Business as Usual for Oil Companies

Markets hate uncertainty, and as the negotiations about forming the next government drag on, there will be an increasing desire to see these talks draw to a conclusion.

One of the main areas of uncertainty has been the issue of oil contracts – specifically, whether a new government would honour the deals struck with the Maliki administration.

Iraq is generally perceived has having played a tough game with the international oil companies. As the chief executive of French oil group Total explained to the Financial Times this week, the IOCs accepted terms in Iraq that they would not have considered in other countries.

Nevertheless, it will come as a relief to many that the likely successor to Mr Maliki, the secular Ayad Allawi, has announced that existing agreements will remain in place: “We are going to honor all contracts. We are going to honor all agreements because we believe this is very important.”

Noting that some of the contracts may need some minor adjustments, he also said that he would work quickly to pass a new hydrocarbons law should his coalition form the new government.

While this news has not particularly affected the stock market or the Iraqi Dinar, it should increase confidence in the business community that Iraq is serious about developing its resources, whoever emerges victorious from the post-election wrangling.

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