By Tariq Abdell, Founder & Chairman, Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The unanimous approval of the new Iraqi government by the Iraqi lawmakers, to be led by the incumbent premier al-Maliki, is long-awaited news – ending nine tumultuous months of political horse-trading. However, the highly politicized nature  of the new cabinet could easily jeopardize its effectiveness and its decision-making independence; subsequently, protracting Iraq’s tribulations: ethno-sectarian strife, improvised population, and languished infrastructure.

Inarguably, Iraq’s new cabinet first order of business is security, 2011 budget, hydrocarbon and investment laws and, most importantly,  revamping of  Iraq’s underdeveloped oil sector which provides over 90 percent of its budget revenues.

Given Iraq’s colossal energy reserves, 115 billion barrels of oil and 112 trillion cubic feet of gas, and the international markets insatiable appetite for energy resources, chiefly the U.S., China, and India; Iraq is strategically positioned as ever before to reclaim its well-deserved seat among the major oil producers  such as Saudi Arabia and Iran.

Nevertheless, the daunting challenges of the oil sector - decades of wars and sanctions- are solemnly hampering the country’seconomic  recovery and its multi-billion dollar mega-reconstruction projects (e.g., housing, schools, hospitals, roads, bridges, airports, dams, etc…) – among them:   

• The oil sector is a highly politicized field.
• Major oil fields require billions of dollars for rehabilitation and development.
• The oil workforce is in desperate need of training and technological know-how.
• OPEC constraints (production quotas, for instance).
• Severely languished oil  infrastructure (systematic bottleneck, for instance)
• Repealed hydrocarbon law

Given the aforementioned challenges, the new Iraqi Government shall devise a concerted post-conflict oil strategy, that is capable of revamping the oil sector and, subsequently, boosting production capacity to its desired levels - from 2.5 million barrels a day to 12 million bpd over the next six years- the strategy shall entail the followings:

a)  Independent and inclusive Petroleum Council -reflecting the geographic distribution of Iraq’s energy resources- that is responsible for formulating oil strategies, enforcing transparency and accountability as bulwarks against corruption, and, most importantly, deflecting the politicization of the oil sector.

b) Conducive and transparent business environment compatible with Iraq’s new constitution -ratification of  the  investment and hydrocarbon laws-  susceptible to assure and attract greatly needed foreign capital and technological know-how.  

C) Equitable distribution of oil revenues to avoid the resource-rich nations’ deleterious disease also known as the resource war. Historically, the bulk of Iraq’s oil revenues are distributed along ethno-sectarian and tribal allegiances, as opposed to inclusive and growth-oriented economic policies,

Moreover, given the IOCs vested interest in the Iraqi oil, the new government ought to seek the IOCs’ expertise to help revamp its oil sector by introducing technological know-how, the industry best practices, and foster a professionally literate workforce. With such perspicacious initiative, Iraqi government will definitely enhance its oil sector efficiency, boost production, and, eventually, spur economic recovery.

Conversely, in the absence of a concerted and inclusive national development strategy susceptible to resuscitate the country’s weakened economy, create jobs, and, ultimately, improve the well-being of  of its impoverished population; Iraq may risk reigniting political instability, ethno-sectarian strife, religious fanaticism, and foreign intervention as result of its  injudicious policies. 

 The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The author, Tariq Abdell, is an Iraq analyst, and Founder & Chairman of Mesopotamia Insight

He can be contacted at: atariq2000@hotmail.com

or

Followed on twitter: http://www.twitter.com/atariqx

By Tariq Abdell, Founder & Chairman, Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The absence, thus far, of a democratically elected and accountable government — over six months of political horse-trading — underscores Iraq’s fragile democracy that is exacerbated by a host of concomitant factors: inept and Self-serving political class, the region’s geopolitical tensions and ploys (Iran’s nuclear and expansionist ambitions, for instance), end of U.S. combat operations, and the resource curse – oil and gas.

The deep-rooted causes of the protracted political crisis and its calamitous symptoms (e.g., extremely impoverished population, lack of basic services, higher unemployment, severely languished infrastructure, dysfunctional State’s institutions, political violence and organized crime, etc…) are most likely to linger for years to come if the coming government is a sectarian-based, non-inclusive, and opts for political marginalization. Consequently,  entrenching Iraq’s centuries-old  ethno-sectarian schisms and setting the conditions for a weak and failed government… Simply put, Lebanization of Iraq’s nascent democracy.

Abraham Lincoln once said “A house divided against itself cannot stand.”, Iraqi politicians are morally and legally accountable before their constituents; thus, they are compelled to devise a concerted  and comprehensive  post-conflict National Reconciliation strategy capable of  a) preserving Iraq’s unity b) averting the collapse of the State’s institutions and c) creating the conditions for a sustainable and inclusive socio-economic recovery.

Drawing on past experiences, Iraqi leaders and lawmakers –from different political factions– need to reach out to nations with similar past and build on their learned lessons:  President Nelson Mandela’s post-apartheid Truth and Reconciliation Commission (SA TRC) in South Africa,  Rwanda’s post-genocide  National Unity and Reconciliation Commission (NURC), etc…  Moreover,  the United Nations (UN), as an honest broker in conflict and post-conflict zones,  could play a major role in overseeing and promoting Iraq’s National Reconciliation, rule of law, and help rehabilitate Iraq’s decadent institutions as result of decades of wars and sanctions.

In the absence of a comprehensive and concerted national reconciliation strategy addressing the aspirations and preoccupations of Iraq’s different ethno-sectarian groups, Iraq is most likely to revert to its darkest years of sectarian violence and lawlessness (05-07) — geopolitically fueled and petro-dollars funded–  and, subsequently,  jeopardizing all the hard-earned achievements chiefly the toppling of Saddam’s tyranny.

Juan Pablo Pérez Alfonso, a prominent Venezuelan diplomat primarily responsible for OPEC inception which Iraq is a founding member, coined the phrase: “You will see oil will bring us ruin … oil is the devil’s excrement.”

Irrefutably, if Iraq’s ruling class persists on pursuing the perilous path of political sectarianism and inequitable distribution of wealth, the outcomes of such tendencies would be a devastating political upheavals and vicious cycle of violent communal conflicts over the control and exploitation of Iraq’s resources (oil and gas) and the allocation of the petro-dollars.

Historically, the bulk of Iraq’s oil revenues are distributed along ethno-sectarian and tribal allegiances, as opposed to inclusive and growth-oriented economic policies, to preserve the ruling class power and maintain loyalties among its favored constituents. Consequently, giving rise to a wealthy and influential — religiously and politically — elite class .

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” according to report from the US Joint Forces Command

Given Iraq’s proven oil and gas reserves, 115 billion barrels of oil and 112 trillion cubic feet of gas,  and current Peak Oil as result of global markets insatiable appetite for energy resources e.g., U.S., China, and India. Iraq is strategically positioned  as ever before to lead the oil market and bring immeasurable inflow of petro-dollars –commensurate with its colossal  reserves– that can be used to fund its impending multi-billion dollar mega-reconstruction projects (e.g., houses, roads, hospitals, bridges, airports, schools, dams, etc) and, ultimately, lift millions of Iraqis out of poverty in a country where over 20 per cent of the population still live below the poverty line.

To this end, Iraq needs to institute an independent and inclusive  Petroleum Council — reflecting  the geographic distribution of Iraq’s energy resources — that is responsible for formulating oil strategies, deflecting the politicization of the oil sector, enforcing transparency and accountability as bulwarks against corruption , and robust enough to reign SOC, NOC, and IOCs. Furthermore, Iraq can draw on other resource-rich nations’ experiences in coping with the resource curse phenomenon e.g., Canada, Norway, and UAE. Also, Iraq needs to tap into its  expatriates’ knowledge and expertise such as Mr. Farouk al-Kasim who helped Norway established its successful and prosperous oil industry.  

Inarguably, a genuine national reconciliation is Iraq’s holy grail, in other words, it’s an imperative prerequisite for preserving Iraq’s unity, terrotorial integrity, and political stability. Conversely, lack of a genuine  national reconciliation strategy, strategic foresight, and leadership could easily trigger a resource war, resource-rich nations’ deleterious disease, over Iraq’s black gold. Alas, Iraq and its future generations would have to pay dearly for today’s  injudicious choices , in other words, perpetuating  Iraq’s ethno-sectarian strife, political instability, religious fanaticism, foreign interventions, economic setbacks, enormous debt and, consequently,  undermining the desperately needed investments.   

In sum, ”A nation’ s strength ultimately consists in what it can do on its own, and not in what it can borrow from others.” Indira Gandhi.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The author, Tariq Abdell, is an Iraq analyst, and Founder & Chairman of Mesopotamia Insight

He can be contacted at: atariq2000@hotmail.com

or

Followed on twitter: http://www.twitter.com/atariqx

By Tariq Abdell, Founder & Chairman, Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The end of U.S. combat operations in Iraq presents a unique opportunity for a new beginning in U.S.- Iraq’s relationship. However, given Iraq’s crippling challenges and U.S. sluggish economy, the success of a such strategic partnership is contingent upon the political will of both U.S. and Iraqi governments, the support of the international community, and the genuine commitment of the international oil companies – Iraq’s biggest investors.

Drawing on past experiences, the stakeholders (U.S. government, Iraqi government, UNDP, World Bank, international oil companies, etc…) need to devise a concerted post-conflict reconstruction strategy, Marshall plan type, that is capable of  a) averting the collapse of State’s institutions and b) creating the conditions for a sustainable socio-economic recovery. However, before undertaking a such colossal challenge, stakeholders need to build a strategic framework defining  the mission’s objectives (attainable and realistic), organizational design (steering committee, for instance) , stakeholders’ roles and responsibilities, needed resources, and performance metrics.

Respectively, I’ll explore key stakeholders’ roles and responsibilities in Iraq’s post-conflict reconstruction  as it’s mandated by their respective missions.

Iraqi government

In this process, Iraqi government should be treated as an equal partner that is fully responsible and accountable of its actions before its constituents and the international community. Consequently, the new elected government needs to formulate a comprehensive development strategy in concert with key stakeholders, including the planning for the impending multi-billion dollar mega-reconstruction projects, and the followings are some key areas of common interest and cooperation:

• National reconciliation to fend off ethno-sectarian strife and political violence.
• Reining in corruption and enhancing institutions efficiency.
• Providing basic services (e.g., drinking water, electricity, running sewer, health care, education, etc….)
• Promoting rule of law and human rights.
• Tackling  illiteracy challenges, a serious threat to the country’s future.
• Creating jobs, higher unemployment rates are source of societal and political upheavals e.g., organized  crime, militias, etc….
• Revamping severely languished infrastructure.
• Reviving the country strategic industries to curtail its dependence on petrodollars.

U.S. Government 

To ensure the success of its new mission “New Dawn” in Iraq, the U.S. needs to learn from its past mistakes – $53 billion of unfinished or poorly executed projects– and capitalize on its acquired knowledge and understanding of Iraq’s ethno-sectarian fabric, political landscape, and socio-economic dynamics. Thus, U.S. Department of State’s Iraq strategic partnership office ISPO and USAID  should play a crucial role in coordinating and overseeing the reconstruction efforts in concert with other stakeholders e.g., Iraqi government, UNDP, etc….

United Nations Development Programme

Given UNDP extensive experience –Honest broker– in conflict and post-conflict zones, the UNDP is well-positioned to promote and oversee national reconciliation, rule of law, and rehabilitate State’s decadent institutions to enhance efficiency and  inclusiveness – Hiring and promotions are merit-based and not politically dictated.

World Bank

Given the decay of Iraq’s financial institutions  as result of decades of wars and sanctions, the World Bank’s role,  key partner in this reconstruction efforts, is to provide post-conflict reconstruction expertise, financial and technical assistance,  which are key ingredients for a sustainable development.

International oil companies (IOCs)

Given the current Peak Oil and IOCs vested interest in a stable and secure Iraq, IOCs should play a major role in this reconstruction efforts. Oil sector is the engine of Iraq’s economy  -%90 of government revenue. Nonetheless, the oil sector challenges are hampering the country’s economic recovery:   

• Major oil fields require billions of dollars for rehabilitation and development as result of decades of wars and sanctions.
• Current oil workforce is in desperate need of training and technological know-how.
• Oil sector is a highly politicized field.

Thus, given Iraq’s vast reserves of oil and gas,  IOCs’ should help revamp the oil sector swiftly by introducing technological know-how, the industry best practices, and fostering local workforce. With such perspicacious initiatives, IOCs will help enhance the oil sector efficiency, increase production, spur economic recovery;  and, eventually, countervail some of deep-seated distrust and apprehension.

In sum, in the absence of a clear post-conflict reconstruction strategy, Iraq’s convoluted political impasse and the international community inaction — lack of political will– are recipes for a prolonged political instability and ethno-sectarian strife; subsequently, jeopardizing all the hard-earned successes (e.g., fair elections, strong Army, etc…) and exacerbating  geopolitical tensions. Moreover, given the endured sacrifices, thus far,  in blood and treasure — thousands of lives and over $ 751 billion war price tag — it’s imperative to stand by Iraq in these difficult times to prevent it from reverting to a military dictatorship or ,worst, religious tyranny.  In his speech to congress (12th March, 1947), President Truman exquisitely puts it when he warns us against lose of hope, destitution, and their grim outcomes chiefly chaos and tyranny:

“… The seeds of totalitarian regimes are nurtured by misery and want. They spread and grow in the evil soil of poverty and strife. They reach their full potential when the hope of a people for  a better life has died. We must keep that hope alive. If we falter in our leadership, we may endanger the peace of the world – and we shall surely endanger the welfare of our own nation…”

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

 The author, Tariq Abdell, is an Iraq analyst, and Founder & Chairman of Mesopotamia Insight

He can be contacted at: atariq2000@hotmail.com

or

Followed on twitter: http://www.twitter.com/atariqx

If a week is a long time in politics, it is a very long time in Iraq. The first day of this week in Iraqi politics witnessed a Sunday 23 May meeting between Iraqiyya leader Iyad Allawi and Grand Ayatollah Ali al-Sistani. On the same day, the Washington Post released a new interview with Prime Minister Nouri al-Maliki that gave excellent insight into the premier’s current mindset. So what’s going on behind the scenes and how far away  is the ratification of a new prime minister and cabinet of ministers?

The overarching trend is that we are headed towards a sprawling “unity’ government that might be described as “a government of everyone and no-one.” This means a government in which almost everyone is a participant to some extent, but no-one has signed on to an agreed manifesto regarding how the government will act. Such a government would not be a meeting of equals; a sub-set of three political coalitions would form the core of the government and would hold the balance of votes in the cabinet – the forum at which many key decisions would be made.

What are the indicators that point to this conclusion? The first and most important is the difficulty of getting Maliki and Allawi in the same room, despite behind-the-scenes US and Gulf Arab pressure to make such a meeting occur. For many policy-makers in Washington and the Arab world, the ideal solution would be a Maliki-Allawi tie-up. In theory, this would assure a strong federal state, a more favourable investment climate, cross-sectarian balance and curtailed Iranian influence. Personality and alliance dynamics, plus insistent prodding from Tehran, make it unlikely that a nationalist super-coalition will emerge.

In the absence of such a nationalist alliance, it is equally unlikely that Allawi’s primarily Sunni Arab bloc will be excluded from government completely. The United States, Ayatollah Sistani and the Kurds have all been vocal on the need for an inclusive government. On 23 May, Maliki noted: “How could the government be formed without Iraqiyya whether as a bloc or as Sunnis?” Maliki added a further inducement to Allawi’s bloc members, noting: “the Iraqiyya list and the Sunni component must be in the sovereign posts, not in secondary posts.”

The comment shows that Maliki retains a clear-headed appreciation of Allawi’s weaknesses. Maliki correctly divines that Iraqiyya is struggling to hold together and may be easy to fragment. On 23 May, the premier noted: “I read the real situation and I see Allawi’s path as difficult; he has many problems ahead of him. I don’t say that I have no problems but mine are less. I have a coherent list unlike the others. So, imagine the problems for Allawi and the others.” Maliki has been consistent in rebuffing all possibility that Allawi will lead a new government and the Sunday meeting between Allawi and Sistani failed to produce any favourable outcome for the Iraqiyya leader.

A greater challenge for Maliki is to reassure Shia, Kurdish and Sunni partners that he can be trusted to take a less authoritarian stance during a second term. Some elements of the pan-Shiite Iraqi National Alliance (INA) such as the Sadrists will require very significant inducements to accept Maliki as prime minister, including so-called “service ministries” such as health, labour and transport. The Kurds and Sunni Arab factions also have a strong bias against the premier. Though Maliki can offer many tempting pay-offs to allies in the form of ministries, there is an under-current of antipathy that suggests Maliki will be shunted aside at a very late stage in government formation and a more acceptable (and weaker) prime ministerial candidate placed atop the sprawling “unity” government.

Whether Maliki remains or is removed, the resultant government may be unlikely to emerge before the start of Ramadan in mid-August. Whenever the government does emerge, we can expect significant churn in the ministries, with most or all of the ministerial portfolios redistributed during the summer negotiations. The aforementioned sovereign ministries – Finance, Interior, Oil, Defence, Foreign Affairs – may be split between political appointees of five main factions. This could result in some favourable results for investors, such as an Iraqiyya or Maliki pragmatist in the Ministry of Oil or a Kurd in an Arab-KRG confidence-building role at the Ministry of Finance. The shuffle could also see unsavoury characters implanted in key positions. In the lottery of government formation, only one statement can be made in confidence — that many existing relationships will be rendered null and void, requiring the work of commercial positioning to begin afresh.

Profile

Dr Michael Knights is Vice President and lead Iraq analyst at Olive Group, the  first security company to operate in Iraq.  He has  worked on Iraqi political and security risks since the mid-1990s, first as an oil and gas journalist and later as an academic, receiving his PhD on Iraq at the Department of War Studies, King’s College London.  Since 2003, Dr Knights has run the Washington Institute for Near East Policy’s Iraq programme, advising US government agencies on Iraq policy and publishing a series of books on local politics and security in Basrah, Maysan, Dhi Qar and the northern provinces including Kirkuk.  Since joining Olive Group in 2006, he has produced in-depth social and political analysis of 26 of Iraq’s major oil and gas fields and keeps a close eye on national security and politics.

He can be contacted at mknights@olivegroup.com

The Zain Group announced today that the management of its Iraq operation, Zain Iraq, will henceforth fall under the direct supervision of the Group’s Chief Executive, Nabeel Bin Salamah. The former Zain Iraq CEO, Ali Al-Dahwi, has been appointed special advisor on Iraq for the Zain Group.

The Zain Group explained that the move was made on the basis of the company’s long term development in Iraq and will not necessarily mean a change in the strategic direction set out by Al-Dahwi, whose energy and hard work have established Zain as a highly visible brand in the Iraqi market with a customer base of 11 million, the highest among the Group’s Middle East operations.

Barrak Al Sabeeh will represent Bin Salamah in an on-the-ground capacity, while Wael Ghanayem, the newly-appointed Zain Iraq CFO will take on the additional role of acting CEO until such time that a new CEO is officially appointed.

With these changes, the Zain Group is confident that they will not only provide the Iraqi people with mobile telecom services of the highest quality and value, as well as the latest products, but also serve as an example of how foreign direct investment has contributed to the development of the new Iraq.

( Arab times )

This month (March 2010), investment permits have been awarded to several projects in Baghdad including companies working in the fields of housing, tourism and hotels.

“Eight investment permits have been given to a number of companies. Housing projects were given a priority,” the Investment Commission in Baghdad said in a statement received by Aswat al-Iraq news agency.
Among the projects is a housing project in Baghdad that includes 1,824 units at the Muthanna Airport, the statement indicated, adding that the total cost of the project is $238 million U.S. dollars.

Mr. Iain Blake, Senior Broker at Anglo Arab Insurance Brokers Ltd., observes, “This development demonstrates the continued progress being made in the reconstruction and rehabilitation of Iraq.”

The announcement comes hot on the heels of a cornerstone being laid in Nassiriya, the capital of ThiQar, 380km south of Baghdad.  The cornerstone of the investment al-Ahrar residential compound was laid in the northern city on Tuesday 16^th March, according to the media director of the implementing company.

“Thi-Qar governor, Taleb Kazem al-Hassan, laid the cornerstone of the project in north of Nassiriya on 32,000 donums and with a total cost of $160 million,” Abduljabar al-Hamdi told Aswat al-Iraq news agency.

“The project includes 1800 apartments with 70 buildings each will consist of seven or eight floors within 18 months,” he added.

“The compound will provide all sort of services from gardens to swimming pools and public gardens,” he noted.

 Mr. Blake continues, “I handle a great deal of Iraqi construction risks and I am noticing that work is spreading out from roads and bridges to broader infrastructural projects encompassing residential developments, hospitals and hotels.  It really is an area where our clients have growing needs to manage their exposures in areas of construction, assets and liabilities.”

While the Iraqi government has made overtures to its Kurdish counterpart in the north to end an oil standoff, much remains in doubt without legislation to keep the industry in check – rules which this time the Kurds are pressing for rather than Baghdad, writes Fawzia Sheikh

For a long time, the northern Kurdistan region was seen as the most attractive oil market in the country but the latest bid rounds in December and subsequent contract signings in the south have made it suddenly “less clear that Baghdad actually needs legislation  with Kurdistan, because they’re actually doing pretty well on their own,” said David Bender, an analyst in the Middle East practice of the Eurasia Group’s Washington office.

Iraq’s government initially pushed for petroleum-sector legislation, but lately the Kurdistan Regional Government (KRG) has been motivated to act “so they don’t get sort of left behind, with this new international oil interest in Iraq,” Bender argued.

Thirty-eight companies from 17 countries have exploration and production contracts in the Kurdistan region, according to Ashti Hawrami, the KRG’s national resources minister. Several medium and large discoveries have been made, while one private sector refinery has been built and another is almost finished, Hawrami noted in a press release.

Baghdad has never viewed oil contracts signed independently by the Kurds as legitimate and blacklisted companies involved in the northern region’s oil fields from working in the south. Oil exports from the Kurdish area stopped last year when companies were not reimbursed.

In recent days, however, the government of Prime Minister Nouri Al-Maliki has been considering covering the development costs of foreign firms working in the north, according to media reports, which also cite that oil exports would flow again soon from the north’s Tawke field, operated by Norway’s DNO and Turkey’s Genel Energy.

The central government’s ban on companies operating in the Kurdish area will probably remain until the implementation of an oil law, which outlines the sharing of profits, the signing of contracts and the role of Iraq’s National Oil Company, Bender told OilPrice.com. He added the Kurds will presumably want to continue to forge contracts without Baghdad’s involvement.

As of now, only small interests have been doing business with the KRG, “but if the Kurds ever want to attract major oil companies, they will have to come to some understanding with the Iraqi government,” added Bender.

Baghdad’s interest these days in reaching out to Irbil, capital of the Kurdish north, is “more politically based rather than anything having to do with oil,” he maintained…the Kurds may be the “king maker in whatever the next government is, and one of their prices is probably going to be some sort of progress on an oil law,” he argued. He said eventually an oil bill will be passed but conceded it is “somewhat worrisome that there is no time table.”

Without clearly defined rules in the petroleum sector, heightened international participation in the Middle Eastern country’s oil market has forced dealing with certain issues through a budgetary process, Bender said. This year’s budget spells out that provinces will be paid $1 per barrel for oil or gas they produce, while the provinces, namely the Kurdish north, have to agree to export oil or face a fine, he continued.

A total of 80 billion Iraqi dinars (ID), about US $67m, has been allocated to improve the roads in the capital Baghdad, the local municipality said on Tuesday.

The money will be used to pave the main streets and highways in the capital, change traffic lights in central Baghdad and to continue construction work on several bridges, according to a statement released by the municipality and received by Aswat al-Iraq news agency.