Iraq allocates 7 billion dollars as receivables to foreign oil companies by the budget of 2019
1/12/2019

"The draft federal budget for Iraq for the current year 2019 allocated between 6 to 7 billion dollars, as annual financial dues paid to foreign oil companies operating in Iraq on the cost of development and operational projects," Ihsan said in a press statement on Friday.

The Iraqi parliament is studying these days the draft federal budget for Iraq, where the draft budget was built on the price of a barrel of Iraqi oil $ 54 per barrel, and the rate of exports from southern and northern Iraq, the rate of three million and 880 thousand barrels per day, mostly from the southern ports.

Foreign oil companies, notably Exxon Mobil, British Petroleum, Shell International, Lukoil, PetroChina, Malaysia’s Petronas, Japan’s Gapex, Gazprom and others, are investing in a number of large and medium oil fields in southern and central Iraq.

http://alghadeer.tv/news/detail/88561/

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.

December 2018 was probably the worst month in a decade for global equities, however the month’s sharp declines are eerily similar to those that drove the markets lower in December 2015 with the similarity extending to almost a replay of the start of 2019 to that of 2016.

The reasons, now and then, are fears of a slowing world economy with the world’s engine, China, showing signs of a meaningful slowdown. But the drivers of the slowdown this time are increasing evidence of the damage from the US-China trade war, echoing the Iraqi saying that “while reasons are many, death is the same”. However, now and then, the slowdowns were months in the making, but the markets ignored them until late in 2018.

The Iraq Stock Exchange (ISX), as measured by the Rabee Securities RSISUSD Index, on the other had quietly eked out a modest gain throughout the month to end up +1.9%. A gain which came despite sharp declines in the price of oil for the month that took Brent crude prices down about –40% from the October multi-year peak.

The ISX’s negative –15.0% return for 2018 marked the fifth year-over-year decline, on the back of declines of –11.8% in 2017, –17.3% in 2016, –22.7% in 2015, and –25.4% in 2014. The ISX further spent most of the last two years trying to break out; only to revisit the major May 2016 lows as each year came a close. This contrasts sharply with most global equities as the December sharp sell-offs took them down to about –20% off recent multi-year highs. This makes the risk-reward profile more attractive for the ISX vs. these markets as portfolio allocations are rebalanced in the light of the changed global environment.

Supporting the risk-reward profile for the ISX is the prospect of a recovery in corporate earnings. Iraqi equities should emerge from a multi-year severe economic contraction with the Telecoms being the first to emerge. Two of the major mobile operators out of three national operators reported Q3/2018 earnings that displayed the markers of recovery in earnings, margins and profits. Of the two, AsiaCell (TASC), listed since 2013, has a reported earnings span of 2012-2018 reflecting the operating environment before, during and after the ISIS conflict.

For TASC, the recovery started in late 2017 with the liberation of Mosul and the gradual return of customers lost since the 2014 ISIS invasion of a third of the country. As reported last month, TASC signalled its confidence in its future outlook with a distribution of a 12% dividend on the back of last year’s dividend yield of 14% –which in absolute terms is about a third higher than last year’s dividend. (See “Telecoms dial up Recovery” for further details on TASC).

The recovery for TASC extended to its stock price, which ended 2018 up +47%, following declines of –17% and –11% for the prior two years. TASC was joined by Baghdad Soft Drinks (IBSD), which was up +34% in 2018 on the back of 2017’s increase of +7%. IBSD is unique among the ISX’s listed companies as it continued to churn out healthy earnings growth through the downturn. Earnings for IBSD grew +13% in the first nine months of 2018, on the back of growth of +11% in 2017, +25% in 2016 and +37% in 2015 (pre-tax earnings).

TASC and IBSD’s performances stand in stark contrast to those of the banks which, as a group, had a dismal performance with the leading bank, the Bank of Baghdad (BBOB) down –52% in 2018 on the back of declines of –33% and –22% for the last two years. Other banks fared just as poorly with declines for a selected group ranging from –63% to –4% for the year. These negative returns don’t include income from dividends –which were quite high for some banks such as Mansour Bank (BMNS) or Commercial Bank Of Iraq (BCOI) that ended the year with dividend yields of 8% and 10% respectively. (See “Of Banks and Budget Surpluses” for more details on the banks).

Looking to 2019, the recovery of the banking sector would hinge on an economic recovery and a return of liquidity to economic activity, which for most of 2018 were held back by political uncertainties surrounding the May parliamentary elections.

Political uncertainty before the May 2018 elections was followed by indecisive election results, which in turn resulted in further uncertainties as the different political parties entered lengthy negotiations for the formation of a coalition government. Adding to these uncertainties was the eruption of massive demonstrations in the south demanding reform and investment into basic services. Things became clearer in early October with the promising appointments of a president and a prime minister in a fashion that broke the failed mould of the past. These were followed with the formation of a working government, which while still incomplete, can begin to act on the needed spending for a post-conflict recovery.

Paradoxically, while the political uncertainties paralyzed the government process, the government’s revenues soared with the recovery in oil prices, which has put the government on course for a two-year accumulated surplus of up to USD 24.5bn by the end of 2018. The oil markets decline from the un-sustainably high levels of the summer however are an un-welcome development but should not alter the country’s improving financial position as long as the government continues with the fiscal discipline brought on by the IMF’s 2016 Stand-By Arrangement (SBA). Moreover, Brent crude prices in a range of USD 50-60/bbl, would ensure that the government maintains this fiscal discipline and focus on reinvestments, a focus and discipline that are normally forgotten during periods of high oil revenues.

The healing effects of higher oil revenues over the last two years should begin the filter down into the broader economy over the next few months. The first evidence of this comes with the recent recovery in broad money, or M2 which acts as a proxy for economic activity, as can be seen in the chart below: –

(Source: Central Bank of Iraq, Iraq’s Ministry of Oil, Asia Frontier Capital)

(Note: M2 as of Sep. with AFC est.’s for Oct., Oil revenues as of Dec.)

While the October M2 figure is an estimate, it is based on actual M0 figures for the month and the recent M2/M0 multiplier figures. As can be seen M2 was moving sideways since oil revenues recovered in January 2016, but it began to accelerate in June 2018-Septemebr 2018 –and estimates for October suggest a continuation of this trend.

As such, this could mean that liquidity has finally begun to filter down into the economy – which should accelerate as the new government begins to act on its investment programme. Ultimately, this should filter down into the stock market, which should bring to an end the market’s divergence from its past close relationship with oil revenues – which currently is at the widest it has been for the last few years (see chart below).

(Source: Iraq’s Ministry of Oil, Rabee Securities, Asia Frontier Capital)

(Note: Oil revenues as of Dec.)

Recovery, in frontier markets, is a mirror image of Mark’s Twain’s phrase on going broke, in that recovery happens gradually and then suddenly. If similar experiences in other frontier markets (declining markets while fundamentals show gradual recovery following a long basing period) then the trend of the last few months could be followed by a sharp reversal.

However, for Iraq significant challenges remain with the huge demands for reconstruction, winning the peace, defeating a likely emerging ISIS insurgency, and controlling violence. In particular, the fragmented politics of the new parliament will continue to be a marker of risk for the government’s future stability, which would in turn pose a risk to 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), and an Adjunct Assistant Professor at 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.

Iranian tendency to delete 4 zeros from the national currency
1/6/2019

head of the "Alolaiaan" in the Islamic Shura Council , Hamid Reza Haji Babaei, Sunday that announced the cancellation of four zeros from the national currency is included on the agenda.

Hamid Reza Haji Babaei in a press statement briefed on the participation of the Governor of the Central Bank of Iran Abdul Nasser Hamati today in a meeting of "the House of Representatives of States" in the Islamic Shura Council, noting that my interest was presented during this meeting a report on the performance of the Central Bank in different fields.


The Iranian parliamentarian said that "Hamati stressed during this meeting that the government of Lador has a high exchange rate of foreign currencies."


"The governor of the Central Bank of Iran believes that the main problem in the country is not in foreign currency but in riyal, and has been standing in front of checks that are sold and bought in Dubai," Haji Babaii said.


"The road is open to China and Korea and the road to establishing relations with India is being opened," he said. "There have also been good talks with Turkey."


"The liquidity of 1,700,000 billion has lost 30 percent of its power as a result of inflation. We intend to delete four zeros from the national currency, which should be done quickly," Hamati was quoted as saying.

https://www.almaalomah.com/2019/01/06/380098/

By John Lee.

China’s Sinoma International Engineering has signed a $246-million contract to build a 6000-tonne/day clinker production line in Iraq.

The plant will be built for Iraqi Cement in the Samawah of Muthanna.

It will handle the entire production process, from raw material crushing to finished cement packaging.

Once the contract is finalised, the project is expected to  be completed within 37 months.

(Source: Shanghai Stock Exchange)

By John Lee.

Iraqi President Barham Salih has told an international conference in Rome that Iraq will remove any impediments to Iraqi and foreign private sector companies, as well as international financial institutions, donor countries and sovereign wealth funds, to invest in major infrastructure projects in the country.

He added that these projects may include deep port facilities in Basra, a highway network, new railways, airports, industrial cities and dams, and irrigation projects in the Nineveh Plain, Garamian, Erbil, as well as land reclamation in the south.

 

The following is the full text of the speech delivered by His Excellency President Barham Salih at the Conference of the Mediterranean Dialogues on Thursday afternoon, November 22, 2018:

Excellencies,
Distinguished Guests,

First of all, I’d like to thank the Italian Ministry of Foreign Affairs and ISPI for organizing this conference and the opportunity to address this distinguished audience. I also want to thank His Excellency President Sergio Mattarella and His Excellency Prime Minister Giuseppe Conte for their kind invitation to Italy.

Many may say there is nothing unique about the present day Middle East — we are living through yet another phase of conflict— as we have been plagued by conflict and powers struggles for much of our contemporary history.

However, the military defeat of DAESH and the formation of a new government in Baghdad may well represent a turning point not only for Iraq, but also potentially for the wider Middle East. Iraq has been the epicenter for change in Middle East- for millennia, Iraq has often been the catalyst, the precursor regional order— or disorder!

I dare say that there is now an opportunity to reorient Iraq’s trajectory and propel the country towards prosperity and stability. This will require embarking on fundamental internal reforms, both political and economic.

As such, Iraq is in need of an internal dialogue to address the underlying structural flaws at the crux of the post-2003 political order. Iraqis are indignant at years of conflict and the failure to deliver services. Restoring basic services like water and electricity, reconstruction of the devastated communities by the war with DAESH and repatriation of our IDPs to their homes is an urgent challenge. Corruption and abuse of public funds undermine the viability of the Iraqi state and sustains the cycle of conflict and terrorism. It is imperative to dry up the swamp of corruption.

The defeat of ISIS was undeniably a monumental challenge and impressive success for Iraqi armed forces— the Army, Police, Hashd Al Shabi mobilized by the fatwa of Ayatollah Sistani and Peshmerga forces fought side by side and have become battle hardened. In this context, we are grateful for the help rendered by our allies in the international coalition, led by the United States and which comprised many nations including our generous host Italy. The task ahead is to enhance our defense and intelligence capabilities, integrate our armed forces within the framework of our national defense institution and affirming accountability of all armed forces to the state.

There remain issues of contention between the Kurdistan Region and federal government— time to resolve these issues in a fundamental way through adhering to the constitution. There is renewed hope as the our new PM Dr Adil Abdul Mahdi and the Kurdistan leadership have pledged to move on to resolve these outstanding issues. The recent agreement to resume oil exports from Kirkuk to Ceyhan is a welcomed gesture in this context.

However, ending the crises that plague Iraq also require a reconstruction of the current political order to restore citizen trust in the government. A reformed political order must be based on the protecting constitution, the civil state that strengthens civic values, supports the role of women and their rights, and ensures a commitment to human rights.

A most important and consequential challenge for Iraq today is economic reform and regeneration. Iraq is endowed with immense natural resources, water and fertile land— and an indispensable geopolitical position that can become the hub for regional trade and economic integration. Yet decades of war, sanctions, conflicts, economic mismanagement and corruption have tuned Iraq into an extreme rentier state. This is unsustainable— we are today a 38 million population, and increasing at a rate of one million each year— youth unemployment is rampant— this is a profound security, social and development challenge.

The new government, led by Adil Abdul Mahdi, a pragmatic reformer and economist, is pursuing an ambitious economic restructuring agenda based on empowering the private sector and promoting investment. The unity of Iraq and its security is crucially dependent on strengthening infrastructure links within Iraq and with the neighborhood. This is imperative to bind the country together and to promote common interests with the neighbors and to ensure job opportunities for our youth.

Iraq will be eliminating impediments to Iraqi and foreign private sector companies, as well as international financial institutions, donor countries and sovereign wealth to invest in major infrastructure projects. These projects may include deep port facilities in Basra, a highway network, new railways, airports, industrial cities and dams, and irrigation projects in the Nineveh Plain, Garamian, Erbil, as well as land reclamation in the south. Similar experiences can be seen in Thailand, Vietnam and India, which attracted investment funding from sovereign wealth funds in Japan, China and the Gulf.

In addition to local economic growth, these projects could also contribute to regional economic prosperity. Iraq is an important strategic hub that joins the Arab world with Iran and Turkey and connects the economies of the Gulf and Europe. These could connect the countries of the region so that Iraq could become the heart of a new Silk Road to the Mediterranean.

But for Iraq to succeed and stabilize, it requires a regional order that can embrace and nurture its stability. Iraq has been the domain for regional power struggles— the rivalry over Iraq, and within Iraq, among regional and global actors have sustained and deepened Iraqi crisis. For the last forty years, Iraq has been moving from a war to a war, sanctions and terrorist onslaught and condemned to en ever deepening cycle of crises. This is got to end. It is time Iraq’s stability and prosperity is turned into a common intertest in the neighborhood. Iraq is an important country in the Arab world— This Arab anchor for Iraq is vital economically and politically, and we are emphatic about fully developing our relations with our Arab and Gulf neighbors. Our relations with Iran is also important, we share a border of 1400 km, and much social and cultural bonds — and it is in our national interest to promote good relations with Iran and alike with our northern neighbor, Turkey, which is undeniably an important economic geopolitical actor.

I just come back from a tour to our neighbors in Kuwait, UAE, Jordan, Iran and Saudi Arabia— our message was that Iraq is adamant to protect its independence and sovereignty— our priority is economic regeneration and jobs for our youth— and that we want Iraq’s stability, sovereignty and prosperity to be shared interests for the neighborhood. I made the point that Iraq’s prospects for success is real, but remains precarious, so it should NOT be burdened with further tensions and escalations in the neighborhood. The Middle East needs a regional order based on shared security interests in the face of violent extremists and also rooted in economic collaboration and integration. As in the past, sovereign Iraq with its geopolitical, cultural and economic relevance can be a catalyst for such an order.

I am sure many of you will consider this as too ambitious— perhaps mere wishful thinking. Europe did it after two devastating World Wars— many other regions of the world have moved away from decades of conflict. We must pursue this agenda for our region with vigor and determination— it is primarily our responsibility in the region— and our people deserve better. However, legions of unemployed youth, millions of IDPs in camps— poverty and conflict are the incubators for terrorism, extremism and yes immigrants fleeing our fertile an rich lands to come to the shores of Europe— this should also be shared global interest— certainly a European interest.

This conference theme is about youth and women empowerment. The agenda of reform in Iraq, and the vision for a durable regional order in the Middle East, is what will defeat violent extremism through providing education, meaningful job opportunities for our youth and prioritizing human development as a core aim for our governments and for the global powers.

Thank you.

(Source: Office of the Iraqi President)

Large turnout of Americans to buy the Iraqi currency and why?
11/21/2018

Media reports revealed today that the Americans are buying millions
of Iraqi dinars to achieve their dream of wealth overnight.


"Those supporters of US President Donald Trump’s policy are counting on his decision to revalue the Iraqi currency and become wealthy because of the exchange rate differential. Will Iraqis take advantage of this?"




"What prompted these people to buy the Iraqi dinar is rumors that Trump took over the presidency of America, which talked about the determination of the US government to control the exchange rate of the Iraqi dinar to become equal to the US currency exactly, while the Iraqi dinar is currently $ 0.0084 dollars, Its value is less than one cent.






This revealed the American media in the forefront of "CNN" had warned in 2006 of the purchase of the Iraqi currency, and despite these warnings and deepen the Iraqi crisis, but a group of websites continued to sell the dinar to customers in the United States.




It is worth mentioning that the idea of ​​winning millions of buying the Iraqi currency has spread widely in the era of Trump in particular, where some of his supporters incorrectly interpreted statements made in April 2017 in response to China’s manipulation of the yuan,

Trump said all currencies "will be on an equal footing," according to Published by The Daily Beast recently.

https://www.yaum8.com/2018/11/22/%D8…9%D9%85%D9%84/

UK-based Amarinth has secured its first order from Iraq Gates Contracting Company (IGCC) for $410K of API 610 OH1 pumps on 22-weeks FCA delivery for the Rumaila oil field, Iraq.

This first order for Amarinth from Iraq Gates Contracting Company (IGCC) of $410K is for ten API 610 OH1 condensate transfer pumps with Plan 11 and Plan 52 double seals and seal support systems.

The pumps are destined for the Rumaila oil field, a super-giant oil field located 50km to the west of the city of Basra, southern Iraq. The Rumaila field is estimated to contain 17 billion barrels, the largest oil field ever discovered in Iraq and considered the third largest oil field in the world. It is managed by the Rumaila Operating Organization (ROO), a joint venture between BOC, BP, PetroChina and SOMO.

IGCC approached Amarinth for the ten identical API 610 OH1 pumps as they were required on an extremely short lead time of 22-weeks Free Carriage Aboard (FCA) from the sea-port in the UK.

This is the sort of challenge that Amarinth has successfully delivered against many times in the past for Middle East oil and gas companies and will leave Amarinth just 20 weeks for the design, manufacture and testing of the pumps and seal support systems, including full documentation and NACE certification for all process wetted parts.

Oliver Brigginshaw, Managing Director of Amarinth, commented:

This latest order from Iraq underlines our on-going commitment and investment in the region and we are delighted that IGCC approached us to supply these pumps recognising that we were the only manufacturer that could deliver bespoke API 610 pumps in the lead time they required.

“In fact, we are seeing that many of the new projects in the Middle East need API 610 pumps on very short lead times as operators start to increase production again, which Amarinth are in a very good position to fulfil.

(Source: Amarinth)

By John Lee.

Russia’s Lukoil will start production at Block 10 in 2021, according to a report from Platts.

The Chinese company Bohai has started to drill the 4th well at the block in southern Iraq.

In February 2017 Lukoil announced Iraq’s largest discovery of oil for twenty years at the Eridu field in Block 10, with recoverable reserves in excess of 2.5 billion barrels of crude.

(Source: Platts)

(Picture: Seismic Survey at Block 10)