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By David Rosenberg, for The Media Line. Reproduced with permission by Iraq Business News.

It was just another day in Iraq on July 15.

In the city of Kerbaba; two car bombs killed a total of seven people and wounded 19. An American solider was killed in Baghdad while in another part of the capital an Iraqi policeman was injured by a sticky bomb placed under a vehicle. More bombs wounded soldiers in Samarra and in Mosul.

But July 15 also saw the grand re-opening Baghdad's renowned Al-Rasheed Hotel after a $65 million renovation. Britain’s Harlow International undertook the construction work while Holland’s Kempinski Hotel group will manage it.

"The rebuilding of infrastructure, including palaces and airports, is evidence of the ability of Iraqis to achieve what they want,” Foreign Minister Hoshyar Zebari said at the ribbon-cutting ceremony.

Even as Iraq suffers an upsurge of violence – June alone saw 155 civilians killed in attacks, the most since January – foreign investors are flocking to the country. Dunia Frontier Consultants, a Washington DC-based consulting firm, estimates that foreigners were responsible for $45.6 billion in investments, service contracts and other business in Iraq in the first half of the year. That was double the amount the same time in 2010.

Where others see carnage, chaos and corruption, investors see a potentially oil-rich economy whose population of some 30 million is desperate for housing, roads, consumer products and services.

“What you have is a country that produces oil, which makes it very attractive for the hydrocarbon industry to invest there. It’s a country with a very large population,” Daniel Broby, chief investment officer at London’s Silk Invest, told The Media Line. “The middle class suffered a lot of problems but they are educated and there is a lot of home ownership, so banking and telecommunications industries are very attractive for foreign investment.”

Driven by high energy prices, Iraq’s economy will grow 12.5% this year, according to the International Monetary Fund. Iraq’s Oil Ministry said in June alone petroleum brought in $7.17 billion as exports averaged 2.273 million barrels a day at an average price of more than $105 a barrel.

With the government’s coffers swelling, Planning Minister Ali Al-Shukri told Reuters on Monday Iraq is looking to raise its 2012 investment budget by 50% to as much as 60 trillion Iraqi dinars ($51 billion).

The following article was published in the latest edition of Inside Iraqi Politics, and it is reproduced here with the publisher’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Full Text of Inside Iraqi Politics Issue No. 19 (PDF)

The government’s aggressive energy policy and its electricity push in particular have stood in contrast to broader policy stagnation, yet there are concerns that inadequacy of the banking sector in providing finance will stymie it. There are also increasing indications that Maliki’s China trip this past week, finance problems with a previously-arranged Korean deal, and his June 2 raid of the country’s only internationally-respected financial institution may be interrelated.

The government framed Maliki’s three-day state visit to China beginning July 18 entirely around economic development and mutual commercial interests. While petroleum supply to China was predictably a major topic, the subtext, discussed more gently, was Iraq’s need for finance. As economic analyst Sadiq al-Rikabi noted, as quoted in the UAE-based al-Ittihad, Iraqi banks lack the liquidity to finance projects, and this despite the enormous sums which the government has received, not only from oil revenue but also the $250 billion Iraq Development Fund Iraq took control of in June. In the past, the government has often grandly announced investment projects only to have them dissipate for a variety of reasons; this pattern may be continuing.

Government spokesman Ali al-Dabagh implied this in comments to AP on July 18, saying “We are asking the China side to make a fund, for the reconstruction, and to guarantee and assure the investment in Iraq for the Chinese companies.” The AP comments did not reference the faltering Korean agreement or Iraq’s banking problems.

In this context we may return to Maliki’s June 2 raid on the Trade Bank of Iraq (TBI) and the flight of its director, Hussein al-Uzri, from the country. Remember that Uzri claimed that Maliki started by demanding that TBI finance the Korean electricity deals, which he said he refused to do without a government guarantee. Maliki accused Uzri of stealing millions of dollars from TBI, which is the only bank in Iraq capable of accessing credit lines from international banks. (See IIP No. 18 for background.)

Hamdiya al-Jaf, whom Maliki appointed to replace Uzri, said in a widely-cited July 18 interview with Reuters “we have proved to the world that the TBI has not changed concerning its work and its banking activities.” She added that TBI [Reuters paraphrase] “operates independently and is monitored by the Central Bank of Iraq [CBI] and the Bureau of Supreme Audit like any other Iraqi bank,” and the “investigation of alleged financial violations had not been completed.”

Jaf’s claims may be true, but anyone concerned about the politicalization of TBI’s decision-making may want to ask for direct proof of this investigation. Our search of Iraqi and pan-Arabic news sources found numerous news outlets quoting Jaf’s remarks to Reuters, yet we found not a single news report citing an independent authority confirming even the existence of an investigation. We also performed searches of the Arabic websites of the CBI, the audit bureau and the justice ministry and found nothing referencing an investigation. So when sources say that “the Iraqi government” has accused Uzri of theft, this is based solely on statements from individuals tied to Maliki. While it is possible that there is an investigation which has not been reported openly, given the vital role of TBI to Iraq’s financing needs, the lack of transparency should raise questions.

Iran plans to increase its electricity exports to Iraq to 1,250 megawatts, the Iranian Energy Minister Majid Namho told  Mehr News Agency on Tuesday.

Mehr quoted the Iranian Minister, in a meeting in Tehran with Iraq’s Electricity Minister, Raad Shallal Saeed al-Any [Ra'd Shalal al-Ani], that “Iran’s power exports for Iraq, now estimated at 800 megawatts, are expected to rise to 1,250 megawatts, according to a decision taken by both countries recently.”

The Iranian Minister also mentioned the “close achievement of a 400-megawatt Karkha-Amara line during the current summer season, being part of electric power exports for Iraq.”

“The Iraqi side has confirmed the necessity to construct the Khorramshahr-Abuflous line, expected to be completed in summer 2012 ... in order to increase Iran’s electric power for Iraq to 1,250 megawatts."

(Source: AKnews)

Real progress had been achieved in replacing Iraq’s ruthless dictatorship with institutions mandated by constitutional principles, which laid the ground for “cautious optimism” about the future, provided that determined national leadership and a stronger spirit of cooperation in the region prevailed, Ad Melkert, Special Representative of the Secretary-General told the Security Council today.

Briefing the Council on recent developments, Mr. Melkert said that in some important aspects, Iraq was at the heart of fundamental changes in the region, as its system of government had incorporated a power-sharing Constitution that guaranteed the participation of women and minorities while nurturing a culture of constitutional debate.  While it had been drawn out, Government formation had progressed, with Parliament now taking an increasingly important role in decision-making.  In a departure from decades of authoritarian regime, negotiations among all parties had become the predominant feature of political life, he added.

Meanwhile, Iraq’s economy continued to grow at a 10 per cent rate amid higher than projected oil revenues, he said, noting that a 50 per cent jump in foreign direct investment to more than $42 billion in 2010 had benefited construction, transportation, electricity, health and agriculture.  At the same time, the poverty index remained high, at 22.9 per cent.  “These political and economic facts matter in a country that has suffered much during three decades of wars and oppression,” he stressed.  Explaining that reconstruction, institution-building and “bringing back knowledge” took time, he said armed opposition groups had tried to make undue gains through kidnappings and assassinations.  That such violence had not subsided underscored the need for determined, jointly shared political action against the perpetrators, regardless of the source of their support.

Consolidating gains would also require a “keen understanding” of the need to resolve pending issues, he said, stressing that the key lay in the implementation of the November 2010 Erbil Agreement that had brought together the Prime Minister of Iraq, the President of the Kurdistan Regional Government and the Iraqiya leader under a power-sharing arrangement.  Since the appointment of security ministers was pending, and the National Council for Strategic Policies had not yet been formed, there was understandable concern over whether the post-election spirit could prevail, he said, calling on Iraq’s political leaders to set aside their differences and move swiftly to agreement on a way forward.

Mott MacDonald’s director of oil, gas and petrochemicals, Azfar Shaukat, told attendees at the Iraq Petroleum Conference of great potential in the oil and gas sector, but warned companies they will have to be patient until significant investment is found.

The event, held at the Landmark Hotel in London, UK, focused on the next phase of developing Iraq’s oil and gas resources as well as the current and future upstream opportunities. It was attended by international oil and gas companies from 70 countries together with key Iraqi oil and gas industry experts.

In his presentation Azfar told delegates that at present Iraq is losing, through flaring, in excess of 10 billion cubic metres (bcm) of associated gas a year. This is gas produced as part of oil production that has historically not been captured. In addition the gas infrastructure in the country is inadequate for the planned volumes and will need significant investment to upgrade.

“The primary focus for Iraq is to improve the reliability and availability of electricity to its population, and since this is planned to be gas-fired, most of the associated gas will be consumed by new power stations,” Azfar commented.

Mott MacDonald has been active in Iraq for more than 50 years and in the last six years has delivered over a 1000 projects in Iraq covering health, transport, power, and water. They are supporting major energy companies in the development of oil and gas fields which involves asset surveys and working with the state and international companies to come up with the right solutions to refurbish and upgrade oil and gas facilities in order to increase production.

Azfar said:

“With targeted oil production associated gas output could rise to 70bcm per year, equivalent to roughly three-quarters of UK annual consumption. However, although neighbouring countries and Europe are interested in gas from Iraq, the actual amount of gas available for export will be very limited over the next 5-10 years.”

In addition to the dispute between Iraq and Kuwait regarding the new Mubarak port in Kuwait, the two countries are also reported to be in conflict about the planned siting of nuclear reactors.

Press TV reports that the head of the Kuwaiti national committee for nuclear power, Ahmad Bisharah, has said that Kuwait is planning to build 4 nuclear reactors near the Iraqi border by 2022.

Kuwait says that it needs to go ahead with this project to generate enough electricity to meet the ever-increasing increasing demand.

The plan has outraged Iraqi politicians. They have urged Kuwait to stop its plan accusing the country officials of being a tool in the hands of the US to weaken Iraq economically and politically.

Meanwhile, members of Basra's provisional council have also urged Kuwait to stop its project planned to be launched in Warbh [Warbah] Island less than 4 km away from the Iraqi coast south of Basra .

They say that Iraqi government must take a serious stance towards the project.

The Iraqi government spokesman, Ali Al Dabagh, has said that Iraq 's foreign ministry will do its best through diplomatic channels to stop Kuwait from going on with the nuclear reactor project.

(Source: PressTV)

The following article was published in the latest edition of Inside Iraqi Politics, and it is reproduced here with the publisher’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Full Text of Inside Iraqi Politics Issue No. 18 (PDF)

Prime Minister Nuri al-Maliki’s dramatic in persona raid of the Trade Bank of Iraq on June 2 and the flight abroad of its director remains unresolved. While raising wide attention in political circles as TBI became a set piece in a fight between Maliki and Ahmad Chalabi, the abrupt change of management in the country’s premier financial institution also raises questions about broader issues of corruption and transparency.

On June 2, Iraqi security raided Iraq’s preeminent bank in what the government alleged was a move against corruption. Corruption is ubiquitous in Iraq, but what made the raid unusual is that Maliki carried it out in person. TBI’s director, Hussein al-Uzri, quickly fled to Lebanon. While basic facts and Uzri’s countercharges against Maliki have been reported in international media, most fail to mention the possible link between Maliki’s raid and his fight with Uzri’s famous uncle, Ahmad Chalabi.

IIP No. 16 introduced the Uzri-TBI scandal and Uzri’s flight in the context of Maliki’s most recent attack in a months-long rift with Chalabi – Maliki’s Shia rivals had put forward Chalabi as a candidate for interior minister, but only as a spoiler. Then Chalabi moved to grab headlines by organizing a “relief ship” for Bahraini Shia – whose cause Maliki had himself championed – and Maliki blocked it on June 3 – just one day after the TBI raid. Then on June 8, Maliki issued an order removing Chalabi as head of the debaathification commission, a move he probably lacks the authority to make, but which is unlikely to face legal challenge all the same.

Chalabi responded vociferously, alleging that Maliki was ignoring other corruption cases and had a political vendetta, while Maliki allies – including his Chief-of-Staff Ali Allaq – have publicly alleged massive theft by Uzri. Since then additional facts have come to light, or least been alleged. According to Uzri, Maliki came to the bank at first like it was a business meeting to ask for $6 billion in financing for deals he had signed with a Korean company to build power generators. Only when Uzri demanded a government guarantee did Maliki begin making allegations. Maliki demanded a meeting with the full management, but seeing the heavy security presence, Uzri decided to slip away, although he wouldn’t say how he got out of the country.

Additionally, according to reports published on a number of Iraqi newsites, Uzri hid for two days in Baghdad before traveling to Irbil and from there to Beirut, where his wife and children have been living. In this regard remember Chalabi’s long relationship with Kurdish leadership going back into the 1990s. In addition to loans for the Korean projects, al-Jeeran claims sources say that Maliki also demanded commercial contracts for some of his allies. The same also quoted government sources as saying that while they were aware of Uzri’s “political relationship” with Chalabi, they were unaware the two were related. If this is an accurate representation, the claim is not credible.

Expanding on Uzri’s claims, the Iraqi writer Sabah al-Baghdadi has made broader allegations about tie-ins to electricity and housing deals, claiming that Maliki’s actions violate legal rules on project financing (but note the source’s bias; Maliki’s security are “Dawa Party militia”). IIP will return to this potentially explosive issue if anything like definitive information becomes available.

Although Uzri does not appear to have much support in parliament – whether due to belief in his culpability or just for being Chalabi’s nephew – some MPs have asked how Uzri could have been allowed to get away given previous flight cases. Most prominently, former interior minister and member of the Transparency Committee Jawad al-Bolani hit out at Maliki on June 20, complaining that they still didn’t know what had happened. At the same time the committee questioned Finance Minister Rafia al-Isawi, but he claimed to have no authority over the matter. Maliki had announced an official investigation on June 2, but it hasn’t released any information yet. Moving forward, Maliki has appointed Hamdiya al-Jaf, a finance ministry functionary, as the new director.

In mid-June, Sir Claude Hankes, a British banker who has served as a long-time advisor to TBI, spoke out and wrote an open letter to President Talabani warning that Maliki’s raid was pure politics and that it threatened Iraq’s banking system. So assuming the truth of the claim that Maliki simply wanted control of the bank, this might explain the fact that Uzri was allowed to escape, and the fact that the warrant for his arrest was not issued until he had arrived in Lebanon. If Maliki had arrested him, Uzri is too famous to have him simply disappear; there would have to be a trial.

The core problem therefore is the lack of transparency. As noted, the government has released no new information recently, and neither the official al-Sabah or the government’s official news website have reported any. (We have noticed over time that the official newspaper typically does not report politically controversial legal cases.) During the preparation of this report, we noted that TBI had no Arabic-language website, and reviewing its English website noted that just yesterday (July 13) did it update data on the new directors. It still lists advisor Hankes at the top despite his vocal support for Uzri, and provides is no information on recent events. The last dated news release is from 2010, and it refers to Uzri as the chairman.

Foreign Office Minister Lord Howell said that Iraq's natural resources have the potential to help tackle the world's energy challenge when he spoke at the Iraq Petroleum Conference.

Ladies and Gentlemen

I am delighted to be back at the Iraq petroleum conference addressing such a distinguished audience, and I would like to thank Dr. Alirio Parra and CWC Group for the opportunity to be here today.

Rising energy prices and the Arab Spring have raised important questions across the Middle East and presented challenges for the world. Today I would like to share with you some thoughts about Iraq’s potential to help meet these challenges through leadership in the Middle East, and how it can be a game-changer in energy markets. I foresee this and similar conferences playing a part in developing this potential and in catalysing investment and decisions about investment in Iraq.

The geopolitical challenge

At the end of May I visited a number of Gulf States, where oil prices and energy security were high on the agenda. In a region which contains the planet’s largest oil reserves, the Arab Spring in a variety of forms has become interlinked with energy issues.

Few could deny the legitimacy of a people seeking freedom – seeking a voice to steer their future.  But few could have predicted the pace of change we have seen brought by the so-called Arab Spring. At a time of fast-moving events, it must also be a time for wise reflection on how best to meet the aspirations of the Arab people. There are no simple answers. Those who offer simple answers are misleading us,as there are many ways for nations to achieve and maintain legitimacy, through their own pattern of participation and consent.

But governments that use violence to try and extinguish the legitimate aspirations of their peoples are destined to fail. The lasting answer to the challenges and instabilities of the Arab Spring is through reform, not repression. We have no doubt about that at all.

Premier Nouri Al-Maliki announced on Sunday that the number of ministries has become a real burden on the work of the state.

"This fact appeared after the 100-day period", he said in a letter sent to  parliament.

Al-Maliki proposed a two-stage procedure, the first of which will see 29 ministries retained.

"So, as a result, we submitted a proposal to trim the government and increase the activities of the ministries, by canceling honorary posts, and combining or making changes in their leading personnel."

Aswat al-Iraq reports that the first stage will see the cancelation of all posts of ministers of state, except parliament, provinces and women ministries, provided that the parliament will take the necessary measures to create a women's ministry.

The second stage will be a sort of combination of ministries or cancellation.

Maliki proposed that the following ministries will be retained: defence, interior, foreign affairs, finance planning, oil, transport, justice, electricity, industry, agriculture, trade, municipalities, works and social affairs, construction, higher education, communications, education, health, culture, youth, technology and sciences, environment, water resources, immigration, human rights, womens affairs, provinces and parliamentary affairs.

(Source: Aswat al-Iraq)

Bloomberg reports that three former employees of the U.S. Army Corps of Engineers (USACE) have been charged along with two other men with participating in a bribery and kickback scheme involving more than $50 million in Iraqi contracts.

The indictment unsealed on Thursday in federal court in Newark, New Jersey, [U.S. v. Markus, 11-cr-366, U.S. District Court, District of New Jersey (Newark)] accused John Alfy Salama Markus, 39; Onisem Gomez, 32, and Ammar Al-Jobory, 33, of using their USACE positions to solicit bribes for construction and infrastructure contracts.

“The defendants allegedly treated projects to secure safe access to fuel, electricity, education and medical treatment as opportunities for illegally amassing personal wealth,” U.S. Attorney Paul Fishman said in a statement.

The 54-count indictment also charged Ahmed Nouri, 41, and Mithaq Al-Fahal, 36, with participating in the scheme. They were employees of separate private engineering and construction companies that got contracts in Iraq.

Markus and Nouri were first charged in October. Markus, a U.S. citizen and Egyptian-born resident of Nazareth, Pennsylvania, is free on $500,000 bail with electronic monitoring. Nouri, a U.K. citizen, was a vice president at Iraqi Consultants & Construction Bureau.

Prosecutors said Markus, a USACE project manager, solicited bribes in exchange for confidential bidding information and took $4.2 million in illicit payments. The money covered contracts for companies involving Nouri and Al-Fahal, an Iraqi citizen and project manager at Sakar Al-Fahal, prosecutors said.

“My client denies the allegations,” said Markus’s attorney, Michael Rogers. “As of right now, it’s just an indictment and we really haven’t seen the government’s evidence. He awaits his day in court.”

The projects included security enhancements to the Bayji [Baiji, Beiji] oil refinery, design and construction of the Baqubah landfill, and protection to the Bayji oil pipeline, according to the indictment.

(Source: Bloomberg)