So far this year Iraqi stocks have been surprisingly oblivious to three very bullish developments. The Iraq Securities Commission has finally issued its instruction on custodian bank licenses. (See this post for more on custodian banks.) The European Central Bank (ECB) is running its printing presses at maximum capacity. And earnings are up sharply at the ISX-listed banks.

The implications for foreign investment inflows are obvious. A solution to the custody problem will make it technically possible for more conservatively run institutions to invest. The ECB’s efforts will provide them with the necessary funds. And the rise in bank profits will make it easier for them to convince themselves that stocks are cheap on a valuation basis.

Yet the Rabee Securities index is down about 11% YTD and there has been no appreciable increase in trading volumes.

Either there is some hidden problem or local investors simply don’t believe that more foreigners are really coming. I think the latter is more likely. All this bullish news will only move the market if it convinces someone to front-run potential new money. Otherwise, the market isn’t going to go up until this money actually starts coming in.

In an efficient market you might expect prices to go up gradually in anticipation of such an event. When the moment finally arrived, there might not be that much upside left. But emerging markets don’t work this way. The adjustment will happen all at once, quite a while after anyone should have been able to see what was coming. The trick is not to cash in your chips before this happens.

Iraq’s cabinet has approved a $363 million (435 billion Iraqi dinar) contract on Tuesday with Egypt’s Orascom Construction to build a 1,014 MW gas-fired power plant in the northern town of Baiji [Beiji, Bayji].

The contract involves building the plant and installing six 169 MW generators which Iraq bought from Siemens in 2008.

The project is expected to be completed within 21 months, Musab al-Mudarres [Musaab al-Mudarris], a spokesman at the electricity ministry, told Reuters.

Iraqi demand for electricity peaked at 15,000 megawatts last year, but the oil-producing nation managed to supply less than half of that.

(Sources: Reuters, Aswat al-Iraq)

Oil giant BP is reported to be in talks with Iraq to boost output from the Kirkuk oilfield in the north of the country.

Bloomberg, citing sources at the Middle East Economic Survey (MEES), says BP officials will meet with Iraq’s North Oil Company (NOC) within weeks to discuss increasing capacity at Kirkuk from about 260,000 barrels per day (bpd) to as much as 700,000 bpd over the next five years.

Oil Minister Abdul Kareem Al- Luaibi [Elaibi], met with BP executives in London on 22nd February after the company expressed an interest in the field.

“We envisage BP doing something similar to Rumaila at Kirkuk,” said an Iraqi oil executive. He was referring to a $30 billion BP-operated project to develop Iraq’s biggest oilfield, located in southern Iraq.

Reuters reports that production at the 77-year old field had been as high as 900,000 bpd in 2001 after years of injecting water and dumping unwanted crude and products into the field.

But the UK oil major downplayed the possibility of taking on a mega-project at Kirkuk.

“We are not aware of any proposals for the development of Kirkuk or any other fields,” a BP spokesman told Reuters. “We would of course consider opportunities for further investment in Iraq as we would opportunities elsewhere in the world.”

The problems at Kirkuk forced the NOC to issue a tender late last year to rehabilitate the ageing field, but industry sources say the process went nowhere.

Iraq put Kirkuk on the block in its first postwar oil auction in 2009. A consortium led by Royal Dutch Shell offered to boost flows to 825,000 b/d for a fee of $7.89 a barrel, but Baghdad insisted on payment of $2 a barrel.

(Sources: Reuters, Bloomberg)

Sami al Araji, chairman of Iraq’s National Investment Commission (NIC), has told a business audience in New Delhi that his country needs $500-$700 billion in investment to rebuild its infrastructure.

Araji compared the opportunities in Iraq to “Germany after the Second World War”, adding, “our message to the world is that we are open for business — there are huge opportunities”.

Iraqi officials conceded that violence was still a risk for investors, but security was improving in the country, Araji said. “I don’t deny there are security considerations but the situation is much better.”

Analysts say greater stability would encourage a surge of foreign investment into both the oil and non-oil economy.

Dennis Flannery, Iraq country head of global investment bank Citigroup, told the conference that the oil industry will throw up tremendous wealth that will transform Iraq, calling the country a “great frontier opportunity for investors.”

India and Iraq have traditionally enjoyed friendly ties and investment analysts see Indian companies as a natural fit.

(Source: Gulf News)

Iraq’s transport minister, Hadi al-Ameri [al-Amari] (pictured), has appealed to foreign firms to help restore his country’s dilapidated infrastructure by rebuilding airports and constructing a European-style rail network, according to a report from AFP.

Addressing nearly 50 companies in Baghdad’s heavily-fortified Green Zone, he said that as Iraq’s oil income rises in the coming years there will be increasing numbers of projects to upgrade the country’s potholed roads and small airports.

“Iraq could be the most attractive place in the world for investment in the transport sector … There are billions of dollars worth of opportunities for investment.”

Ameri said he expected revenues from oil would top $200 billion, double current projections, when production rises to around 4 million barrels per day in the coming years.

He said the government wanted to renovate existing airports and sea ports, as well as building new ones, and that it also wanted to establish 2,000 kilometres (1,250 miles) of rail track with “European characteristics”.

The recently-approved 2012 budget allocates around $1 billion for transport and communications.

Just last week the National Investment Commission again called for international companies to tender for the construction of a monorail system in Karbala.

(Source: AFP)

The first official and business delegation from Lithuania has visited the Kurdistan Region to meet with local officials and explore potential areas of cooperation.

The large group was headed by the Lithuanian Vice-Minister of Economy, Mr Daumantas Lapinskas, and included the Vice-Minister of Agriculture, Mr Mindaugas Kuklierius, and the Deputy Director of External Economic Relations Department from the Lithuanian Ministry of Foreign Affairs, Mr Regimantas Jablonskas. These senior officials met with a number of KRG ministers and representatives during their three-day visit to the Region.

Mr Lapinskas, said that the delegation was surprised by the vast progress taking place in the Region and that they were pleased with the warm hospitality they had received. He said, ‘We have witnessed much development across the city, and we believe there is much interest from our business community to engage in Kurdistan.’

The delegation pledged to return to Lithuania and raise more awareness about the safety, stability and progress that they witnessed and about the significant economic opportunities Kurdistan has to offer.

In addition to the official meetings attended by the delegation’s senior leadership, a business forum was hosted by the Erbil Chamber of Commerce, the KRG Ministry of Trade and Industry, and the KRG Ministry of Planning for the representatives of the 16 Lithuanian businesses that accompanied the delegation. The forum was also attended by dozens of director-generals from the various ministries and by local businesses interested in building stronger ties with Lithuania.

Commenting on the visit, the KRG Minister of Trade and Industry, Mr Sinan Chalabi said, “I was pleased to see such a large delegation. We witnessed significant success from the business forum, and we are hopeful that these meetings will lead to a number of important partnerships in the future.”

The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

For some time, Iraqi politicians have been discussing a bill proposed by President Jalal Talabani, of the Kurdistan Alliance, on the subject of administrative changes to boundaries of governorates that were altered by the Baath [Ba'ath] regime.

In principle, this discussion has been kept separate from the bigger question of article 140 of the Iraqi constitution on disputed territories. Some politicians have presented the bill as a preparatory step towards the implementation of article 140. Others, including Prime Minister Nuri a-Maliki, have cited the Talabani bill as something that necessitates postponement of the creation of federal regions in parts of Iraq affected by the bill.

For a long time, the Talabani bill was known mainly through paraphrases. By now, it is however clear that the proposed law is very short and basically just involves the cancellation of all “unjust” boundary changes by the former regime in pursuance of its “political goals”.

If implemented to the letter, this would mean altering the administrative boundaries of Iraq to the pre-1968 situation, roughly as on this map from 1966:

Baghdad would swallow Salahaddin, Kirkuk would grow a good deal, Najaf and Muthanna would cease to exist.

Importantly, in a consistent implementation, Kurdish-majority Dahuk would also revert to Mosul/Nineveh! Now, presumably that is not what Talabani wants (the Kurds mainly want a bigger Kirkuk), and presumably he is using the words “unjust” and “political aims” in order to create a justification for going back to 1968 generally speaking – but not, of course, when it comes to land given to the Kurds by the Baathists. But that doesn’t make a lot of sense. Dahuk was given to the Kurds by the Baath precisely in pursuance of political “aims”, namely that of creating the first zone of administrative autonomy for a Kurdish minority in any modern Middle Eastern state. To the many Arabs in northern Mosul who suddenly found themselves in a Kurdish-majority governorate, the decision may well have been seen as “unjust” first and foremost.

That is why the new Talabani draft law is just another article 140 in disguise. It is trying to create a cloak of objectivity but it has in fact exactly the same failings of subjectivity as article 140 has – disputed territories exist only in the eye of the beholders. As such, the new draft law of Talabani is likely to prove inflammatory to the derailed Iraqi political process rather than a means of facilitating greater rapprochement.

AFP reports that Japan is to offer $530 million in loans to Iraq, in part to help rebuild oil refineries, as Tokyo seeks to diversify fuel supplies after the tightening of sanctions on Iran.

A Japanese foreign ministry spokesman said that loans totalling 42.5 billion yen have been pledged to Baghdad to aid four infrastructure projects: a refinery in the southern city of Basra, another refinery in the northern city of Baiji, a hospital and a telecommunications system.

The total value of the projects is 160 billion yen and the main contractors will be Japanese companies.

Japan has eagerly sought to strengthen its ties with Iraq by offering reconstruction support in the aftermath of the conflict there. The world’s third-largest economy relies heavily on the Middle East for its oil needs, and is under pressure from the United States to reduce its dependency on Iran.

(Source: AFP)