Iraq: The awakening of an economic giant

[ronscarpa]

Iraq: The awakening of an economic giant

Financial Times / ME - September 15 2010 @ 17:34 PM

President Barack Obama officially declared the end of US combat operations in Iraq on August 31, but the news from the country continues to be dominated by the ongoing political turmoil and violence. Iraq clearly remains a volatile country and is likely to be so for years to come. What is less obvious, however, is that beneath the unsettled surface, Iraq is an economic giant, slowly but surely awakening after a 30-year slumber.

The first stirring of economic life began last year, when 12 new contracts were awarded to international oil companies to increase production in 10 of Iraq’s grossly under-exploited oil fields.

Iraq’s oil reserves are the fourth largest in the world, after Saudi Arabia, Venezuela and Iran, but production today is barely 2.5m barrels a day, making Iraq at best a middle-weight on the international stage. The new contracts should bring a substantial stream of investment in the country’s neglected oil infrastructure, allowing production to rise to more than 10 mb/d by 2020 (the government’s own target is 12 mb/d by 2016).

This would make Iraq one of the world’s biggest oil suppliers, with only Saudi Arabia and Russia capable of producing more. At today’s prices, Iraq’s oil revenues would rise to about $280bn a year, almost $10,000 for every man, woman and child, compared with the $70bn or so which it manages currently.

Oil wealth is, of course, not always a blessing for a nation, and Iraq’s recent past is testimony to this. But the coming windfall has the potential, if properly managed, to transform Iraq into one of the wealthiest countries in the region and a heavy-weight on the international oil stage. Indeed, we calculate that by the end of the decade, the increase in oil production could quadruple gross domestic product per capita and leave Iraq with financial reserves in excess of $350bn, putting it on par with Saudi Arabia, Kuwait and the UAE today. Iraq, currently borrowing from the International Monetary Fund to make ends meet, could become one of the world’s main exporters of capital.

Altruism aside, the benefits to the rest of the world of a resurgent Iraq are also great. A new and reliable source of oil is welcome to importing countries. Reconstruction presents massive opportunities, particularly for the regional construction and related sectors. A prosperous and open Iraqi economy, with its 30m-plus citizens, is a sizeable new market for goods and services offered by global and regional businesses.

However, there are a number of formidable obstacles and challenges. First is security. Current levels of violence are unlikely to hinder significantly plans to increase oil production as most of the big fields lie in the relatively stable Shia south. But for the oil windfall to benefit the wider economy, improved national security is a must.

The second obstacle is domestic politics. A new oil law in the pipeline raises uncertainties regarding the legal and regulatory environment for the industry. Moreover, political instability, incompetence and inertia are also threats to the delivery of crucial infrastructure to the oil industry, such as roads, electricity and water, without which international oil companies are unlikely to be able to deliver on the planned production rise.

Finally comes economic policy and governance. For the wider economy and population to benefit from the country’s prospective wealth, economic policy must address the big issues of poverty, particularly in rural areas, health, education and more. Corruption must also be weeded out. So far, the authorities have done pretty well in stabilising the war-battered economy, and have made significant steps towards improving transparency and accountability. But this has been achieved with the guiding hand of the IMF and other organisations. It is unclear how governance and policy will fare when Iraq goes it alone.

Will Iraq overcome these obstacles and realise its full economic potential? The uncertainty is great. But then again, so is the opportunity. We remain hopeful that once a new government is in place, Iraq will then resume its awakening as an economic giant.

- Farouk Soussa is Citigroup’s chief economist for the Middle East

http://www.ft.com/cms/s/0/9208ae8a-c0e4-11df-99c4-00144feab49a.html

[Heli Pilot]

Great article. Thanks for the post.

[zantac]

Great find Ron

If you’re feeling a bit down after a week of BS great finds like this is just the perfect TEXAS TEA we should all be drinking SOOOOOOOOOOOOOOOOOOOOON

[carlablum]

This is huge!!!!!!!!!!!!

So tell me.......... How could one of the potentialy world’s biggest oil suppliers with oil revenues that could rise to about $280bn a year compared with the $70bn or so which it manages currently, have a currency that is worth toilet paper???????!!!!!!!!!!!!!!!!!!!!

Go RVVVVVVVVVVVVVVVVVVVV!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

OK I'm done

I am soooo excited!!!!

2 weeks before dad died he told me to hang in there and that Iraq will be so rich that there is now way the currency can't go up!! I will hang in there as long as it takes!!

Carla

Oh and Thank you so much for the post, Ron!!!

Edited September 15, 2010 by carlablum

[Richardk]

It's good to see something positive after reading so much "if" rumors.

Thanks for the post.

Go Rv/RI

[splicer09]

Great post. Even when Iraq has to go it alone they will still have the help and guidance from the US and others. The rate has to climb.IMO

[ronscarpa]

Great find Ron

If you’re feeling a bit down after a week of BS great finds like this is just the perfect TEXAS TEA we should all be drinking SOOOOOOOOOOOOOOOOOOOOON

Thanks (+) Z - I'm ready when you are - good stuff...! Just come on over to Las Vegas - we do it right here...!

RON

This is huge!!!!!!!!!!!!

So tell me.......... How could one of the potentialy world’s biggest oil suppliers with oil revenues that could rise to about $280bn a year compared with the $70bn or so which it manages currently, have a currency that is worth toilet paper???????!!!!!!!!!!!!!!!!!!!!

Go RVVVVVVVVVVVVVVVVVVVV!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

OK I'm done

I am soooo excited!!!!

2 weeks before dad died he told me to hang in there and that Iraq will be so rich that there is now way the currency can't go up!! I will hang in there as long as it takes!!

Carla

Thanks Carla (+) ... You're tops and a tough act to follow...!

Be Blessed - RON

Oh and Thank you so much for the post, Ron!!!

[skiguy]

Think about this one...If Iraq would revalue today, they would potentially get all of their reconstruction contracts for less than they originally planned. (Based on contracts being written in USD or others not IQD) If they contineu t write contracts with these big companies, they end up getting lots of work done at less than they had origianlly bargained for. They call this a pareto superior efficient bargain in economics. Think about it, Shabibi is one smart guy when it comes to monetary policy and economics. You thik he isnt thinking the same thing? Good chance he sees this and is waiting for the right time to revalue. As a note, this extremely lucrative deal would be null and void with a redenomination.

[Norm Walker]

This is a good article, and more proof of why the Dinar could RV at $3 something.

[dinariac]

Think about this one...If Iraq would revalue today, they would potentially get all of their reconstruction contracts for less than they originally planned. (Based on contracts being written in USD or others not IQD) If they contineu t write contracts with these big companies, they end up getting lots of work done at less than they had origianlly bargained for. They call this a pareto superior efficient bargain in economics. Think about it, Shabibi is one smart guy when it comes to monetary policy and economics. You thik he isnt thinking the same thing? Good chance he sees this and is waiting for the right time to revalue. As a note, this extremely lucrative deal would be null and void with a redenomination.

Excellent economics refresher. I needed it. It's only been 30 years since I took it in college. And, as you stated, Shabibi is a shrewd financial wizard and is NOT ignorant to the facts and truths of the world's economics and finances.

Thanks for the find and post ronscarpa

[Uncle Barkie]

Great find Ron.

[Phoenix]

First posted Augs 29th

A New Dawn....a New Day.

As of Wednesday September 1st Operation New Dawn begins in Iraq.

We celebrate the launch of the last and final phase for the United States military in Iraq and with great hope and expectation we pray to see great things for the nation of Iraq and it's people.

For years the specter of war and blood shed has haunted the nation of Iraq bringing pain, suffering and sorrow but through unwavering perseverance in the face of all odds, victory and freedom has appeared from beneath the ruble of warfare and now stands tall to face the bright light of a new day.

The New Dawn brings hope and opportunity to the people of Iraq and hope and stability to the region.

The New Dawn brings the light of hope to illuminate the darkness allowing the seeds of tomorrows great nation to sprout...taking root in the soil well tilled by a multitude of hands...from a multitude of nations for the welfare of all.

This Dawning of the New Day brings with it change and hope for the peoples of Iraq and the world will witness the birth of a new government....a new budget...and a new economy.

The Sleeping Giant has awoken....awoken to the light of the New Day....and the world will witness the rebirth of Babylon and her mighty towers shall stretch to the sky and all the world will be amazed as the great wealth once hidden....is seen sparkling as new gold in the bright clear light of the new day.

As has been said from days of old...

"It is always darkest right before the dawn" and right now it is evident that this saying has never been more true.

In the darkness before this great new dawn of this great new day confusion is rampant...shadows...dark images...sounds in the night and howls of creatures unseen...chaos some would say.

But know full well the new dawn is about to break and as the light of the New Day begins to flow the darkness will flee and the truth will be made evident and jubilation will abound as all marvel at the birth of this great nation of Babylon rising like a mighty tower to take it's rightful place as the Queen of the Nations at whom all will marvel as the merchants of the earth rush to her and the peoples of the earth will drink deep of her riches.

All hail Babylon and may all whom drink from her cup prosper now and forever.

September 1st 2010...the New Dawn....of the New Day.

Phoenix

Edited September 16, 2010 by Phoenix

[Traconesu02]

Thanks for the post ronscarpa

[RicknSaudi]

Thanks Ron. This just lends credibility to Iraqs ability to substantiate a high RV. Gooooo Baby!

[Eddinar]

Great post Ron...Excellent News!

[Ninjaturbo02]

This was a nice article... Thank you for the information... i enjoyed reading this.

[Kr3W]

LOVED reading this... hang on in there everyone! It's gettin close!

[tampa1000]

NICE!!!! Thanks for sharing!!!

[slatesrh]

shes having another contraction Hopefully this baby will pop soon!!!!!!