As part of the XXII St. Petersburg International Economic Forum, Rosneft and the Kurdistan Regional Government of Iraq signed an agreement securing the intention of the Parties to make a detailed analysis of potential gas cooperation options.

The Parties ensure stepwise implementation of the arrangements following the Investment Agreement signed at the XXI St. Petersburg International Economic Forum.

Rosneft will focus its analysis on how to participate in the integrated gas business value chain in the region in order to extract maximum efficiency from investments and operations in such areas as exploration and production, transportation and trading with especial attention given to partnership and project (third party) financing options.

Under the Agreement the Parties will elaborate an integral plan to progress the gas business within the Kurdish Region of Iraq. One step in this plan is the conduct of a pre-FEED of Iraqi Kurdistan’s gas pipeline construction and operation.

This is a key project to the monetization of the exploration and production opportunities Rosneft has been evaluating since signing a Gas Cooperation Agreement with the Kurdistan Regional Government of Iraq at the 10th Eurasian Economic Forum in Verona on 19 October 2017.

Following the outcomes of the integral development plan in terms of the attractiveness and efficiency of the options, Rosneft will decide on how to participate in the regional gas business.

(Source: Rosneft)

By John Lee.

China’s ZhenHua Oil [Jinhua] has signed a service contract to develop the southern part of the East Baghdad oil field.

Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] said that the signature of the contract was significance for Baghdad because it is the first project in the capital.

The development of the field will raise the production of the Midland Oil Company.

As part of the deal, the project will also provide social services, and see the construction of a housing complex with 2000 residential units.

(Source: Ministry of Oil)

The victory of Shiite cleric Moqtada al-Sadr’s party in Iraq’s recent election has put the United States in a wait-and-see position, Defense Secretary James N. Mattis told reporters yesterday in Colorado Springs, Colorado.

The secretary was in Colorado to preside at the change-of-command ceremony for North American Aerospace Defense Command and U.S. Northern Command.

“History tells us that all wars eventually end, and the decisions you take following a war — comparing the United States leadership after World War II, versus what came out of Versailles after World War I — can set the conditions for the future,” the secretary said, adding that in this case, the United States must first see who is going to be the prime minister, because no party or coalition won enough to govern Iraq on its own.

After World War II

“First, all wars eventually come to an end. By 1948, ’49, after the vicious World War II, the Pacific Island Campaign was as vicious a fighting between two nations that’s ever been in history,” Mattis said. “We all know what Germany did during World War II with death camps [and] with invasions across Europe.”

And yet, by 1948 and 1949, he said, “we were standing up NATO to defend Western Europe, and we were working with Germany.”

“The Marshall Plan was underway,” Mattis said. “We were [also] working with Japan.” Germany and Japan now are U.S. treaty allies, he noted.

Mattis pointed out that despite the rout of the Islamic State of Iraq and Syria, some terrorists remain in Iraq. “But it was interesting, wasn’t it, that in the midst of everything going on next door in Syria, having recently destroyed the ISIS strongholds in Iraq – they are still isolated cells of them, of course,” the secretary said.

A Responsive Government

The secretary reiterated the United States will have to see whether the new Iraqi leaders form a responsive government.

Mattis noted the Marshall Plan was met with initial skepticism.

“People in 1944 were told basically in five years we’ll be serving alongside German troops and sending locomotives and railroad tracks to Germany,” he said. “We would have laughed in your face, said that’s not going to happen; this is a war to the death. Damn near lost.”

But that’s exactly what we did, he noted.

“So wars rub the veneer off all of us and leave the passions really exposed, and now it’s time for strategic thinking, for looking to the future, and determining how the Iraqi people can dictate their future,” the secretary said, “not external threats from Iran, not money from Iran, not internal threats from ISIS or other terrorists.

“This is between our two governments, and we’ll see what government they end up with,” Mattis said. “So we’ll play that forward. It’s too early to tell.”

(Source: US Dept of Defense)

By Mustafa Saadoun for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News

Many Iraqi legislators call for canceling election results

On May 21, a group of Iraqi parliament members submitted a request to the speaker to cancel the results of the May 12 parliamentary elections. The group also called for dissolving the Independent High Electoral Commission, discontinuing electronic voting and reinstating manual voting and sorting, with many legislators saying the elections were sabotaged.

The next day, six Kurdish parties of the Iraqi Kurdistan region threatened to boycott the political process if their demand to cancel the results in Iraqi Kurdistan and other contested areas is not met. However, the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP), the two main political parties that came in first and second in the provinces of the region, did not join in on the complaints.

On May 18, the Independent High Electoral Commission announced the results of the elections. It also said that ballots cast in 103 polling stations in five provinces — Baghdad, Anbar, Salahuddin, Ninevah and Kirkuk — had been annulled because of sabotage and suspicions of fraud. However, the commission did not say whether the cancellation of those ballots actually changed the results.

Out of 329 members of the Iraqi parliament, 176 agreed on canceling the results of the elections, legislator Tawfiq al-Kaabi said. This would mean that the number of parliament members calling for the elections to be voided has reached the majority required for a law to be passed.

Legal analyst Ali Jaber told Al-Monitor, “The Iraqi parliament has the right to dissolve the current electoral commission and cancel the results of the election if it is proven to be sabotaged and fraudulent.”

Said al-Kakai, a member of the Independent High Electoral Commission, agreed with those calling for the cancellation of the results and the reinstatement of manual sorting. During a televised interview aired May 18, he said results that had been double checked in six provinces did not match with the original tallies, with the worst cases having differences ranging from 12% to 63%.

Former Prime Minister Ayad Allawi, the leader of the predominantly Sunni National Coalition, is also skeptical of the results, although his grouping won 21 seats. He is suspicious about the vote in refugee camps and abroad and called for the cancellation of those results. He also said he supports manual vote sorting in the contested provinces.

Parliament Speaker Salim al-Jubouri, who lost on May 12 despite being a top National Coalition candidate, said in a recorded message two days after the elections, “There is a conspiracy targeting me specifically. It appears to be part of a more elaborate plan. Yet most of its threads and tools have been revealed, and I will be disclosing all information to the public.”

Shiite parties were also skeptical of the results. Mohammad al-Sahyoud, a candidate from the State of Law Coalition, called “for canceling the results of the elections, extending [the term of] the parliament and announcing a caretaker government due to electoral fraud and sabotage” in a May 17 press statement.

Political analyst Ahmad al-Abiad told Al-Monitor, “The US supports the necessity of having manual sorting for 5% of ballot boxes. This might happen in the coming days.”

He added, “The suspicions around the results of the election are great and the calls for canceling them are even greater, but we do not have any constitutional procedure for canceling the results of elections. So the only solution available for political blocs is to pass a law in parliament canceling the elections before the constitutional end of their term June 30. The government can also appeal the parliament’s decision to the Federal Supreme Court of Iraq.”

The State of Law coalition, which won 25 seats in parliament, was a big loser in the elections, seeing its total drop 66 seats from the 2014 elections. The lower number could jeopardize the coalition’s involvement in the next government.

Skepticism about the results emanated from political parties and groupings that received fewer seats than expected.

Some individuals from other coalitions also called for canceling the results. Member of parliament Mohammed al-Lakash of the National Wisdom Movement (Hikma), which won 19 seats in the new parliament, called for canceling the results because of “fraud attempts, voter intimidation and bribery.”

The Iraqi Turkmen Front in Kirkuk, led by member of parliament Arshad al-Salihi, objected to the election results in the province and asked its supporters to protest in the streets of Kirkuk. It also sued the Independent High Electoral Commission.

This is the first time since 2005 that election results have faced such strong objections. The complaints seem to be coming from all political parties except for the Sairoon Alliance.

The alliance led by the Shiite cleric Muqtada al-Sadr won 54 seats in the next parliament. It is the only coalition that did not doubt the results of the elections despite Sadr’s constant objections to the current electoral law.

While it is possible that a law canceling the results could be passed, such a step seems unattainable given the short deadline left for the parliament. The parliament members would first have to hold talks in order to reach a political agreement on the topic. This might lead the country into chaos, so an alternative quick solution that might please all political parties might be to manually sort the ballot boxes of some polling stations.

By John Lee.

Reuters reports that Bain Capital Credit has been chosen for a 900-million-euro ($1.06 billion) deal to rescue the heavily-indebted Italian engineering firm Trevi.

Among Trevi’s current projects is the stabilisation of Iraq’s Mosul Dam.

More here from Reuters.

(Source: Reuters)

By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

After the Sairoon (On the Move) Alliance emerged victorious in the May 12 Iraqi elections, its leader, Muqtada al-Sadr, has been seeking meetings with the leaders of the other top-vote-getting alliances to discuss the possibility of forming the largest bloc in the new parliament and ultimately form the new Cabinet.

At a May 19 joint press conference after talks with Sadr, Prime Minister Haider al-Abadi, whose Al-Nasr (Victory) Alliance came in third, said, “During our meeting, we agreed to work together and with other parties to expedite the process of forming a new Iraqi government.”

A few days later, on May 22, Al-Nasr spokesman Hussein al-Adeli said Abadi had reached an agreement with Sadr on a map for forming a new government. Abadi himself, in his weekly press conference the same day, said his coalition was close to reaching an understanding with the Sairoon Alliance “to form a strong technocratic government.”

In a May 20 meeting with Hadi al-Amiri, leader of the second-place Fatah Alliance, consisting of the political wings of the pro-Iran militias of the Popular Mobilization Units, Sadr had said, “The process of government formation must be a national decision, and importantly, must include the participation of all the winning blocs along a national path.”

Sadr appeared to select the phrasing “national decision” and “national path” especially for Amiri, who had days earlier met in Baghdad with Qasem Soleimani, commander of Iran’s Quds Force, in an attempt to form a pro-Iranian parliamentary bloc.

Sadr also held talks with Ammar al-Hakim, leader of the Hikma Alliance, on May 21 and spoke of the importance of forming the upcoming government in a way that ensures “fixing the path of the political process to suit the aspirations of the Iraqi people who reject sectarianism and corruption.”

Sadr also met May 21 with Iyad al-Allawi, leader of the predominantly Sunni Al-Wataniyah Alliance, and two days earlier had received a letter from Kosrat Rasoul Ali, first deputy for the secretary-general of the Patriotic Union of Kurdistan, in line with discussions on potential alliances requiring Sunni and Kurdish participation alongside the Shiite majority to form a government.

After failing to assemble a parliamentary bloc under Iranian auspices consisting of the four largest Shiite lists — the State of Law Coalition and the Al-Nasr, Hikma and Fatah Alliances — Iranian Ambassador to Iraq Iraj Masjedi attempted to lure Sadr to his side to prevent the formation of an anti-Iran government. Masjedi told Iran’s Al-Alam TV May 21, “Iran has constructive relations with all parties, blocs and coalitions that won the majority of parliamentary seats in the fourth elections.”

Masjedi also denied rumors of a dispute between the Iranian leadership and Sadr, saying, “Iran’s relations with Sadr are historical and deep-seated. The country had close relations with the martyrs Mohammed Baqr and Mohammed Sadeq al-Sadr [Muqtada’s uncle and father, respectively].” Masjedi added, “Iranian officials’ relations with Sadr are friendly and brotherly, and many of them, including Soleimani, appreciate Sadr greatly.”

In fact, Sadr’s father and Iranian officials were not friendly at all. His representative in Iran, Jaafar al-Sadr, son of Mohammad Baqr, was arrested and his office shuttered in Qom in 1998. In addition, everything indicates that relations between Muqtada and Iran have gone downhill as well in recent years.

Sadr had made several statements critical of Iranian interference in Iraqi decision-making, and his alliance competed against the pro-Iran lists — Al-Fatah and the State of Law Coalition — in the elections. In the preceding years, Sadr’s supporters chanted slogans against Iran at protests calling for reform. Sadr, unlike his rivals Maliki and Amiri, has not met with Soleimani in recent years.

Sadr greeted a group of ambassadors from neighboring countries May 19 after his list’s victory was confirmed. In attendance were the ambassadors of Saudi Arabia, Jordan, Kuwait, Turkey and Syria. Official Iranian websites, including Al-Alam’s, criticized Sadr’s relations with Saudi Arabia and charged that Riyadh had been behind Iran’s exclusion from the meeting.

Sadr insists that the largest parliamentary bloc include all Iraqi components, which would be unprecedented if successful. The largest parliamentary bloc has always consisted solely of Shiite parties, which then negotiated with Kurdish and Sunni blocs over forming the government.

On May 21, Sadr tweeted, “I am Muqtada. I am Shiite, Sunni, Christian, Saebean, Yazidi, Islamist, civil, Arab, Kurdish, Assyrian, Turkmen, Chaldean and Shabak. I am Iraqi. Do not expect me to side with any sect against the other to renew enmities and lead to our demise. We are headed toward a comprehensive Iraqi alliance.”

Al-Hayat newspaper on May 21 cited Iraqi sources close to Sadr discussing efforts to bring together Abadi, Allawi, Kurdistan Democratic Party leader Massoud Barzani and Sunni Al-Qarar Alliance leader Khamis al-Khanjar to explore forming the leading parliamentary bloc with all their parties’ participation. If Sadr succeeds, Iraq might overcome sectarian quotas in forming a government, and Iranian influence would dwindle with its political allies, Al-Fatah and the State of Law Coalition, excluded from the bloc.

Coalition Trainers in Iraq Helping ‘Make a Good Force Better’

The coalition training effort in Iraq is all about “making a good force better,” said Italian army Brig. Gen. Roberto Vannacci, the deputy commanding general for training for Operation Inherent Resolve’s Joint Forces Land Component Command in Iraq.

Iraqi security forces continue to press the fight against the Islamic State of Iraq and Syria by rooting out and destroying pockets of ISIS terrorists in the country. From the nadir when ISIS was knocking on the gates of Baghdad, Iraqi forces have taken on the terror group and liberated almost all of the territory the group once held.

The trainers of the coalition’s Operation Inherent Resolve gave Iraqi security forces the training they needed to expel the violent extremist group, Vannacci said during a video teleconference from Baghdad to reporters in the Pentagon.

“By all measures, the Iraqi security forces have already proven that they are more than ready and capable of securing the country,” Vannacci said. “On May the 12th, Iraq’s first national election since the rise of ISIS was held peacefully despite repeated warnings from ISIS of their intent to use violence to discourage Iraqis from voting. This is mostly thanks to the training and preparations conducted by Iraqi security forces to ensure that all Iraqis were able to exercise their right to vote free from fear of harm.”

Vannacci said the coalition continues the mission to train and equip Iraqi security forces, to ensure the lasting defeat of ISIS, and to set the conditions for full-on stabilization efforts.

“To date, more than 150,000 Iraqi security forces have been trained across multiple locations in Iraq,” the general said.

That training runs the gamut from full-on combat to policing to stabilization, he said.

Demining, Lifesaver Training

In addition to basic combat skills, the coalition trainers have also stressed demining operations and combat lifesaver training. “In Western Baghdad, more than 25,000 police and border guard personnel have been trained in law enforcement and border security procedures,” Vannacci said.

And, more than 18,000 members of Iraq’s elite counterterrorism force received coalition training, the general said.

The coalition also trains and equips the Iraqi air force, Vannacci said. This, he said, includes training Iraqis to fly and maintain their aircraft.

Training the Iraqi forces is a multinational effort, the general said. “Australian forces in Taji and Spanish forces in Bismayah are training ground troops,” Vannacci said. “In the Kurdish region and in western Baghdad, Italian personnel are training army and police forces. Also, German forces are providing training in the Kurdish region while Danish forces are leading the training in Al Asad Air Base.”

The coalition has also provided Iraqi forces with more than $2 billion in equipment, the general said.

Providing Equipment

“Seventeen Iraqi army brigades have been provided with initial equipment sets, including personal equipment, small arms, ammunition, around 1,000 nontactical vehicles and over 1,100 armored vehicles,” Vannacci said.

Efforts to train police and border guards continue apace with the coalition providing additional equipment to around 20 federal police and border force brigades, including provisioning more than 180 prefabricated, border guard and police presence infrastructure since the beginning of 2018, he said.

The coalition has also provided more than 400 explosive detection and demining kits to assist in the detection and removal of improvised explosive devices, Vannacci said.

Iraqi security forces have shown their worth as part of the coalition by conducting strikes in Syria, where they targeted ISIS activity designed to export violence, the general said.

“The hard-fought victories in Ramadi, Mosul and Tel Afar prove that the Iraqi security forces have always been capable of fighting for the freedom of all Iraqis,” Vannacci said. “The coalition’s goal is simply to make a good force better and to enhance to capability of the Iraqi security forces to ensure Iraq’s lasting peace and security. By all measures, they are well on their way.”

(Source: US Dept of Defense)

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Market Review:  The Elections, the Economy and the Stock Market

A key aspect of the Iraq investment opportunity is arbitraging the delta between real and perceived risk. The perceptions of the widely covered parliamentary elections fit within this arbitrage opportunity in that they miss the mark by a wide margin.

The May elections did not result in an overall winner with an outright majority (165 seats among the parliament’s 329 seats) enabling the formation of a government. Instead, they produced winners and losers who will eventually form a coalition government. At the lead is Sairoon, a coalition of Shia cleric Muqtada Al Sadr, Communists and Liberals, with 54 seats; followed by Fateh, a coalition of the political arms of the Popular Mobilisation Units (PMU’s), with 48 seats; finally, Nasr, the Prime Minister’s (PM) coalition, with 42 seats.

The rest are made up of: five different coalitions each with 18-25 seats; four coalitions each with 4-6 seats; and finally, a gaggle each with 1-3 seats. The next step would be the formation of an alliance of coalitions that would, on the first day of the new parliament by end of June, have the largest number of seats to enable it to have a PM with a chance of forming a government. The whole process should take a few weeks but, in the past, it took a few months.

The winning coalitions, irrespective of their lead player, are all cross-sectarian unlike the prior ethno-sectarian monolithic blocs that dominated over the past 14 years – a division that was the root cause of Iraq’s political and social instability since 2003. Moreover, for the first time since 2003 there was a strong mass opposition to these ethno-sectarian monolithic blocs that manifested

in an active non-participation movement. This led to an election participation turnout of 44.5%, which in turn had huge effects on the seats won and lost by the different coalitions.

Drilling further into the leading blocks shows neither they nor their leading players conform to simplistic assumptions. For example, Muqtada Al Sadr is often described as a firebrand cleric who is anti-secular, anti-Western and pro-Iran as a result of his leading role in Iraq’s dark history since 2003. Yet, at least outwardly, he went through a transformation to a firebrand cleric who is anti-Iran and anti-its proxies in Iraq, whose alliance with Communists and Seculars kept the 2015 pro-reform demonstrations alive and relevant.

Moreover, he was a leading player in rebuilding Iraq’s relationship with Saudi Arabia and the UAE – both received him in their capitals in 2017 to further this rebuilding. The second leading coalition, Fateh, a grouping of the political arms of the supposedly pro-Iranian PMU’s, although not all are, is led by Iranian-allied Bader Organization. Yet Bader has been a part of every Iraqi government since 2005, responsible for the Ministry of the Interior, and as such a major part of the next phase of Western support for Iraq in rebuilding its security apparatus in the long-term fight against ISIS.

The most visible fruit of which has been the decline of violence since the end of the Mosul campaign and in the first violence free elections (see chart below). Finally, the Naser coalition which is led by the PM and while much admired for leading the fight against ISIS, he suffers from perceptions of failure to address the demands of the demonstrators since 2015. Although an unfair criticism given the overriding priority to deal with the ISIS invasion, it was behind much of the reason for his collation’s third place showing. Nonetheless, his chances of returning as a PM capable of leading a workable government are high.

UN Casualty figures for Iraq November 2012 – April 2018

(Source: United Nations Assistance Mission for Iraq (UNAMI), for 8 months from 2015 UNAMI, in some cases, could only partially verify certain incidents)

Optimists see the potential for a coalition governing with a clear reform agenda and with a proper opposition in parliament providing a check on the government. The pessimists however see a repeat of the prior coalition governments that were made up of all groupings in parliament, and thus no real change to the failures since 2003. However, irrespective of who would be right, a few things are clear that would have implications for Iraq’s economy, the investment opportunity in Iraq and the stock market.

The combination of the lead by Sadr’s coalition, the continued pro-reform demonstrations since 2015, and the large active non-participation movement together imply that the upcoming government would need to address the issues at the heart of the public’s anger. This would be the provision of services and reconstruction, which require much needed overdue investments in the country’s infrastructure and the reconstruction of the liberated areas.

The new oil price dynamics have a huge positive implication on Iraq’s ability to provide funds for this massive investment spending estimated at USD 88bn over the next five years. Current estimates for the country’s revenues for 2017-2022 are based on Iraqi oil price assumptions of USD 45.3/bbl in 2017 and increasing to USD 47.1/bbl by 2022. These estimates would result in a cumulative deficit of USD 17.6bn, thereby increasing the debt load, necessitating borrowing to fund the deficit and restrict the ability to fund reconstruction. This implies the need for outside aid and investment to fund reconstruction.

However, different assumptions based on the new oil price dynamics would provide a vastly different picture. For instance, using realized prices of Iraqi oil of USD 49.2/bbl for 2017, and assuming Iraqi oil prices of USD 60/bbl for 2018, then declining to USD 51/bbl in 2022, would produce a cumulative surplus of USD 47.4bn instead of the earlier assumed cumulative deficit of USD 17.6bn. In other words, this equals a turnaround of USD 65bn in potential available funds.

While, an assumption of an oil price of USD 64/bbl for 2018, then declining to USD 55/bbl by 2022 would produce a cumulative surplus of USD 78.2bn, or a turnaround of USD 95bn in in potential available funds.

Granted some of this windfall will result in higher government spending, especially on populist measures which would be detracting from the funds available for infrastructure investment. Though this would nevertheless be a large positive for consumer confidence and economic activity, all of which would ultimately support the earnings profile of consumer service providers and the banking sector.

In the immediate term, given the impossibility of forecasting future oil prices out to 2022, if Iraq’s oil price was to hold the YTD average for the remainder of 2018, it would convert the IMF 2018 projected deficit of USD 9.5bn into a surplus of USD 10.9bn. This means a turnaround of USD 20bn in potential available funds. Coupled with a slight positive variance to 2019 projections, this would provide Iraq with enough fiscal flexibility to start directly funding the immediate needs for reconstruction. This changed fiscal position would further allow it to comfortably access debt markets at reasonable rates to build upon this reconstruction. The potential addition of regional investments led by Saudi Arabia, as discussed here in the past, could lead to a self-reinforcing investment cycle.

The stock market’s action in the weeks before and after the elections has been business as usual and very much followed the same themes discussed over the last few months. This is an indication of how much negative news the market has discounted over the last three years that saw the index, as measured by the RSISUSD Index, decline -68% from its 2014 peak to the 2016 bottom.

Through 22nd May the market was down -3.9% for the month, bringing the year to date gains to +5.8%. The daily market action has been almost identical to that of the prior month with the same low turnover, the same buying in the selected leading stocks and the same selling in the banks based on the same fears.

The response of the currency to the elections for the most part matches that of the market with the market price of the Iraqi Dinar (IQD) weakening versus the USD in the days around the elections but returning to the same levels at the start of the month. The upshot, is that the premium of the market price of the IQD over the official exchange rate increased from 1.2% at the end of April, reaching 2% just before the elections and is now back to 1.2%.

The issue that continues to dominate the market is the timing of the return of liquidity as a result of the expansionary effects of higher oil prices and the end of conflict. As discussed here in the past, the observed time lag between Y-Y changes in oil revenues and Y-Y changes in M2 has been about 7-9 months which suggests that M2 growth should see improvement over the next few months as the chart below implies: it shifts the Y-Y percentage change in M2 back by 9 months versus the Y-Y percentage change in oil revenues. However, it is complicated by the additional time taken up by pre and after elections, and the additional time needed for the formation of the new government. All of which will delay this recovery but would likely result in a large back-end loaded return of liquidity.

Oil Revenues (green) vs the RSISUSD Index (red)

(Source: ISX Central bank of Iraq, Iraq’s Ministry of Oil, AFC.)
(Note: M2 as of Jan. with AFC est.’s for Feb & Mar, Oil revenues as of Mar with AFC estimates for Apr & May)

As argued here in the recent past, the backdrop continues to be positive: historically the equity market, as measured by the RSISUSD Index, has tended to follow oil revenues with a time lag of 3-6 months as the chart below shows.

Iraq’s Oil Revenues (green) vs the RSISUSD Index (red)

(Source: Iraq’s Ministry of Oil, Rabee Securities, Iraq Stock Exchange, AFC)
(Oil revenues are as of Mar with estimates by AFC for Apr & May)

Given the time lag involved and the delay over the formation of the new government, this will probably unfold over the next few months and the recovery will likely be in fits and starts with plenty of zig-zags along the way. This continues to underscore the opportunity to acquire attractive assets that have yet to discount a sustainable economic recovery.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS). He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

_______________________

[1] Source of current estimates on Iraq (deficit, oil price, revenues etc) are from the IMF Iraq Country Report No. 17/251 (http://www.imf.org/~/media/Files/Publications/CR/2017/cr17251.ashx). Updated assumptions are the author’s calculations based on the above source

By John Lee.

Bashneft, a subsidiary of Russia’s Rosneft, has found oil at its Salman-1 exploratory well at Block 12 in Iraq.

In a statement, the company said that an exploration well was successfully drilled to depth 4,277 metres; oil was found, “which gives grounds for expecting the discovery of industrial reserves“.

Rosneft said it views this discovery as an important milestone in the development of exploration and production projects abroad.

China-based company Zhongman Petroleum and Natural Gas Group (ZPEC) was previously announced as the general drilling contractor.

(Source: Rosneft)

The UK’s Serious Fraud Office (SFO) has brought further charges against two individuals facing trial in relation to the Unaoil investigation.

Basil Al Jarah and Ziad Akle have both been charged with conspiracy to give corrupt payments to secure the award of a contract worth US$733 million to Leighton Contractors Singapore PTE Ltd for a project to build two oil pipelines in southern Iraq.

  • Basil Al Jarah was charged on 15 May 2018 with two offences of conspiracy to give corrupt payments, contrary to section (1) of the Criminal Law Act 1977.
  • Ziad Akle was charged on 16 May 2018 with one offence of conspiracy to give corrupt payments, contrary to section (1) of the Criminal Law Act 1977.

Basil Al Jarah and Ziad Akle will appear before Westminster Magistrates’ Court on 23 May 2018.

The SFO would like to thank the Australian Federal Police for the assistance it provided in connection with our investigation.

The investigation is ongoing.

(Source: SFO)