country ought to specialise in industries in which it has a comparative advantage, so theoretically a country rich in natural resources would be better off specialising in the extraction of natural resources.

Other models and theories suggest that this could be detrimental. For instance, when the natural resources begin to run out or if there is a downturn in prices and competitive manufacturing industries cannot return as quickly or as easily as they left. This is because technological growth is smaller in the booming sector and the non-tradable sector than the non-booming tradable sector.[5] Since there has been less technological growth in the economy relative to other countries, its comparative advantage in non-booming tradable goods will have shrunk, thus leading firms not to invest in the tradables sector.[6] Also, volatility in the price of natural resources, and thus the real exchange rate, may prevent more investment from firms, since firms will not invest if they are not sure what the future economic conditions will be.[7]

[edit]Minimization

There are two basic ways to reduce the threat of Dutch disease: by slowing the appreciation of the real exchange rate and by boosting the competitiveness of the manufacturing sector.

One approach is to sterilize the boom revenues, that is, not to bring all the revenues into the country all at once, and to save some of the revenues abroad in special funds and bring them in slowly. Sterilisation will reduce the spending effect. Another benefit of letting the revenues into the country slowly is that it can give a country a stable revenue stream, rather than not knowing how much revenue it will have from year to year. Also, by saving the boom revenues, a country is saving some of the revenues for future generations. Especially in developing countries, this can be politically difficult as there is often pressure to spend the boom revenues immediately to alleviate poverty, but this ignores broader macroeconomic implications. Examples of these sovereign wealth funds include the Government Pension Fund in Norway, the Stabilization Fund of the Russian Federation, the State Oil Fund of Azerbaijan, Alberta Heritage Savings Trust Fund of Alberta, Canada, and the Future Generations Fund of the State of Kuwait established in 1976. Recent talks led by the United Nations Development Programme in Cambodia – International Oil and Gas Conference on fueling poverty reduction – point out the need for better education of state officials and energy cadres linked to a possible Sudden Wealth Fund to avoid the Resource curse (Paradox of plenty).[citation needed] Another strategy for avoiding real exchange rate appreciation is to increase saving in the economy in order to reduce large capital inflows which are able to cause an appreciation of the real exchange rate. This can be done if the country runs a budget surplus. A country can encourage individuals and firms to save more by reducing income and profit taxes. By increasing saving, a country can reduce the need for loans to finance government deficits and foreign direct investment.

Investments in education and infrastructure have the ability to increase the competitiveness of the manufacturing sector. An alternative is that a government can resort to protectionism, that is, increase subsidies or tariffs. However, this could be a dangerous strategy and could worsen the effects of Dutch Disease, as large inflows of foreign capital are usually provided by the export sector and bought up by the import sector. Imposing tariffs on imported goods will artificially reduce that sector’s demand for foreign currency, leading to further appreciation of the real exchange rate.[8]

[edit]Diagnosis

It is rather difficult to definitively say that a country has Dutch Disease because it is difficult to prove the relationship between an increase in natural resource revenues, the real-exchange rate, and a decline in the lagging sector. There are a number of different things that could be causing this appreciation of the real exchange rate. The Balassa-Samuelson effect occurs when productivity-increases affect the real exchange rate. Also important are changes in the terms of trade and large capital inflows.[9] Often these capital inflows are caused by foreign direct investment or to finance a country’s debt.

Similarly, it is difficult to show what is causing a decrease in the lagging sector. A case in point is the Netherlands. Though this effect is named after the Netherlands, economists have argued that the decline in the Dutch manufacturing industry was actually caused by unsustainable spending on social services.[10]

[edit]Examples

Australian gold rush in the 19th century, first documented by Cairns in 1859[10]

Australian mineral commodities in the 2000s[11]

Australian mineral boom in 2011[12]

Signs of emerging Dutch disease in Chile in the late 2000s, due to the boom in mineral commodity prices[13]

Azerbaijani oil in the 2000s[14]

Canada's rising dollar hampered its manufacturing sector beginning in the 2000s and continues today due to foreign demand for natural resources, with the Athabasca oil sands becoming increasingly dominant.[15][16]

Indonesia's greatly increased export revenues after the oil booms in 1974 and 1979[17]

New Zealand dairy industry boom in the 2000s[18]

Nigeria and other post-colonial African states in the 1990s[19]

The Philippines' strong foreign exchange market inflows in the 2000s leading to appreciation of currency and loss of competitiveness[20]

Russian oil and natural gas in the 2000s[21][22]

Gold and other wealth imported to Spain during the 16th century from the Americas[10]

The effect of North Sea Oil on manufacturing sectors in Norway and the UK in 1970-1990.[23]

Post-disaster booms accompanied by inflation following the provision of large amounts of relief and recovery assistance such as occurred in some places in Asia following the Asian tsunami in 2004[24]