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By Michael Knights, for the Washington Institute for Near East Policy. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

The Necessary U.S. Role in Fixing the Baghdad-Kurdistan Energy Dispute

On February 15, 2022, Iraq's Federal Supreme Court ruled that the 2007 oil and gas law for the Kurdistan Region was unconstitutional, requiring a review of numerous production sharing contracts and oil sales agreements.

If the case prevents oil exports via Iraqi Kurdistan, then the world market will almost immediately lose 500,000 barrels per day, triggering higher oil prices, expanded windfalls for Russia and Iran, the collapse of Iraqi Kurdistan's economy, and a dangerous turn in Baghdad's ties with Erbil and with Ankara.

In this timely Policy Note, Iraq expert Michael Knights calls for the United States to act with other concerned states to resolve the Baghdad-Erbil energy crisis. In doing so, he categorizes the sub-issues of FSC implementation on a spectrum from higher to lower consensus, and explains both sides' views in an unvarnished, direct manner.

A targeted intervention by the United States and its partners, the author argues, could guide the dispute toward a long-overdue resolution that greatly aids U.S. interests and the global effort to find a substitute for Russian and Iranian oil and gas.

Click here to read the full report.

From The Middle East Institute. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Economic Diversification and Energy Transition in Iraq and the Gulf

Iraq is in the midst of an unprecedented economic crisis as it grapples with a volatile post-election political environment and continued social unrest. The onset of the pandemic two years ago combined with the subsequent decline in oil prices to create added economic pressures for a state that remains highly oil-dependent and a society that is overwhelmingly dependent on the public sector for employment.

The country's inability to provide jobs and services for its predominantly young population has sparked a protest movement that has added urgency to the need for major reforms. Meanwhile, the growing threat of climate change and climate-induced socio-economic challenges have raised the specter of an existential crisis, one that could potentially be hastened by Russia's invasion of Ukraine and the resulting impact on food security.

And while other Gulf oil exporters are reaping the benefit of a windfall in revenues by spring 2022, disputes over revenue sharing and the ability to catalyze domestic spending and investment continue to weaken recovery prospects for all of Iraq.

To identify pathways to deal with demands for economic reform and volatility in resource revenue, in November 2021 the Middle East Institute (MEI) and Iraq Policy Group (IPG) convened a high-level workshop on the side-lines of the American University of Kurdistan's annual Middle East Peace and Security Forum, bringing together decision-makers in Baghdad, Erbil, and the wider region, as well as practitioners, scholars, and the private sector to examine the country's prospects for addressing its short- and long-term economic challenges as Baghdad and Erbil embark on ambitious reform agendas.

This included discussions and debates on plans to diversify their economies away from fossil fuel dependency, the progress of reforms, regional policy goals on net zero at 2050, and the wider lessons that Erbil and Baghdad could draw from the Gulf region.

This report provides the insights and analyses of a select group of participants, and forms part of a series of forthcoming Iraq- and Gulf-focused reports and initiatives that MEI and IPG will be convening.

Click here to read the full article.

By John Lee.

The Institute for Economics and Peace has ranked Iraq 157th out of 163 countries in its 2022 Global Peace Index.

This represents an improvement of two places on last year's ranking.

Worldwide, the average level of global peacefulness deteriorated by 0.3 per cent over the past year. Although small, the report says that this deterioration continues a long standing trend, with the GPI deteriorating in eleven of the past fourteen years.

The latest report only partially captures the effects of the Russian invasion of Ukraine; these effects will be more fully captured in the 2023 report.

The most peaceful countries were listed as Iceland, New Zealand and Ireland, while the lowest ranked were Afghanistan, Syria and Yemen.

The full report can be downloaded here.

(Source: IEP)

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Tension simmers on Iraqi street as food prices rise

Already faced with chronic issues such as persistently high unemployment and a lack of access to basic services, Iraqis are now hit by skyrocketing prices for food staples.

Observers blame the jump in prices on both the Russia-Ukraine war and endemic corruption.

The rising consumer price inflation has sparked street protests in different parts of the country.

The full report can be viewed here (registration required).

(Photo Credit: Fared Baram/ NRC)

The Iraq Britain Business Council (IBBC) hosted the largest attendance for their Spring conference at the Mansion house on 24th May, with just under 300 attendees, half of whom came from Iraq.

Widely considered a success, the overall theme was 'sustaining economic growth in Iraq', There were multiple panels and roundtable sessions; including four panels focused on Finance and Energy, and additional themes of Education and Skills, Future Tech, Privatisation and a Kurdish ministerial roundtable with full attendance at all.

The conference was opened by Baroness Nicholson, president of IBBC.

Notable speakers included the Governor of the central bank H.E Mr. Mustafa Ghalib Mukheef, the Governor of Kirkuk, H.E. Mr Rakan Aljoubouri, the Chairman of the Trade Bank of Iraq, Dr Salem Chalabi and H.E. Dr Dara Rasheed, Minister of Planning, Kurdish Regional Government, and Mr Louis Taylor, CEO of UKEF, while Lord Howell gave an insightful and powerful speech on energy provision and the continuing importance of oil and gas distribution and production, especially in the light of Russian aggression. Professor Frank Gunter offered his paper for privatisation to a packed room. Dr Luay Al Khateeb, Distinguished Fellow Columbia University, chaired the Energy Transition session alongside with panellist from BP, Shell, GE and Oilserv.

The Rasmi AL Jabri award to the most outstanding, well run, professional Iraqi company engaged with the UK and international business from Iraq, was awarded to The Sardar Group and accepted by Mr Sardar Al Bebany from Rasmi's son and Baroness Nicholson.

Delegates came from all regions of Iraq, including KRI, Basra and Baghdad, with chambers of commerce, leading Iraqi businesses, and private investors and business- people engaged and supplying IBBC corporate members.

Principal sponsors included the Iraq private banking league, who brought 20 banking members, gold sponsors - The Sardar Group and Hydro C and Bronze sponsors - GE.

The Conference was also made available online and a recording of the Tech forum is available here.

(Source: IBBC)

From Farm to Fork: Europe Day in Iraq highlights country's vital agri-food sector

The Delegation of the European Union to Iraq marked Europe Day in Baghdad today. An event that brought together partners, highlighted the country's vital agri-food sector and efforts that support its sustainable development.

The one-day event was attended by representatives of the various partner ministries and local authorities, UN agencies, international partners, the private sector, unions, and key stakeholders of the agricultural sector.

The EU Ambassador to Iraq Mr. Ville Varjola, stated that:

"This week, we are celebrating Europe Day. It commemorates the 'Schuman Declaration' of 9 May 1950, which paved the way for Franco-German reconciliation and laid the foundations of what is now known as the European Union. Today, the EU continues to work in order to achieve peace also outside its borders.

"History has proven that the development of a robust agricultural sector is one of the most powerful tools to end poverty, boost prosperity, and ensure food security. For this reason, the EU is investing in the development of the entire agri-food value chain in Iraq to promote the needed diversification of its economy. This has proven to be all the more important given the rise in food prices globally, triggered by Russia's unprovoked and unjustified war on Ukraine".

A key feature of the event was an exhibition hall, under the theme "from farm to fork" that displayed an array of different activities and stories from the field. This included booths and stalls run by women from rural areas, as well as partner agri-food companies exhibiting and selling their products. It also included an exhibition on the livestock-dairy value chain.

The event was an opportunity for participants to voice their experiences of working in the sector, whether in terms of forging commercial alliances with buyers or accessing opportunities to develop their entrepreneurship skills and small businesses.

"Thanks for all operating agencies in Iraq and the European Union for providing cooperation to implement programmes that support the agriculture sector," said Dr. Hadi Hashim, representative of the Ministry of Agriculture during the event.

A technical panel discussion with experts from the sector offered an insight into some of the challenges, opportunities and practices in addressing agri-food development through a value chain approach.

The panel discussion served to raise awareness on this new approach, supported by the EU and with buy-in from the Iraqi government, identify a common understanding on how to further support value chain stakeholders to improve competitiveness and unleash the potential in the sector, as well as to present on-going activities carried out through the Agri-food Business Development Programme - AfBDP.

"This is an excellent example of how to support the agriculture sector and how to create synergies among different stakeholders," said Dr. Salah El Hajj Hassan, FAO representative in Iraq, on behalf of Ms. Irena Vojáčková-Solloran, UN Deputy Special Representative of the Secretary-General for Iraq, Resident and Humanitarian Coordinator.

The European Union in Iraq funds international partners - the Food and Agriculture Organization of the United Nations (FAO), Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ), the International Organization for Migration (IOM), the International Labour Organization (ILO), the International Trade Centre (ITC), and the United Nations Educational, Scientific and Cultural Organization (UNESCO)- under the umbrella of AfBDP.

Central to the AfBDP is an agri-food value chain approach that supports stabilisation and governance, while promoting sustainable and decent job creation.

(Source: UN)

By Mustafa Saadoun for Al Monitor. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Russian ambassador to Iraq: 'No objections' to Kurdistan Region exporting gas to Europe

Elbrus Kutrashev (pictured) spoke to the Kurdish news outlet Rudaw about plans to export natural gas from the autonomous part of northern Iraq to Europe in response to the war in Ukraine.

Click here to read the full article.

By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund.

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

Market Review: "Ramadan & Profit Taking"

The market, as measured by the Rabee Securities RSISX USD Index, declined by 7.0% for the month, and up of 8.2% for the year.

The market's strong gain of 27.8%, from November 2021 to the end of March 2022, was an excuse for profit-taking during the fasting month of Ramadan which coincided with April 2022. The market's technical picture is still intact as can be seen from the chart below showing that the RSISX USD Index has pulled back to the upper end of its two-year uptrend - an uptrend that ended a brutal multi-year bear market. A much healthier picture than that of most markets worldwide. This underscores its attractive risk-reward profile and diversification benefits versus these markets, especially considering that Iraq's economy, unlike most economies worldwide, is a significant beneficiary of the high oil price environment, in place over the last 18 months and solidified following the invasion of Ukraine.

(Source: Iraq Stock Exchange, Rabee Securities, AFC Research, data as of April 29^th)

Among the index's constituents, the best performing was National Chemical and Plastics Industries (INCP) up 9.9%, followed by Al-Mansour Pharmaceutical Industries (IMAP) up 3.1%, and Asiacell (TASC) up 1.3%. All other constituents were down with the worst performer being the National Bank of Iraq (BNOI) down 19.4% - BNOI's impressive multi-year growth was covered in last month's "The Opportunity in Retail Banking". Other decliners were the Commercial Bank of Iraq (BCOI) down 11.1%, the Bank of Baghdad (BBOB) down 6.8%, Baghdad Soft Drinks (IBSD) down 4.1%, Al Mansour Bank (BMNS) down 3.9%, Al-Kindi of Veterinary Vaccines and Drugs (IKLV) down 1.3%, and Kharkh Tour Amusement City (SKTA) down 1.1%. Al-Kindi of Veterinary Vaccines and Drugs (IKLV) replaced Gulf Commercial Bank (BGUC) in the latest index rebalance on 3^rd April 2022 by Rabee Securities as part of their regular index rebalancing.

Iraq is a massive beneficiary of high oil prices

As argued here in "Oil and the Economy" the changed geopolitical landscape, as a consequence of the invasion of Ukraine, will have significant consequences for the supply and demand of oil, which in turn will be transformational for Iraq, its economy and equity market over the next few years.

Reflecting these changed oil supply-demand dynamics, future oil price expectations, as measured by Brent crude futures contracts, continue to be high (green line in chart below), but moderating from the unsustainable highs in the immediate aftermath of the invasion (maroon line in chart below). This in combination with similarly sharply increasing food prices, will inhibit future world economic growth, as articulated by the IMF in its latest "World Economic Outlook" in which it lowered the outlook for both 2022 and 2023 world economic growth to an increase of 3.6% following an estimated increase of 6.1% in 2021. In spite of slowing world economic growth from the effects of high commodity prices, demand for oil will outstrip supply in the medium term, given the need by Western governments to ensure energy security, and end dependence on Russian oil.

Consequently, these lowered expectations for future oil prices, even if they moderate further, would still be significantly higher than those at the end of last year (grey line in chart below) - which were used in the "Iraq' Outlook for 2022", arguing then that "oil prices at these levels are positive for the country's financial position in that they will provide governments, current and upcoming, with the wherewithal to continue with current expansionary economic policies that will also allow for the accumulation of budget surpluses."

(Source: Investing.com, data as of April 25^th)

A sense of the expected government's surpluses can be seen by considering that Iraq's oil export sales could be USD117bn, and USD110bn in 2022 and 2023, should Brent crude prices average USD100/bbl and USD90/bbl for 2022 and 2023 (chart below). Contrasting these with 2021's budget expenditures of about USD75bn, gives a scale of the fiscal space available for the government to pursue expansionary budgets, as well as to mitigate the effects of rising food prices on the economy. To this end, the government is proposing a USD17bn "Emergency Food Security Support" bill under review by Parliament - which should have similar positive effects on the economy to those achieved by the economic support measures undertaken by governments worldwide in 2020 during the worst of the COVID-19 crisis.

(Source: Ministry of Oil, AFC Research. Projections are based on assumptions of average Iraqi oil price at a 3.5/bbl discount to Brent crude as given by future contracts in the prior chart, and unwinding of the OPEC+ deal by end of 2022)

Iraq's equity market in the meantime is in the process of emerging from a multi-year bear market, in which it discounted all conceivable negatives that dwarf, by orders of magnitude, those that other global markets are in the process of discounting. The Rabee Securities RSISX USD Index's 68.0% decline from its 2014 peak to the end of 2020 includes back-to-back declines of 5.4% in 2020, 1.3% in 2019, 15.0% in 2018, 11.8% in 2017, 17.3% in 2016, 22.7% in 2015, and 25.4% in 2014. Clearly, the market's year to date gain of 7.9%, coming on the back of a +21.4% return in 2021, represents a break from the past in that the market has established a sustainable up-trend as seen from the first chart. However, the index by the end of April 2022 is still 57.9% below the peak in 2014 - underscoring the potential catch-up upside for the equity market as it begins to fully appreciate the economic implications of a sustained period of high oil prices.

Iraq's value proposition is compelling as its economy is a huge beneficiary of the high crude oil price environment, while its equity market is in the very early stages of emerging from a multi-year bear market, and as such its risk-reward profile is very attractive against most global markets (chart below).

Normalized five year returns for the RSISUSD Index vs MSCI World Index, MSCI Emerging Markets Index and MSCI Frontier Markets Index

(Source: Bloomberg, data as of April 27^th)

Please click here to download Ahmed Tabaqchali's full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years' experience in US and MENA markets. He is a Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council. He is also a board member of Capital Investments, the investment banking arm of Capital Bank in Jordan.

His 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.

WFP Iraq Country Brief, March 2022

In Numbers

• 710,492 people assisted in March 2022
• US$ 2.25 million distributed in March 2022 through cash-based transfers
• 1,686 mt of in-kind assistance distributed
• US$ 39.4 million six months net funding requirements (April - September 2022)

Operational Updates

• In March, WFP provided cash and food assistance to 182,152 internally displaced persons (IDPs), 68,419 refugees, and 8,118 people from vulnerable communities through resilience building initiatives. Through the School Feeding Programme, WFP supported 451,803 children.
• WFP's resilience-building initiatives continue to provide smallholder farmers with the support they need in order to improve their production and increase crop yields. In Ninewa governorate, WFP provided greenhouses, beehives, cattle and seeds to 325 farmers who utilize the knowledge and expertise shared by WFP to provide a sustainable livelihood for themselves and their families.
• WFP collaborated with the Iraqi Ministry of Water Resources to organize the second Annual Baghdad International Water Conference, to help highlight and provide solutions to the issues of climate change and water scarcity facing Iraq's people and agriculture. WFP presented its latest data and findings on the issue to support the government of Iraq with its Green Paper to address these serious challenges.
• In its continued efforts to support Iraq's youth, and confront climate change, WFP provided a new solar power system for the Career Development Centre at the University of Sulaymaniyah. The solar energy provided now effectively meets the electricity gap during power cuts or shortages, enabling seamless support to youth in need as they take part in the EMPACT (Empowerment in Action) project. Participation in this project supports students with relevant training in English, digital skills and entrepreneurship that enables them to find work opportunities, start small businesses and provide an income.
• In collaboration with the University of Sulaymaniyah and German creative design platform JOVOTO, WFP celebrated the three young EMPACT graduates Aisha, Mohammed and Kawther, whose designs revolving around the EMPACT project won the first, second and third prizes respectively, in the first design innovation joint competition.
• For International Women's Day on 8 March, Urban Livelihoods participant and trainer Nada was invited by the Embassy of the Netherlands in Baghdad to visit from Basra, to participate in a special event to speak about her journey and experience. The impact of WFP's Urban Livelihoods programme, implemented across southern Iraq and Ninewa, is apparent through star participants such as Nada. She attended the programme, then taught photography skills that she acquired from her training, quickly became a social entrepreneur, leader of a prolific youth creative group, and role model for her contemporaries in Basra.
• Under the School Feeding Programme funded and coimplemented by the Government of Iraq, WFP organized several workshops and training sessions to further develop the capacity of the Ministry of Education, to be able to successfully implement the programme independently in the future, while WFP continues providing technical and logistics support and expertise. These included three Training of Trainers (ToT) sessions, three capacity building workshops and a Food Quality Control workshop that was delivered in cooperation with WFP's Regional Bureau.
• As part of the joint Social Protection Programme with the government and UN partners, WFP held three consultation workshops for more than 80 Government of Iraq and Kurdistan Regional Government staff members and key Ministerial participants. The workshops produced a roadmap for establishing a Single Registry based on multi-stakeholder discussions. The workshops also initiated dialogue on the improvement of Iraq's social protection schemes with special focus on the public distribution system for food rations (PDS). In addition to multiple Ministry representatives, the workshops were attended by UNICEF, ILO, World Bank, GIZ and UNHCR.
• Representatives of Canada and Germany visited Sharya IDP camp in Duhok and met with a number of displaced families to discuss their situation, reasons that prohibit their return to their homes, and ongoing needs.
• In light of the rise in food prices as a result of the RussianUkrainian conflict, WFP temporarily increased its cash transfer value to vulnerable IDPs living in Jadaa-5 camp to mitigate the effects and ensure that families are not affected.

The full report can be downloaded here.

(Source: ReliefWeb)

By Ayser Jabbar for Al Monitor. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Iraq grapples with rising food costs as a result of Ukraine war

Ripple effects from the Russian invasion of Ukraine are driving the Iraqi government to allot additional funds to ensure the food supply is stable.

Click here to read the full article.