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Iran’s power development firm, Sunir [Sanir] is negotiating with the Iraqi side to expand the capacity of a plant it is constructing in Baghdad from 160 megawatts to 640 megawatts.

Sunir, the power construction arm of Iran’s energy ministry, is the largest foreign contributor in Iraq’s rickety power infrastructure, according the the report from Azzaman.

Iraqi Electricity Ministry’s spokesman Mussab al-Mudaris said a delegation from Sunir is currently in Baghdad negotiating new deals.

Sunir, which was given an ultimatum to finish a plant it is building in the low-income township of Sadr City before July, is reported have almost finished the project.

Mudaris said the plant, which Sanir wants to expand, will go into operation “within a few days.”

“The first unit producing 160 megawatts will start work within days. The second with a 155 megawatt capacity will be ready next month,” he said.

The plant has cost more than €155 million.

Mudaris praised Sunir for finishing the job before the deadline, saying the government would grant the company more power construction contracts.

He said the Electricity Ministry was negotiating with Sunir to install gas-driven turbines at Dibis, a major power plant in Iraq.

Last month, Iraq and Iran signed a new agreement under which Iranian firms were to construct 11 new power plants in the country.

Iranian firms are heavily engaged in contracts in Iraq. In 2010, Iran doubled its trade with Iraq to nearly $8 billion.

(Source: Azzaman)

By Tariq Abdell, Iraq’s political risk analyst, and Founder & CEO of Mesopotamia Insight.

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

In light of ongoing socio-political changes in MENA region, Iraq's massive protests, from Zakho to al-Faw, accentuate the political astuteness and the frustration of the Iraqi people with their elected officials. Disenfranchised Shiites, Sunnis, Kurdish, Arabs, and Christians are all demanding the same: an end to ethno-sectarian quota-sharing system, corruption, and, most importantly, universal access to basic services such as potable water, electricity, housing, education, healthcare, and jobs.

Nonetheless, given the legitimacy and urgency of the protestors' demands, the government nebulous responses (halving of some officials' salaries, 100-day ultimatum to incumbent ministers, boosting food ration with extra cash, etc...) are mere cosmetic measures to allay people's frustration and anger. Unarguably, the cumulative effects, hitherto, of the elected officials' ineptitude and schism are protracting decades of erroneous policies and, subsequently, the people's tribulations. Impelling the majority of the Iraqi people to question the legitimacy of their government and the effectiveness of its institutions, a dangerous threshold that could hastily throw the country back into its darkest years of sectarian violence and lawlessness.

Notwithstanding Iraq's colossal energy resources, billions of oil and natural gas reserves, Iraq fragile democracy and ineffectual institutions, in a restive region, are the breeding ground for societal and political upheavals and foreign interventions. In fact, Iraq's daunting and intricate challenges are both internal and regional:

Internal challenges:

• Lack of basic services, e.g., six million people with no access to clean water -UNICEF.
• 20 to 25 percent of Iraqis still live below the country’s poverty line.
• Unemployment rates hover around %18, notably among military-age male population.
• Higher illiteracy rates, exacerbated with massive brain drain, are eroding Iraq's skilled and professionally literate workforce.
• Rampant corruption and nepotism undermine the efficiency of the State institutions.
• Inequitable distribution and mismanagement of oil's revenues - no hydrocarbon law.
• Parliament still faces a backlog of sensitive issues.

Regional challenges:

• Given the region new geopolitical developments, heightened tensions between Iran and Saudi, Iraq could easily turn into a sectarian proxy war battleground - Shiite Vs. Sunnis.
• The fallouts of Iran's nuclear standoff with the West could easily spillover to Iraq’s already contentious politics and further undermining its stability.
• Given Kirkuk's enormous oil reserves and ethnic diversity (Arabs, Kurds, and Turkmen), it's protracted dispute is a timed bomb, which could expeditiously reignite Iraq's civil war.
• Turkey’s recurrent incursion into Northern Iraq in the pursuit of the Kurdish workers party (PKK) elements and PKK assiduous attacks on the northern oil pipelines are a major threat to the country’s resources and sovereignty.
• Given the hostile intentions of some neighboring counties, the U.S. planned troops withdrawal, by the end of the year, could further jeopardise Iraq's defense capabilities.

Thus, given the enormity and complexity of the aforementioned challenges, Iraq only viable mean to fend off political instability and chaos is to renounce its sectarian-based policies and espouse an inclusive and genuine democratic system that heads to the people aspirations and protects their rights (UN Universal Declaration of Human Rights). Furthermore, both the government and opposition ought to consolidate their efforts to bolster accountability, eradicate corruption and, subsequently, strengthen the State institutions, an essential prerequisite for a rapid socio-economic recovery. To this end, the new government’s long-term vision should entail an action plan that reflects the country strategic and pressing priorities, namely:

• Genuine national reconciliation to overcome sectarian and political schism and violence.
• Overhauling of State institutions to rein in corruption and enhance efficiency.
• Merit-based appointments to promote efficiency and accountability.
• Providing access to basic services (e.g., potable water, electricity, running sewer, etc)
• Equitable distribution of oil revenues.
• Investing in human capital through education and training.
• Job creation to fend off societal and political unrest (Organized crime, for instance).
• Advancing the principles of human rights and rule of law.
• Diversifying and reviving of Iraq' strategic industries to curb its dependence on a single commodity - fossil fuel.

Conversely, in the absence of a comprehensive and inclusive socio-economic development strategy, aiming at strengthening State institutions, eradicating corruption, and addressing the aspirations of the Iraqi people, regardless of their political and religious believes, Iraq may revert to its darkest years of sectarian violence and lawlessness (05-07), giving regional players (Iran, Saudi, Turkey, Syria) a free hand in Iraq's affairs - exploiting Iraq's vulnerabilities (Shiite-Sunni strife, for instance)- to further their national interests and, subsequently, turning Iraq into a prime battleground for proxy wars, or worse, a pariah State. Simply put, “a house divided against itself cannot stand” Abraham Lincoln.

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

The author, Tariq Abdell, Iraq's political risk analyst, and Founder & CEO of Mesopotamia Insight

He can be contacted at: [email protected]

or

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

Karbala has allocated 70 billion Iraqi dinars [$60 million] from the 2011 budget to improve the electrical grid and road system in the province.

The President of the provincial council in Karbala said that the Council decided to allocate 70 billion dinars from the budget for the sectors of electricity and roads from a total allocation of 90 billion dinars.

This allocation is designated to alleviate the suffering of citizens in these two major sectors, with 40 billion dinars going to improve the electric grid and 30 billion dinars for the road sector.

(Source: National Media Center)

So far the Japanese earthquake, tsunami, and nuclear disaster have had surprisingly little impact on emerging markets. While the Nikkei is down 13% since the quake (as of March 17), the MSCI emerging markets index has fallen only 3%. And in Iraq, Rabee Securities’ RSISX is actually up 0.4%.

Emerging markets could continue to slide, however. The main risk comes from the possibility of a global liquidity squeeze as Japan repatriates funds to finance reconstruction efforts. Post-quake moves in the yen:dollar exchange rate may be an early warning sign. The yen rose over 3% to levels around the post-World War II record high of 79.75 (reached in April, 1995) before being pushed back above 80 by the Bank of Japan's March 18 intervention.

This is one risk that ISX investors do not have to worry about, however. As most of the trading is still local, there just isn’t much foreign money to be pulled out. And the few foreigners in the market appear to be mainly individuals and dedicated country funds. The former are unlikely to be directly affected by the availability of yen-denominated financing. And the latter will generally be committed to staying fully invested and have lock-up periods of at least a year. Most will have only begun raising money last year, which means few of their investors could redeem now even if they wanted to.

Of course it is also conceivable that the crisis in Japan could trigger a global economic slowdown, which could potentially impact the ISX via the oil price. But while a downturn in the world economy would lead to slower growth in energy demand, it would almost certainly be accompanied by an increase in the share of fossil fuels in global power production. In the short term, Japanese demand for diesel can be expected to rise sharply as homes and businesses turn to generators to make up for electricity shortages. Longer term, a shift away from nuclear power to oil and natural gas is practically guaranteed, not only in Japan but in other countries as well. The net effect of the quake on the Iraqi economy is ambiguous and could even be positive.

Of course none of this is to say that the ISX is a safe place to put your money. My point is simply that, as long as there's not much foreign participation, the fallout from events overseas is likely to be limited.

Oil giant Shell hopes its plan to use the huge amount of associated gas expected to come from Iraq's oil output growth over the next decade will be approved soon, the company's chief executive Peter Voser said on Tuesday

According to the report from Reuters, he did not clarify what he meant by 'soon'. "We have made good progress", he said, "a little bit slower than anticipated".

Iraq has been working to finalise a $12 billion [14.6 trillion Iraqi dinar] joint venture between the state-owned South Gas Co, Shell and Mitsubishi since an initial agreement was signed in 2008.

Although the previous Iraqi government approved a deal in principle, it has yet to be finalised.

Iraq flares around 700 million cubic feet of gas every day at its southern oilfields -- energy it could harness to generate electricity and end the chronic power blackouts that still plague the country almost eight years after the U.S.-led invasion.

Voser said he particularly saw plenty of demand for power in the Basra area of Iraq.

(Source: Reuters)

Two hydro-electric plants in Sulaimaniya province of Iraqi Kurdistan are being renovated at a cost of $40 million [48 billion Iraqi dinars], according to a report from AKnews.

Sirwan Mohammed Mahmoud, the media and relations director at Sulaimaniya electricity office, told the agency that the budget to renovate Darbanikhan (pictured) and Dokan dams comes from a share of the $500 million international loan that was allocated to the Iraqi government; Kurdistan was assigned $85 million of that loan.

Othman Abdul-Rahman, the director for Dokan plant, said at a recent press conference that the protection and control systems at Dokan were initially installed in 1987, and will be replaced with a digital system. Maintaining and finding replacement parts for the old system had become increasingly difficult.

An Italian company is implementing the changes for both plants, and word is expected to be completed within one year.

Darbandikhan plant was constructed in 1961.

(Source: AKnews)

The protests in Iraq, while obviously inspired by those in other Arab countries, have a different focus. The latter have been primarily about politics. In Iraq the protestors’ demands center on economic problems. They want more jobs and electricity and less corruption.

Due to its natural resource endowment, Iraq is an example of what political scientists call a rentier state—a state whose main function is to distribute profits from resource exports. Productivity-based growth is relatively unimportant. What really matters is how fairly the resource pie is divided.

Thus the fundamental issue is quite straightforward: What is going to be done with Iraq’s coming oil bonanza? Ideally, everyone will benefit through the provision of subsidized services, government sinecures, and handouts of one sort or another. Alternatively, there could be a situation in which a small number of elites transfer the lion’s share of the new wealth to Swiss bank accounts while most people live in poverty.

By keeping the pressure on the politicians, perhaps the protestors can push the country a bit closer to the former of these two extremes.

A spokesman for the ministry of electricity has reported that plans are being considered to move the national grid underground, in order to prevent citizens illegally taking power supplies directly from overhead distribution lines.

Musab al-Mudarres told AKnews that the practice of taking electricity directly from local power lines is widespread across Iraqi, and the ministry does not have the power or resources to prevent them.

“Underground networks have proved successful in some areas of Baghdad such as Zayouna and Yarmouk where they have replaced the overhead power lines,” Mudarres said, adding that similar projects have been set up in Sadr City and Adhamiya.

Last July the Iraqi government launched a campaign in the capital to put an end to the public theft of national power supplies in response to public protests over limited hours of domestic provision.

According to government figures, the energy available to Iraq is around 9 thousand megawatts of energy, while demand is estimated at up to 14 thousand megawatts during the summer months.

The Iraqi government has announced plans to increase the country’s generative capacity to 27,000 megawatts over the next four years, requiring an investment of between $3bn and $4bn per year.

The majority of households across the Iraqi provinces have between six and eight hours of national electricity each day.

This poor provision of electricity has been one of the main grievances of protestors in the wave of public demonstrations that have swept through Iraq over the past month.

(Source: AKnews)

[Update: The National Investment Commission (NIC) has issued a statement on 22nd March 2011 on behalf of the Chairman of the Nineveh Investment Commission, denying these reports of contracts signed with South Korean companies.]

The Chairman of the Nineveh Investment Commission said on Wednesday that it has signed investment contracts with 20 South Korean companies to build and rehabilitate the infrastructure in Mosul.

Mowaffaq al-Younis told AKnews that the board contracted with 20 South Korean companies specialising in electricity, sewerage, drainage, and the installation of drinking water supplies.

The infrastructure in Mosul suffered a marked decline over the past years as a result of military conflicts.

"We hope that these companies would start working next month ... the Commission expects that investment in Nineveh in various public areas would be around U.S. $ 12 billion until the end of 2015."

Korean companies have completed investment projects in Nineveh in 2010, including the reconstruction of Nineveh medicine laboratory (30 km north of Mosul), which was also equipped with modern Korean equipment, as well as establishing Wafah hospital for diabetes patients at a cost of 10 billion Iraqi Dinars.

(Source: AKnews)

Hundreds of Iraqis protested against the government on Monday in a “Day of Regret” on the anniversary of the election that resulted in a second term for Prime Minister Nouri al-Maliki.

And in a move that has drawn criticism from many quarters, the security forces have shut down the offices of two small parties that helped to organise the demonstrations, the Iraqi Nation Party and the Iraqi Communist Party, neither of which have seats in parliament. According to reports, their offices were seized because the Ministry of Defense was “in the need of these buildings now”.

Whatever the truth behind these stories, Michael Corbin, US deputy assistant secretary of state for Iraq, has predicted a continuation of protests for several months, as the electricity shortage will clearly not be resolved before the heat of the Iraqi summer sets in.

Regarding moves in Congress to cut State Department funding, Corbin added: “One thing that we've learned in over eight years in Iraq is that you can't do Iraq on the cheap.”

For advice on the most cost-effective ways of doing business in Iraq, why not contact Gavin Jones at Upper Quartile and Adrian Shaw at AAIB.

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