As markets continue to saturate in the region, Iraq emerges as a new destination for investors in the hospitality and aviation sectors, eagerly searching for new territories to conquer.

This weekend alone saw two major announcements with Abu Dhabi-based Rotana Hotels and Resorts poised to build a luxury property in Baghdad by 2012, while German carrier Lufthansa announced plans to jet into the Iraqi capital from September.

And even though the state-owned Iraqi Airways’ bankruptcy declaration on Thursday could prove to be a setback for Iraq, the country’s first private carrier, Alnaser Airlines, continues to forge ahead with its expansion plans after launching flights to Dubai earlier this month.

Earlier, Emirates Business had reported that Iraq’s hospitality sector alone was expected to see an influx of $145 billion (Dh532.1bn) over the next fives years, with an estimated 22 per cent of that investment originating from the UAE.

Iraq’s government-run National Investment Commission (NIC) revealed the figures, adding that an amendment in the law will now also allow foreign ownership of land to attract more international hospitality clientele.

“NIC plans to draw $500bn into Iraq over the next five years, with 29 per cent of that attributed to the hospitality industry alone,” said NIC’s Dr Ayser Fahd, Manager, Economic Department. “We expect foreign investment from the UAE to account for nearly 22 per cent in this sector.”

Rotana, along with Marriott and Kempinski, are just some of the high-profile brands that have signed up or in the process of expanding their properties into Iraq.

While Rotana and Kempinski have already broken ground for four and five-star properties in Kurdistan – with the former hotel opening this summer – Marriott’s entry is also on the cards, which Fahd confirmed, adding: “We have already processed the paperwork for Marriott International. I’m sure an announcement should follow soon.”

Talking about their expansion into Iraq, Rotana’s President and CEO Selim El Zyr told the paper earlier: “The opportunity arose when we were approached to manage two new five-star projects, one in the city of Erbil, located in the Iraqi Kurdistan region and the other in Baghdad, located within the International Green Zone, which is the heavily guarded diplomatic/government area in central Baghdad.

“Based on our research and market study, we believed that these markets were emerging and saw them as an opportunity.”

The group’s 205-roomed Erbil Rotana, in partnership with Lebanon’s Malia group, is set to open in the first quarter of 2010, said El Zyr.

The 250-room five-star Baghdad property is scheduled for an early 2012 opening, in partnership with Summit Hotel Limited.

Other hotel properties scheduled for Iraq include Abu Dhabi investment company, Noor Capital’s, plans to build a $100 million five-star hotel apartment project in Karbala, with United Kingdom hospitality developer Range Hospitality.

The project, called The Range, is expected to be completed in 2013.

Turkey-based Divan Hotels, which also recently announced plans to open a $90m five-star hotel in Northern Iraq in the first half of 2011.

Chairman Sarp Turanlıgil said: “We believe that an international-standard chain hotel such as Divan Erbil will meet an unserved need in this market and for that reason we resolved to make this investment.”

Flight connections

Deutsche Lufthansa, Europe’s second-biggest carrier’s announcement this weekend to restart regular services to Baghdad makes is the first for a western European and US carrier to resume flights to the capital.

Turkish Airlines became the first carrier in Europe to resume Baghdad flights in October 2008. The airline is offering one daily connection, according to its website. Bahrain-based Gulf Air began serving the Iraqi capital in September 2009, while Abu Dhabi’s Etihad Airways followed last month.

Etihad also announced earlier it would launch services to Erbil from Tuesday, subject to government and regulatory approvals.

James Hogan, Etihad Airways Chief Executive, said: “We expect to see strong demand on these routes, particularly from government and business travellers, as well as people from Iraq visiting family and friends around the world.

“We launched a cargo operation to Baghdad in September 2009, and have recently commenced additional cargo flights to Erbil, which we expect will perform well for Etihad.”

According to industry figures, Baghdad Airport currently manages around seven million passengers a year.

Meanwhile, Erbil could be served by nearly 30 international airlines by year’s end according to media reports, with flydubai and Qatar Airways, each portraying interest in Iraq’s Kurdistan region.

“Iraq is definitely on our radar. We’ve been there a few times,” Fly Dubai’s CEO told The Associated Press in an interview.

“It’s currently underserved,” said Ghaith Al Ghaith. Qatar Airways CEO Akbar Al Baker announced at the Arabian Travel Market earlier this month that his airline has permission to fly to Baghdad, Erbil, and Najaf.

Meanwhile, Alnaser Airlines, Iraq’s first private airline established in 2009, started its daily flights from Dubai to Iraq earlier this month. The flights are running to their full capacity of 140 passengers.

The airline, owned by an Iraqi national, Shaikh Hussain Al Khawam, has started a joined venture with the US-owned FK Gryphon Airlines, which in 2008 started commercial operations in Iraq and Kuwait.

29 May 2010 - The Guardian

An OPEC quota of 6 million barrels per day (bpd) will be too low for Iraq and it expects its quota to be no less than that of OPEC’s most influential member Saudi Arabia, Iraq’s oil minister said on Thursday.

Top oil producer Saudi Arabia’s OPEC quota is just over 8 million bpd. Iraq is the only one of OPEC’s 12 members that is exempt from quotas after years of sanctions and war.

Baghdad has signed deals to boost oil output capacity to a level rivalling Saudi Arabia, and tough negotiations are expected in the future on its reincorporation into OPEC quotas.

“Yes, we expect that Iraq’s quota would not be less than any other country in OPEC,” Iraq’s Oil Minister Hussain al-Shahristani told Reuters in an interview, when asked if he expected Baghdad to have a quota equal to Saudi.

“Of course we don’t think that 4 million barrels per day is an acceptable or reasonable quota for Iraq’s production,” he said, adding that a 6 million bpd quota would be too low.

Iraq strengthened its hands for any future negotiations when it agreed a series of deals that could boost its output capacity to around 12 million bpd in seven years from 2.5 million bpd now.

OIL PRICES

The recent drop in oil prices was unrelated to market fundamentals of supply and demand but was connected to Europe’s financial crisis, Shahristani said.

Oil prices traded near $73 a barrel on Thursday, close to the bottom of the $70 to $80 range that many in OPEC have said is fair for both producers and consumers. The price dropped below $70 this week, which was too low to encourage investment in future projects to boost capacity, Shahristani said.

“What we noticed over the past days is volatility in the market — that doesn’t need any interference by OPEC in the time being,” he said.

OPEC would continue to monitor oil price volatility to see if prices developed a downward trend before taking any action, Shahristani said.

“I think the oil market will correct itself and the prices will go back to what they were two or three weeks ago … unless the crisis became worse in Europe,” he said.

OPEC has left its output ceiling unchanged for more than a year since announcing a record supply curb of 4.2 million bpd in December 2008 to combat the global economic downturn.

Shahristani said he expected no change in OPEC output levels in October when the group next meets to discuss supply policy, if oil prices, supply and demand remained at current levels. “In general, I don’t think that there will be big changes in the global oil market production or consumption or even in price levels that would need OPEC to take new decisions,” he said. “I expect that OPEC would continue with current production levels.”

Amman, 31 May 2010 - Dow Jones

The former head of Iraq’s largest state-owned oil company and advisor to the country’s oil ministry has criticised deals Baghdad signed with international oil majors to develop some of its biggest fields.

“There is no clear national plan on how to develop these huge oil fields,” Jabbar al-Luaiby told Dow Jones Newswires in an interview.

BP, Royal Dutch Shell and Cnooc Ltd, Exxon Mobil Corp and Italy’s Eni Spa. (ENI.MI) have bagged deals with Iraq to develop fields in the war-torn country, which holds the world’s third-largest proven oil reserves after Saudi Arabia and Iran, according to BP.

Al-Luaiby’s remarks could increase pressure on Baghdad to revise contracts awarded to foreign companies. Ayad Allawi’s Iraqiya bloc, which won the most seats in the recent parliamentary election, said it would like to review oil contracts signed with the majors.

“They’re huge deals that need the infrastructure, the potential and management which Iraq is currently lacking because of years of war, economic sanctions and destruction,” said al-Luaiby, who recently left his position as an advisor to Iraq’s oil minister.

Al-Luaiby added that international oil companies can still play a part in tapping Iraq’s vast resources once better infrastructure and oversight is in place. Foreign investment could help reverse the impact of two decades of war, sanctions and neglect on Iraq’s oil industry.

31 May 2010 - Azzaman

The Ministry of Oil has urged Iraq’s disparate political factions not to meddle in its affairs.
 
The ministry’s spokesman Isam Jihad said launching allegations and lawsuits against the ministry for political gains dose these factions no good.
 
“I advise them not to embark on this path unless they have conclusive evidence,” Jihad said.
 
Jihad was responding to the news reports quoting Iraqi politicians as being critical of the ministry’s performance and citing numerous examples of its what they say are errors contributing to lower oil output figures.
 
“I ask them (political factions) not to throw the oil sector into the middle of their political struggles. They should leave the sector to the specialists to develop and improve oil output figures,” Jihad said.
 
There is no need, he added, to go on accusing the oil ministry of unproved allegations.
 
“Statements about the Ministry of Oil have to be professional and transparent. It is unnecessary to preoccupy the judiciary with issues that are baseless,” he added.
 
The ministry is facing several lawsuits from politicians, blaming oil officials and departments for not doing their job properly.
 
No lawsuit has succeeded so far.
 
One lawsuit was turned down by the courts, following lengthy trial. It was launched by Shadha al-Mawsai, a member of parliament.
 
The court has now asked Shadha to pay the trial costs estimated at 300 million dinars, about $250,000.

Baghdad, 31 May 2010 - Reuters

Three managers of state-owned Iraqi banks have been arrested on suspicion of using bogus transfers to siphon off billions of dollars of government money to invest in private business.

The head of Iraq’s anti-corruption Integrity Commission, Rahim Al Ugaili, said while most of the money had been returned to the banks as part of the scheme, about $360 million was still missing.

The money was withdrawn from four state-owned banks – three branches of the Rafidain bank and one branch of the Agricultural Bank, he said.

About $8.2 billion was withdrawn and then redeposited in a one-year period from Agricultural Bank alone.

He said the scheme involved collusion between merchants and bank managers to fraudulently withdraw money from the state-owned banks.

The merchants would use the government money to invest in private businesses and then return it to the banks.

Corruption has been a major problem for Iraq since the 2003 US-led invasion. Transparency International’s 2009 corruption perceptions index has Iraq ranked as one of the world’s most corrupt nations – 176th out of 180 countries. “This money was being used in business in the private sector, which means the money was being given to merchants who used it in trading… then they gave it back to the government [banks],” Ugaili said.

“If that continued with a larger amount of money, it would be very dangerous for the Iraqi financial system,” he added.

Three lower-level employees of the banks were also arrested, Ugaili said. Arrest warrants also were issued for four merchants and the owner of an Iraqi private company. Some of them are abroad, Ugaili said.

Iraq’s deputy finance minister for banking affairs, Dhiyaa Al Khayoon, said the scheme involved bogus bank transfers and collusion to hide bills received from the central bank. He said the manager of private Basra Bank had also been arrested.

“This is the biggest ever robbery from the Rafidain Bank,” he said. “This is a catastrophe for the bank.”

Ugaili said a lack of both money and political will had hindered Iraq’s fight against corruption.

“I thought with the end of Saddam [era], we would not find people above the law… Now some of the [most] influential people in the country are above the law,” he said.

30 May 2010 - Iraq Directory

The first international fair for food products and household items continue in Basrah for the third day, with over 40 Turkish companies, as well as a number of international and local companies.

Salem Shaier director of (ATILIM), a Turkish Company participating in the exhibition, said that the exhibition aims to establish trade cooperation between the participating companies and Iraqi traders, indicating their intent to a similar exhibit next year.

Turkish Consul in Basrah, Ali Reza Oozjo, said that the exhibition, which consists of a number of suites, will contribute in the development of economic relations between the two countries.

Aozjo said many Turkish companies intend to invest in the province.

Basrah International Airport has witnessed last month, an exhibition of construction materials and construction equipment, and participated more than 30 Turkish companies. The second exhibition which is scheduled to end on Friday, is larger than the previous exhibition.

30 May 2010 - CNBC

China’s top power equipment maker Shanghai Electric is moving ahead with a $1 billion power-generating plant to boost Iraq’s electricity capacity by 1,320 megawatts, officials said on Saturday. The planned steam power plant in the town of Zubaidiya near the city of Kut, 150 km (95 miles) southeast of Baghdad, is seen as one of the biggest power projects in the country, where intermittent electricity is one of the public’s top complaints. Seven years after the U.S.-led invasion, Iraq’s national grid still only supplies a few hours of power each day.

Iraq’s dilapidated infrastructure has been hit hard by years of war, insurgency attacks and underinvestment. The project, which includes purchasing and installing four steam turbines, each with a capacity of 330 MW, will provide Iraq with a big power increase over the next four years, both Iraqi and Chinese officials said. Work to install those units started earlier this month and the first unit is expected to operate after three years. “It is a big project, it is considered one of the biggest power plants in Iraq,” said Hameed al-Ibrahimi, an official in the Iraqi Ministry of Electricity, who is in charge of the project. “Iraq is in need of (any) 100 MW,” he told Reuters at the project’s site.

The Ministry of Electricity puts Iraq’s available power capacity at 9,000 MW, and installed capacity at 11,000 to 12,000 MW. Demand is estimated to be at least 12,000 MW. The idea for the project is almost 10 years old. When Iraq’s first talks with China’s Shanghai started, it was to build a factory to manufacture power turbines. The plan was put on hold for years due to economic sanctions imposed on Iraq followed by years of bloodshed unleashed by the 2003 U.S.-led invasion. As security conditions slowly improve across the country, Iraq has revived and revamped the project. It signed the contract with Shanghai in 2007, but it was again delayed due to security concerns and unavailability of land for the plant.

Now work is ramping up with a handful of Chinese engineers and staff already on the ground as a camp is being built to accommodate the expected influx of workers over the next few months. The plan is to get at least 100 more Chinese workers in the coming two to three weeks as the pace of work increases, said Cao Linjun, the site manager from Shanghai Electric, dismissing security concerns as an obstacle. “If I feel afraid, I will not come here,” he said during a visit to the plant, which was protected by three security units, an emergency police unit, an army unit along with other guards. Iraq is trying to shake off the legacy of years of violence and economic decline by luring foreign investment and expertise to help it rebuild. Violence has fallen sharply in the last two years, but daily bombs and killings are still common.

30 May 2010 - Financial Times

The Iraqi government on Wednesday said it would dissolve the national airline amid a legal dispute with Kuwait over reparations dating from Iraq’s invasion of its neighbour in 1990.

The $1.2bn (£837m, €979m) reparations relate to aircraft and parts taken by Iraq during its occupation of Kuwait. The decision to wind up Iraqi Airways is an attempt to avoid the claims filed by Kuwait Airways.

The quarrel highlights the lingering tensions between the two countries and the long shadow cast by Saddam Hussein’s rule. Despite the dictator’s downfall in 2003, Kuwait insists Iraq’s government must pay a total of $24bn in outstanding reparations. Iraq still transfers 5 per cent of its quarterly oil and gas revenues to Kuwait to meet this obligation.

The airline dispute came to a head last month after Iraqi Airways made its first flight to London in 20 years, only for its aircraft to be met by a lawyer representing Kuwait Airways.

The Kuwaiti airline had obtained a High Court order in London providing for the freezing of Iraqi Airways’ assets. Its director-general was forced to hand over his passport. However, the aircraft that landed was chartered from a Swedish company, so it could not be seized. The Iraqi Airways executive was also eventually allowed to return to Baghdad.

“They didn’t leave any chance for Iraqi Airways to operate,” Ali al-Dabbagh, a government spokesman, told the Financial Times. “We feel this needs to be closed … needs to solved in a friendly way, not in the court.”

Mr Dabbagh said the government had yet to decide whether to sell the Iraqi Airways aircraft or establish another company to bypass the legal claims.

“We have to find out the legal way – is there a legal way to avoid the Kuwait claim on the Iraqi Airways property or on the new airline?” Mr Dabbagh said. “If that is still there, then we will not form [an alternative airline].”

Kuwait Airways filed its first claim in Britain in 1991, alleging that Iraq stole 10 civilian aircraft.

Christopher Gooding, a lawyer at Fasken Martineau, which represents Kuwait Airways, said any move to dissolve Iraqi Airways and declare it bankrupt would not lead to the claims being dropped.

“First, it appears to me to be a sorry reflection of Iraq’s attitude to its international commitments that liquidating its own national airline is seen as preferable to addressing those commitments,” said Mr Gooding in a statement.

“Threatening to start a new airline merely demonstrates what a cynical tactic this is.”