Iran: Trade exchanges with Iraq will be made in alternative currencies
9/2/2018



The head of the Iranian-Iraqi Chamber of Commerce Yahia Al-Ishaq announced the suspension of the dollar exchange between the two countries in terms of trade exchanges between the two countries.

The dollar will be replaced by other currencies such as the euro, the Iranian riyal and the Iraqi dinar, the Mehr news agency reported.

"Most of the trade exchanges will take place in alternative currencies," the head of the Iranian-Iraqi Chamber of Commerce said.

"Another part of the trade between Iranian exporters and Iraqi traders will be through a trade-off system or by consensual forms between the parties."

He said that ‘the volume of transfer of funds between Baghdad and Tehran through banks very few, despite the existence of transactions between the two countries worth 8 billion dollars.’

Yahya al-Ishaq pointed out that "solving banking issues between the two countries should be one of the priorities of the main Iranian economy, in order to remove obstacles to the establishment of a joint Iranian-Iraqi bank."

"Iraq is Iran’s second largest trading partner after China," he said. "Iran’s exports to Iraq are very different from Iranian exports to China."

Iraqi Prime Minister Haider al-Abbadi said in August that Baghdad rejects any economic sanctions against any country, especially neighboring countries, while stressing Iraq’s commitment not to deal with the US dollar with Iran.

Washington has imposed sanctions against Iran in several areas, including bank transfers in US currency, metals, aluminum, steel, etc., while energy and oil will be in November.

The United States withdrew from the nuclear deal with Iran last May, announcing the resumption of severe economic sanctions against Tehran, while the local Iranian currency has seen a significant devaluation of its value against foreign currencies.

http://www.ikhnews.com/index.php?page=article&id=171655

By John Lee.

Iraq’s State Oil Marketing Organization (SOMO) is reported to be close to a deal with China’s state-run Zhenhua Oil to boost its crude oil sales.

According to Reuters, China is under pressure to cut oil purchases from Iran, as the United States re-imposes sanctions on Tehran.

More here.

(Source: Reuters)

By Ahmed Tabaqchali. Originally published by Iraq in Context; re-published by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Current analysis of renewed Iran sanctions often overlooks the wider context of Iraq’s regional trading relations. 

The extent of Iraq’s compliance with US sanctions on Iran has raised concerns regarding the loss of Iranian exports to its economy. However, Iraq’s trade with Iran, when looked at in the context of the wider region, shows these concerns in a different light.

It is arguably smaller than is widely perceived, especially given the long border between the two nations and the supposedly strong influence of Iran in Iraq, something which is contested.

There are many variables, following the imposition of sanctions, that will influence Iraq’s economy and trading relationships, making it difficult to examine any change in Iraq-Iran trade in isolation. Some of these variables are China’s response to these sanctions – its continued or increased purchase of Iranian oil or to impose tariffs on US crude- in light of its escalating trade war with the US.

Add to this the effects on oil demand from a change in world growth prospects as a result of an intensifying US-China trade war. Balancing or complicating events is the success of Saudi Arabia in sustaining increased oil production, or Iraq’s ability to increase its oil production. Finally, the state of the Turkish economy and the declining value of the Turkish Lira (TL[i]), in light of recent events, will play essential roles given Turkey’s substantial trading relationship with Iraq.

Much of the recent coverage of Iran’s trading relationship with Iraq refers to the significant annual exports of USD 12bn- which while significant, should be taken in the framework of Iraq’s overall imports and the trend of these imports from 2003-2017 (chart below). Additionally, Iran’s trade like, all other neighbouring nations’ trade with Iraq, is one-sided to its benefit. Iranian exports to Iraq are made up of goods and services, with the goods element at about USD 6bn for the 12 months ending March 2018[ii], which corresponds to about 15% of Iraq’s imports for 2017.

Iraq’s imports exploded six-fold from 2003 until 2013 to satisfy the population’s demand for goods after the isolation of the years under the sanctions. All of Iraq’s neighbours: Turkey, Iran and Jordan saw massive growth of exports to Iraq during this period for all types of goods, from fresh foods to finished products, given the near destruction of Iraq’ capacity to produce during the 14 years of sanctions and the ensuing civil war.

Iraqi Imports 2003-2017

 

(Source: https://tradingeconomics.com/iraq/imports)

Iraq imports peaked in 2013, after which the twin shocks of the ISIS war and the collapse in oil prices crushed the economy and with-it Iraq’s demand for goods. The effects of the ensuing ISIS conflict on overland trade routes affected the relative performance in the following years of each country’s exports.

The transit routes and volumes for 2014 (before the full effects of conflict and economic contraction) show the relative importance for each route, not only for the trade with a particular country, but that country’s additional role as a source of re-exports (chart below). In particular, Turaybill for Jordanian exports and re-exports coming from Aqaba, Kuwait’s Safwan, and Basra as a route for world exports as well as for UAE exports and re-exports from Jebil Ali. By 2014 exports from Syria ceased with the exception of the Al Waleed crossing, until it too ended when it fell under ISIS control in May 2015[iii]. Trade with Saudi Arabia ended with the invasion of Kuwait in 1990.

Iraq: Trade transit routes & volumes 2014

 (Source: Chart taken from a World Bank Report[iv])

Iranian exports peaked in absolute terms in 2013, declining by about 6% by 2017, while Iraq’s imports declined by 36%, with the result that Iran increased its market share from 11% in 2013 to 15% in 2017. However, this has more to do with the trade routes than any special relationship that Iraq might have with Iran or Iran’s competitiveness. The ISIS occupation closed Iraq’s trade route with Jordan, Syria and degraded the value of the routes with Turkey given ISIS’s occupation of Mosul and surrounding areas.

The growth in Iran’s exports from 2004 is shown in the chart below (data are based on the Iranian calendar up to the year 1395, ending in March 2017). Latest reports indicate that the figure was almost unchanged for the year ending in March 2018. Yet, Iraq’s overall imports recovered by 13% in 2017 vs 2016, and its imports from Jordan and Turkey increased by 8% and 19% respectively. All of which put the relative value of trade with Iran in context.

Given Iran’s natural geographical advantages from the long border and its supposed hegemony over Iraq, it can be argued that it should have accounted for much more of Iraq’s imports or at least cemented its conflict enhanced position when Iraq’s imports recovered. Instead it lost market share from 2016 to 2017, implying that it would continue to lose market share without the imposition of sanctions, and as such the sanctions would only accelerate this trend.

Iranian exports to Iraq 2004 – 2016

 

(Source: http://www.iraqbase.com/trade_with_iraq/iraq_tradition.aspx#c_31)

While Turkey’s exports of around USD 12bn in 2013 were twice Iran’s levels, most of these exports were destined for the Kurdistan Region of Iraq (KRI) in which Turkish goods and companies played a significant role in the economic boom the region witnessed until 2014.  The KRI, in 2017, accounted for 67% of all Turkey’s exports to Iraq up from 50% in 2007[v].

Turkish exports to Iraq suffered significantly due to the triple shock to the KRI’s economy – the loss of federal budget transfers, the ISIS conflict and the oil price collapse – as well as from the contraction of the Iraqi economy. Turkish exports declined 36% in 2013-2016 vs a decline of 43% in Iraq’s total imports, increasing its market share from 20% to 22%. The effective gain in market share is more significant than that, as most of these exports were for Iraq overall as opposed to being concentrated in the KRI. Turkish exports’ 18% recovery in 2017 and total imports’ 13% increase vs flat Iranian exports emphasises the competitiveness of Turkey’s exports whether due to quality or currency competitiveness vs the Iranian Rial.

Finally, the value of Turkish exports actually increased by about 25% in TL terms[vi], as the TL exchange rate against the USD decreased from TL 2.15 by end of 2013 to TL 3.79 by the end of 2017. All of which underlines the importance to Turkey of its exports to Iraq, especially in light of the 40% decline in the TL vs the USD so far in 2018. The significance of these exports might very well increase Iraq’s bargaining power with Turkey over many issues, particularly the water flow of the Tigris and Euphrates. Iraq’s relative bargaining power is further enhanced by the fees -converted to TL- collected for the oil that is shipped through Turkey to its port of Cihan, especially if Iraq resumes the Kirkuk oil exports of 250,000-300,000 barrels per day (bbl/d) that were cut after it reasserted feral authority over these fields in October 2017[vii].

Turkish exports to Iraq 2004 – 2017

 

(Source: https://tradingeconomics.com/turkey/exports/iraq)

Jordan’s exports and re-exports to Iraq suffered a great deal due to the closure of the land routes as a result of the ISIS occupation and subsequent conflict. The chart below shows a decline of 64% from 2013 to 2016 in Jordan’s exports, and probably a similar decline for re-exports. The mild recovery of 8% by 2017 from 2016’s low levels should be seen in the context that the trade route only reopened in October 2017, which argues well for meaningful growth in 2018[viii]. While Jordan’s economy is too small to fully replace Iran’s exports, its fresh foods[ix] would fill some of the gap and its much larger re-exports through Aqaba will make a difference.

Jordan’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/jordan/exports/iraq)

Kuwait’s exports to Iraq recovered meaningfully in 2017 after a decline in 2013-2016, yet overall volumes are small. Most of these are re-exports through Safwan as Kuwait’s ports complement Basra.

Kuwait’s exports to Iraq 2003-2017

 

(Source: https://tradingeconomics.com/kuwait/exports/iraq)

The biggest potential beneficiaries from the sanctions would be Saudi Arabia and the UAE. Developing their relationship and influence in Iraq through trade and investments is magnified without competition from Iranian goods. Their economies would benefit from both the opportunity to replace Iranian products and from a sizeable recovering market. Even though 2016[x] was a low point for UAE’s total exports to Iraq, exports accounted for 53% of the mix making Iraq the seventh largest export market, while re-exports accounted for 47% of the mix, with Iraq as the fourth largest re-export market.  All of which highlights Iraq’s importance to both the UAE’s economy and its vital re-export business.

UAE’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/united-arab-emirates/exports/iraq)

Trading with Saudi Arabia ended with the occupation of Kuwait, and while it saw a recovery since 2003, it remained tiny compared to the sizes of the two economies. The re-opening of the Arar border crossing in late 2017, coupled with the re-setting of the relationship, will change this significantly with Saudi expectations that trading values would approach those of Iran in ten years’ time[xi].

Saudi Arabia’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/saudi-arabia/exports/iraq)

However, there is more to Iraq’s trade with Iran other than its exports of goods, as the relationship includes the export of electricity and gas, as well religious tourism in the form of at least three million religious tourists a year, especially during the annual Arbaeen pilgrimage.

Iran’s recent exports of electricity have been about 1.0 gigawatts[xii] (GW) increasing available domestic supply to 18.91 GW[xiii] by end of 2016. However, the supply has been frequently interrupted since 2015 as Iraq has failed to make the required contractual payments to Iran[xiv]. The supply cut in July 2018 being the latest case – which was a combination of over-due bills of about USD 1bn[xv] and Iran’s increased domestic needs for electricity. The argument over the importance of this supply has been made moot as Iran would not be able to resume exports in the near future, due to its own domestic needs[xvi]. Short-term solutions to replace this lost supply from Kuwait and Saudi Arabia have the potential to become long-term solutions that will further cement the relationship.

For instance, Kuwait supplying fuel for some of the inactive power stations would go some way for Iraq to increase the utilization of its available but unutilized generating capacity due to lack of fuel. This relationship could be developed to one of mutual benefits with Kuwait supplying electricity in return for Iraq supplying gas[xvii], which while mutually beneficial would help the rebuilding of trust. Similarly, discussions with Saudi Arabia for the supply of electricity, possibly under much more advantageous commercial terms[xviii] than those with Iran, would further develop this relationship.

Much more troublesome and very difficult to replace would be the supply of Iranian gas to power stations in Baghdad and Basra – these were based on deals signed in 2013 to supply 9.1 Billion Cubic Meter (BCM) a year to each city. Exports to Baghdad started in June 2017 and totalled 1.2 BCM by November 2017[xix], while exports to Basra were supposed to start after May 2018[xx].  Both sides have been silent on this recently, as media reports have only covered Iraq’s implementation of the sanctions in the form of banking transactions and closing access to Iranian goods. While details could be delayed until the November implementation of the oil sanctions or Iraq would seek waivers. Either way, there are no easy or short-term solutions for the replacement of this vital supply apart from increased focus and spending on capturing flared gas. However, this gas has been only available recently, and in relatively small quantities, while its eventual replacement, i.e. gas recovered from flaring, is substantially cheaper as the Iraqi government pays the Basra Gas Company (BGC) about USD 2.50 per MMBtu vs for Iranian USD 6.6 – 7.2 per MMBtu[xxi] (data as of early 2018).

Religious tourism is an important sector, employing about 160,000 people directly, extending to 447,000 beneficiaries (2014 data[xxii]). While, Iranian pilgrims and visitors are an essential component in religious tourism, yet a significant percentage of pilgrims or visitors are Iraqis. Moreover, the importance to Iraq’s economy from the spending of Iran’s pilgrims is somewhat misunderstood or overstated. For instance, during the Arbaeen, Iraqis provide hospitality through offering accommodation in their homes and providing free food as part of their religious duties towards the pilgrims[xxiii]. As such, the extra consumer spending during the most prominent religious event comes from Iraqis. The spending by regular Iranian religious visitors, throughout the year, will not be so easily replaced- although it is mitigated by the fact that almost all those visitors use Iranian airlines and employ Iranian tour operators.

Finally, the effects, of the loss of USD access for Iran, on Iraq would take a long time to assess. In 2012, the governor of the Central Bank of Iraq[xxiv] suggested that there were increased demands of 40-50% for the USD following the imposition of sanctions on Syria and Iran, which led to an increase in the market price of the USD vs the Iraqi Dinar (IQD) as can be seen from the chart below.

Iraqi Dinar (IQD) exchange rate versus the USD Jan 2011 – August 2018

 

(Source: Central Bank of Iraq, Iraqi currency exchange houses, Asia Frontier Capital)

(Note: The sharp pikes in 2012, 2013 & 2015 were due to CBI policies that restricted the sale of USD, but abandoned after causing a rise in market rates)

The convergence of the market price of the USD and the official exchange rate vs the IQD came to an end in 2011 and diverged in 2012 due to the increased demand for the USD. Apart from the spikes due to policies to limit the official supply of the USD, the normal range was 2-4% premium of the market price over the official rate. This increased up to a 10% premium during the worst of the crisis as oil revenues were substantially below expenditures and exports were less than imports. This divergence came to an end with the recovery in oil prices and the declining cost of war until it stabilized at around 1.5% premium to the official exchange rate.

It’s difficult to make the same argument today about the increased demand, or at least a sharp increase, from the current round of sanctions given that the re-integration of Iran with the world economy following the signing of the JCPOA (The Joint Comprehensive Plan of Action) still suffered from the reluctance[xxv] of most banks to deal with Iran. In particular, Iran’s access to the USD continued to be severely limited. All of which might explain that the signing of the JCPOA had not affected the market price of the USD vs the IQD.

However, it is worth noting that after a stabilization over the last few months, the premium of the market price over the official rate increased in early August from about 1.5% to over 2%. This might be related to the sanctions effect or to the signs of recovery of the local economy from increased consumer spending and the resultant increase in demand for imports. A full recovery in consumer demand for imported products would likely take the premium to a range of 2-4%.

It can be argued, that while Iraq genuinely disapproves of the Iranian sanctions given its own bitter 14 years’ experience with them, yet it stands to benefit from their imposition as they will fast-track a number of positive trends that are already taking place.

Iraq’s new-found ability to self-fund its reconstruction, estimated at about USD 18.8bn by end of 2018[xxvi], will accelerate its economic recovery through a liquidity injection of 14.5% into the non-oil economy once reconstruction projects are underway. In the process making the country extremely attractive for its neighbours’ economies, both as a goods export destination and for re-construction businesses. The opportunity to replace Iranian goods increases the benefit for these exporters. Ultimately, this will cement the USD 30bn pledged for the reconstruction of Iraq at the Kuwait Conference[xxvii] from promises into actual spending that will benefit the economies of the providers as much as Iraq’s economy. The deeper implication is a change in their relationship from that of benefactors into partners which will ensure its sustainability- in the process speeding Iraq’s re-integration in the region and ensure a balanced relationship with its neighbours.

The re-opening of the Iraq-Saudi Arabia border crossing and the Iraq-Jordan border crossings will accelerate the rehabilitation of Anbar (arguably disenfranchised after 2003 and a seat of resentment for the post-2003 political order), and the southern governorates (neglected by both the current and the prior regimes). The resumption of trade-links with their associated economic activities would provide a huge boost to the local economies, which while contributing meaningfully to the healing process, will build upon and magnify the economic revival until it becomes self-sustaining with the boost from reconstruction.

Meanwhile, the relationship with Iran might mature if the Iranians look beyond their frustration at Iraq’s compliance with the sanctions and listen closely the anti-government sentiment within Iran following the December 2017 demonstrations. What is vital here, and something that would increase stability within Iraq, is a complete rethinking the relationship to that of a state to state basis from the current relationship involving sub-state actors. This would subsequently benefit Iran by making another Iraqi security crisis less likely, and ensuring the relationship is based on national sentiment, rather than non state actors.

Disclaimer

Ahmed Tabaqchali’s 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.

[i] The code for Turkish Lira is TYR, but TL is used widely. https://en.wikipedia.org/wiki/Turkish_lira

[ii] The 12 months ending in March 2018 correspond to the Iranian year 1396. Iranian data are provided using this calendar.

 https://financialtribune.com/articles/economy-business-and-markets/81287/iran-third-biggest-trading-partner-of-iraq-with-16-share

[iii] Al Waleed crossing was freed by Iraqi forces in June 2017. https://www.reuters.com/article/us-mideast-crisis-iraq-syria/iraqi-forces-remove-islamic-state-fighters-from-vicinity-of-u-s-base-in-syria-idUSKBN19807Y

[iv] http://documents.worldbank.org/curated/en/672671468196766598/pdf/106132-v2-main-report-P159972-PUBLIC-KRG-Economic-Reform-Roadmap-post-Decision-Review-05-30-16.pdf

[v] https://www.washingtoninstitute.org/policy-analysis/view/turkey-and-the-krg-signs-of-booming-economic-ties-infographic

[vi] Arrived at by diving the value of exports by the year end value of the TL.

[vii] Iraq’s bargaining power is further enhanced if it links this with plans to double Kirkuk’s output over the next few yeaes

 The Kurdistan Regional Government (KRG) exported an average of 550,000 bbl/d in 2017 until October 2017. After which they ranged between about 240,000-370,000 bb/d for an average of 311,000.

http://auis.edu.krd/iris/sites/default/files/Statehood in KRI through an Economic Lens_ FINAL.pdf pages 6 & 7, page 7 footnote 15.

[viii] http://www.jordantimes.com/news/local/industrial-exports-iraq-resume-after-border-reopening

[ix] Although most of Jordan’s exports are currently value-add products. In 2016, Pharmaceutical Products accounted for 16% of total exports, Electrical & Electronic Equipment for 13%; Fertilizers for 12%; plastics for 11%. While Vegetable, Fruits & Nut food preparation accounted for only 2.3%, and Edible Vegetables, certain roots and Tubers accounted for 2.2% for a total under 5%.

[x] http://iraqieconomists.net/en/2017/09/19/uae-iraq-trade-touches-7-billion-2016/

[xi] https://www.thenational.ae/world/mena/saudi-iraqi-trade-to-reach-23-billion-saudi-riyals-within-10-years-1.706487

[xii] https://en.mehrnews.com/news/122562/Iran-to-resume-electricity-exports-to-Iraq-within-weeks

[xiii] Table 3, page 79 ““A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

   Figures from the Ministry of Electricity show that available capacity, was 16.0 GW by end of July 2018, which does not include the lost Iranian supply. https://moelc.gov.iq/index.php?name=News&file=article&sid=4212

[xiv] This article explains the nature of the relationship and the history of the under-payments https://www.washingtoninstitute.org/policy-analysis/view/the-irgc-may-try-to-divert-iraqs-electricity-payments

[xv] https://theiranproject.com/blog/2018/07/08/iran-cuts-electricity-supplies-to-iraq-over-unpaid-bills/

[xvi] https://theiranproject.com/blog/2018/07/17/govt-spox-iran-not-to-resume-electricity-supplies-to-iraq-in-near-future/

[xvii] https://www.middleeastmonitor.com/20170202-kuwait-considers-export-of-electricity-to-iraq/

[xviii] https://www.bloomberg.com/news/articles/2018-07-29/iraq-says-saudis-to-sell-it-power-at-a-fraction-of-iran-s-price

[xix] Page 82 “A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

[xx] http://www.irna.ir/en/News/82906994

[xxi] Page 82 “A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

[xxii] http://documents.worldbank.org/curated/en/255111529495871846/pdf/Jobs-in-Iraq-a-primer-on-job-creation-in-the-short-term.pdf

[xxiii] http://www.bbc.com/travel/gallery/20171220-the-iraq-city-that-opens-its-doors

[xxiv] https://www.alarabiya.net/articles/2012/04/12/207233.html

[xxv] https://www.reuters.com/article/us-iran-banks-kerry-idUSKCN0Y30OJ

[xxvi] A recent report by the author covers this in further detail.http://www.iraq-businessnews.com/2018/06/15/forget-the-donations-stupid-new-dynamics-in-funding-reconstruction/

[xxvii] https://uk.reuters.com/article/mideast-crisis-iraq-reconstruction/factbox-pledges-made-for-iraqs-reconstruction-in-kuwait-idUKL8N1Q55RY

Germany’s Siemens will upgrade one of the country’s largest gas-fired power plants.

Under a new contract, Siemens will add 650 megawatts (MW) to Shatt Al Basra Gas Power Plant, which currently has a power generation capacity of 1,250 MW and consists of non-Siemens turbines operating in simple-cycle mode.

Siemens will supply five of its highly-efficient steam turbines, ensuring the additional power supply comes at no extra fuel requirement. With this upgrade, the facility will be converted to operating in combined cycle mode and its overall efficiency will increase to more than 50 percent. Once the works are completed, the power plant will supply around one million Iraqis with reliable and clean electricity.

Siemens was awarded the contract by China Machinery Engineering Corporation (CMEC). The developer of the project is KAR Electrical Power Production Trading FZE (KEPPT).

Earlier this year, Siemens was contracted to supply two of its robust SST-5000 steam turbines to a similar project in Rumaila in Iraq, making it the first large-scale open cycle conversion project in the country. The upgrade works for both the Rumaila and the Shatt Al Basra power plants are scheduled for completion by 2020.

Jean-Claude Nasr (pictured), Senior Executive Vice President, Power Generation at Siemens in the Middle East, said:

“Iraq is rebuilding its power infrastructure and we are eager to support the country’s future aspirations. A reliable and efficient power supply is the backbone of a prosperous economy and today’s announcement underscores an important step towards realizing Iraq’s aspirations towards building a robust power system and a sustainable economy for its people.”

Siemens recently received an order to modernize the Rumaila gas-fired power plant in Iraq, adding 700 MW to the plant. The scope of supply includes two SST-5000 steam turbines.

From energy supply and industry to financing and training, Siemens outlined its roadmap and commitment to supporting the development of Iraq in February at the Iraq reconstruction conference held in Kuwait.

The roadmap identified the country’s short, mid and long-term development needs. It focused on key areas including energy management, resource efficiency, education, anti-corruption and financing. It detailed how Siemens can support the country’s transformation. Siemens envisions 40 million Iraqis living in vibrant cities, powered by reliable and efficient energy; a strong industrial sector and sustainable economic development, led by world-class, home-grown talent.

(Source: Siemens)

Economist: Foreign exchange between Iraq and Iran will be cash
8/8/2018

Iraq and Iran have great trade ties, US economic sanctions can not limit trade between the two neighbors, the economic expert said on Wednesday.

Al-Suri said in a press statement that "Iraq and Iran are two neighboring countries and it is difficult to control the subject of goods and goods between them, as these issues can not be controlled except by satellite," noting that "transactions in foreign currencies between Iraq and Iran will remain, through monetary exchange without recourse To remittances, as happened at the time of the previous US sanctions. "

He added that "the government can not control all the economic conditions, especially the border crossings in full, only through the implementation of the law to protect the local product, where trade between the two countries will remain."

"Iraq may be a gateway to the Iranian economy, although Iran has great relations with Asian countries, especially China and India, and has relations with Turkey and Russia," he said.

http://www.knoozmedia.com/356128/%D8…-%D8%A7%D9%84/

By Youssef Ali.

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

President Donald Trump’s decision to pull out of the nuclear deal and sign the executive order to reimpose sanctions on Iran has had a significant impact on the global oil markets.

This move poses a severe threat to the economies of major oil exporting countries including Iraq, the second largest oil exporter in OPEC after Saudi Arabia and the third in the world after Russia and Saudi Arabia by 4.4 million barrel per day. Many analysts are reflecting on the effects that this conflict has on the economy of Iraq, which heavily relies on oil.

The sanctions mainly target the Iranian energy sector, which supplies Iran with foreign exchange and at the same time represents about 40% of revenues of its budget. The goal of the sanctions is to prevent Iranian oil exports by imposing sanctions on its customers.

Eliminating Iranian oil supplies will cause unrest in the oil markets around the world because it will lead to price surges, hence substantial economic losses on importing countries, which are already fearing a potential recession. That is why the U.S. tried to convince some of OPEC’s members to increase their supplies contrary to the recent deal amongst OPEC and non-OPEC countries to decrease production, and that in order to compensate Iranian supplies and prevent the disruption of the oil market to prevent damage to the global economy.

This move led to massive disputes between the major suppliers and pushed Iran to threat blocking oil exports from the Middle East altogether if it was to be prevented from exporting its own oil to the international market. If Iran follows through with its threat, it would mean massive losses for the Gulf countries, including Iraq whose economy is primarily depended on oil exports.

That said, completely stopping Iranian oil exports would be practically unlikely for the following reasons:

The nature of oil markets which is volatile and is based on trust. If the OPEC members in the Gulf Region, especially Saudi Arabia and UAE decided to replace the sanctioned Iranian oil supplies, the possibility alone that Iran would follow through its threat of closing the Strait of Hormuz would diminish the trust in that market. The supplies which pass through the strait would be considered as unstable, importers would start looking for alternate sources. This would destroy energy markets in the Middle East, meaning massive losses to the economies of all parties involved, including neutral states such as Iraq.

On a global basis, the mentioned encounter will damage the international economy that is fearing a potential recession, because this encounter, if it happens will cause a massive increase in global oil prices, leading to a domino effect that would create a hike in the prices of many goods and services.

This is why it is expected that while the sanctions will be implemented, all parties involved will allow for under-the-table arrangements in order to avoid such mutual destruction by allowing Iran to open an limited channel to export its oil, as it has happened in the past. Prior to signing the nuclear deal, UAE oil brokerage companies and banks played such a role before they were shut down after the recent pull out of the nuclear deal by the U.S. Allowing for such back-channels would mean that the sanctions will have their impact on the Iranian economy by disrupting the traditional oil export routs and limiting its revenue, yet allowing for a backdoor deal that will help the international community avoiding a conflict that could have grave impact on the global economy.

There is a role for Iraq to play in this crisis. The current policy of Iraq in regards to this conflict, in which it is trying to mediate between the parties involved is a wise policy. It is in the interest of nobody to escalate the situation in the Gulf region. On the other hand, Iraq could, given the circumstances,  gain enormous benefits by performing the same role that UAE brokerage companies and banks were playing, which would be a win-win for everyone involved.

In other words, Iraq can empower its private sector to establish companies and banks that facilitate the financial transactions related to the Iranian oil export, which would add important revenues to the economy of Iraq and increase the financial movement in the country; at the same time it would ensure the interests of Iran and decrease the likelihood of an encounter in the Gulf, which would serve the Gulf Arabs well.

Iraq must exploit this opportunity, especially since the Europeans countries along with Russia and China have already expressed their willingness to play this role. This opportunity could also be a significant incentive for Iraq to improve its ailing banking system to be able to implement such operation.

However, this is not possible without  negotiating with the U.S. on this issue in order to avoid being subject of the sanctions. The U.S. has in the past exempted Iraq from the sanctions for dealing with Iran, given its special circumstances. The U.S. also has expressed its readiness this time to allow some exceptions. This could be Iraq’s chance to negotiate an arrangement that serves everyone well, at least for the short-term.

On the long term however, Iraq has to find alternate routes to export its oil in order to avoid the increasingly unstable oil routes of the Arabian Gulf. Viable solutions could be the Iraq-Jordan pipeline that would start in Basra and end in Aqaba. Iraq needs to accelerate building this pipeline. Another option is the rehabilitation of the Iraq-Syria pipeline that begins from Kirkuk and ends in Banias, which, of course, would only be an option if the security in Syria improves.

Iraq is either the core, or constantly caught in the middle of many crisis that are shaking the Gulf region. These reoccurring crisis pose huge obstacles in front of rebuilding and investment. If Iraq wants to survive them, it needs to play a constructive role and aim for stability and profit for all parties involved.

Advertising Feature

By Veronica Cotdemiey, CEO of Citizenship Invest.

Obtaining a dual a nationality or second citizenship has long been a significant goal for many families in the Middle East.

The constant struggle of not being able to travel freely; being scrutinized by immigration and governmental entities; as well as being a citizen of countries with political and economic distress are the main drivers that encourage individuals to consider investing in a second nationality.

There are two main approaches for obtaining a second citizenship by investment. The first way is through Fast Citizenship programs which are prevalent in the Middle East as they provide the quickest route to owning a lawful second citizenship. Countries like St. Kitts & Nevis, Antigua & Barbuda, Grenada, Dominica, St. Lucia and Cyprus allow foreigners to financially contribute or invest in real estate to obtain a legal citizenship within a period of less than 6 months.

Furthermore, these countries’ citizenship legislative acts do not pose any relocation requirements, which means that the applicants and their families do not need to move to another country in order to obtain or keep the citizenship. The non-relocation requirement makes these programs highly popular among Middle Eastern businessowners and successful professionals. These programs have a strong effect in raising the country’s GDP but it can also culminate in long-term economic prosperity through investment in housing and infrastructure.

Some of these programs have existed for over 30 years and are sought-after by nationals from all over the world included Americans. From Middle East the key nationalities searching for these programs are Iraqis, Syrians, Yemenis, Lebanese and many more who are constantly faced with travel restrictions. An alternate passport opens up an entirely new world on visa-free travel including the UK, Schengen countries, Singapore, Malaysia, Russia, China, Hong Kong. Additionally, many nations in the Middle East face political and economic problems, which makes it difficult to predict the future of these nations, and their family futures along with them. Therefore, having a second citizenship or passport is a strong contingency plan for many individuals in the region.

Nevertheless, there is another option available for investors and it is through Residency programs. There are many countries around the world that grant applicants a permanent residency through investment. Let us take Spain as an example. Spain’s Golden Visa includes the main applicant, spouse, and all dependent children, after the applicant purchases a property in Spain. The duration of the Residence Permit in total is 5 years, Permanent Residence may then be applied for a further 5 years where you must reside in Spain to be eligible to apply for the citizenship. Residents may study, work and live indefinitely in Spain and travel visa-free within the European region. Best of all, they will own a European nationality, which consequently allows them to live anywhere in Europe and grants them visa-free access to over 170 countries worldwide.

Another example is Portugal, which is a member of the European Union and also has its own Residency program. Unlike Spain, this program does not require investors to physically live in Portugal to obtain the Portuguese citizenship. The country has a high quality of life with modern business and medical facilities, which makes Portugal a beautiful country with high standards of living. The citizenship will be granted to the applicant and family after a period of 6 years, therefore the entire family will benefit from being European nationals and will be able to pass the nationality to future generations through naturalization.

To make things simple, permanent residency programs are primarily for investors who plan to relocate to benefit from living in a European country and eventually becoming European citizens. However, it is the long route towards obtaining a second nationality and their citizenship is no 100% secure as it is up to the Government’s discretion.

Fast citizenship by investment programs on the other hand, pose different advantages. They are more suitable for individuals who do not wish to disrupt their current lives by immigrating to a different country, who do not want to wait 6 to 10 years and who are not willing to take a language test.

Click here for more information.

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 12th July 2018).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD731 (-0.3%) / $784 (-0.3%) (weekly change) (-9.9% and -6.2% YTD change, respectively). The number of week traded shares was 4.9 bn and the weekly trading volume was IQD5.0bn ($4.2 mn).

ISX Company Announcements

  • The CBI signed a memorandum of understanding (MoU) with UnionPay International Company to contribute to the development of intelligent payment technologies and electronic payment services in Iraq. UnionPay is one of the largest companies in China and most Asian countries in this field, in addition to being the third largest international company to issue and collect cards. The CBI notes that this is the third memorandum signed by the bank in 2018 with international card companies as part of its plans to expand the use of high technology to promote card work and develop payment systems in accordance with international best practice. (CBI)
  • UK-based ONEm is partnering with Asiacell (TASC) to bring unlimited news and entertainment content from Reuters to Iraq. Asiacell subscribers can now exclusively access global news on any mobile device for 600 IQD per week. The Reuters service provides full coverage of real time news and entertainment content in Arabic delivered by SMS. (Iraq Business News)
  • Al_Rabita Al_Maliya Co (MTRA) will hold a joint GA with (Bilad Al-Sham for Money Transfer and Al-Shariq for Money Transfer) on Jul. 26, 2018 to discuss merging these three companies and deciding to change the company from a Money Transfer company into an Islamic Bank according to CBI’s approval.
  • Iraqi for Tufted Carpets (IITC) will hold an AGM* on Jul. 25, 2018 to discuss and approve 2017 annual financial results. ISX will suspend trading of IITC starting Jul. 22, 2018.
  • National Bank of Iraq (BNOI) will hold an AGM* on Jul. 23, 2018 to discuss and approve 2017 annual financial results. ISX will suspend trading of BNOI starting Jul. 18, 2018.
  • International Development Bank for Investment (BIDB) will hold an AGM* on Jul. 18, 2018 to discuss and approve 2017 annual financial results. ISX will suspend trading of BIDB starting Jul. 15, 2018.
  • Iraqi Middle East Bank (BIME) completed their legal amendment of article (six) on Jul. 3, 2018 to decrease the number of BoDs from 7 members to 5 original members and other 5 alternative members.
  • Cross Transactions: 510 mn shares of Cihan Bank for Islamic & Finance (BCIH) on Jul. 8 and Jul. 11, 2018, which represent 0.2% of BCIH capital.

IBBC holds annual Cumberland Lodge Conference with Political, Academic, Education and Business Experts, 6-8 July

The Iraq Britain Business Council hosted its annual Cumberland Lodge Retreat on 6-8 July, inviting a host of political, business, academic and education experts to discuss the most pertinent issues relating to Iraq and its future.

The title of the conference was ‘Iraq: Domestic Expectations & Geopolitical Aspirations’ and addressed a variety of issues on regional politics, election diagnosis and the future of higher education in Iraq.

On Friday members and guests heard speeches from Baroness Nicholson of Winterbourne, President of IBBC and the Prime Minister’s Trade Envoy to Iraq, Dr Edmund Canon Newell, Principal of Cumberland Lodge, Mr Nazar Mirajan Mohammed, Minister Plenipotentiary Iraq Embassy and Sara Akbar, Founder Member of IBBC, Kuwait Government Adviser and CEO of new IBBC member OiLSERVE.

The conference also featured in-depth discussions with high level representatives from the Government of Iraq, including Dr Abdul Razzaq Al-Issa, Minister of Higher Education and Scientific Research, Dr Adbul Kariem Al Faisal, Chairman of the PM’s Advisory, Dr Dara Rasheed, Deputy Minister for Construction, Housing and Municipalities and Deputy Head of Refaato and Dr Salah Hadi Saleh Alhashim, DG for Scholarships at he Ministry of Higher Education and Scientific Research.

Agenda & Speakers

Session 1: Present Situation in Iraq

Chair: Baroness Nicholson of Winterbourne

Dr Barham Salih MP, Coalition for Democracy, Jon Wilks CMG (tbc), HM Ambassador to Iraq, Dr Renad Mansour, Research Fellow, Chatham House, Professor Toby Dodge, Director Middle East Centre, LSE

Session 2: Iraq in a Regional Perspective

Chair: Dr Renad Mansour, Research Fellow, Chatham House

Sara Akbar, CEO Oil Serve Kuwait

Session 3: China and Iraq

Chair: Botan Osman, Managing Director, Restrata

Raffaello Pantucci, Director of International Security Studies, RUSI

Session 4: IMF view on Iraq

Chair: Gavin Wishart, Board Member, IBBC

Gavin Gray, Mission Chief for Iraq, IMF

Session 5: Partnerships between British and Iraqi Universities

Chair: Dr Victoria Lindsay, Director British Council Iraq

Professor Obay Al Dewachi, President of Mosul University, Professor Nick Petford, Vice Chancellor, Northampton University, Professor Mohammed Al Uzri, Honorary Professor with Social and Epidemiological Psychiatry Research Group, Leicester University, Professor John Strachan, Vice Chancellor, Bath Spa University

On Saturday 7, an after dinner speech was given by Dr Mohammed Jasim, Library Director of Mosul University, who gave an impassioned presentation on the progress made in rebuilding the university’s dilapidated library.

IBBC would like thank the staff at Cumberland Lodge, all speakers and delegates who contributed to the extremely fruitful discussions, and to its members, with representatives attending from Al Burhan Group, Al Nukbha OFS, Bath Spa University, BP, Olive Group, Eversheds Sutherland, G4S, KBR, Menzies Aviation, Mosul University, Najaf Chamber of Commerce, OiLSERV, Penspen, Perkins+Will, Petrofac, Restrata, Serco, Shell, TurnKey LLC, University of Leicester, University of Northampton and Wood.

(Source: IBBC)