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An advisor to the governor of Diyala revealed on Thursday that the sum of $300 million was “squandered” in payments to Iran for the supply of electricity.

“Iran’s Karmanshah line that supplies Diyala with electric power since 2004 caused the waste of $300 million paid to the Iranians, despite beign a mediocre service that provides the province with 200 megawatts of power while the province’s actual need is up to 500 megawatts,” Rassem Ismail, an advisor on reconstruction and investment affairs, told Aswat al-Iraq news agency.

“The sums paid for the Iranian side ever since the project commenced were enough to build 10 power stations at a total capacity of 2250 megawatts,” he added.

(Source: Aswat al-Iraq)

Iraq's cabinet has approved a multi-billion dollar deal with Royal Dutch Shell and Japan's Mitsubishi Corp. The deal, signed on Tuesday, will provide much needed electricity from natural gas that is currently being burned off.

The State-owned South Gas and Basra Gas companies in southern Iraq will take a 51 percent stake in the contract, with Shell taking 44 percent, and Mitsubishi taking a 5 percent share.

Lacking the technology needed to capture the gas for power generation, Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what is produced as a by-product of its crude oil production.

The joint deal with Shell and Mitsubishi will exploit gas in the Rumaila, Zubair, West Qurna and Majnoon fields near Basra.

At the time said the deal was first proposed in 2008, the government expected it to be worth around $4bn, but no specific financial figures were given on Tuesday.

As we reported recently, Iraq has invited international energy firms to submit bids in an auction for three gas fields, in a third major tender aimed at developing the war-torn state's oil and gas sectors.

Existing power plants in Iraq have proved incapable of generating sufficient electricity to meet peak summer demand, forcing draconian rationing that sees consumers receive supply for one hour in five, or less.

Iraq's LNG reserves are estimated at 110 trillion cubic feet.

(Sources: AFP, WSJ)

The managing director of the Telecommunication Company of Iran in Kurdestan province, Mohammad Saeed Ahmadi, told Fars News Agency that his company was ready to help upgrade the telecommunication infrastructure and fiber-optic systems in Iraq's northern regions.

"In addition to fiber-optic projects, we have the ability to undertake all kinds of telecom activities in the region," he said.

He was speaking on the sidelines of an exhibition of Iranian companies' capabilities in the northern Iraqi city of Sulamaniya.

Ahmadi said Iranian companies have the technical know-how to carry out complex telecom projects overseas. "We will start our work whenever authorities of Iraq's northern region voice their readiness."

Referring to TCI successes inside the country in recent years, he said "We have announced our ability and willingness" to help share the experience with the Iraqis and rebuild their telecom infrastructure.

More than 185 companies from 21 Iranian provinces participated in the exhibition displaying Iran's capabilities in the Iraqi Kurdish city.

As we reported last week, Iran said it is ready to export electricity to Iraq.

"We have the possibility of supplying 500 to 1,000 megawatt of electricity to the Bashmakh market in Iraq," head of the Power Distribution Company of Iran's Kurdestan province Mohammad Mostafa Najafian said.

(Source: Iran Daily)

National Overview

There were 105 incidents reported nationally between 20 – 26 June showing a small decrease in the level of incidents from the previous week when 123 were officially reported. The number of Explosively Formed Projectiles used in that period dropped from eight to two, both of which occurred in Basra, targeting a Private Security Company and a United States Forces – Iraq patrol. In the review period, the north central region saw the most reported incidents, increasing slightly from 37 to 40.

Iraqi Security Forces continue to develop despite the partial funding freeze imposed on security spending by the Ministry of Finance. Key challenges include the constrained Iraqi government budget; poor planning and procurement capacity and limited ministerial transparency and capability. Iraqi Security Forces do not show any signs of fracturing along ethnic or sectarian lines and continue to make progress in diversifying the composition of units.

An ongoing concern is the attempted disarmament of the Sons of Iraq militias (the Concerned Local Citizens). This issue is thought to be a serious risk to local security conditions in some parts of Baghdad, eastern Anbar, Babil, plus the provinces immediately north of Baghdad (Diyala and Salah al-Din). Though not a widespread phenomenon yet, there is potential for anti-government resistance to disarmament and a resultant shift of sympathies by Sunni militiamen back to anti-government forces.

Elections Overview

When the new Iraqi parliament convened for the first time on 14 June, the session was left open in an attempt to procedurally stall the process of government formation. The move was choreographed by the core of the emergent “unity government” – Prime Minister Maliki’s bloc, the pan-Shiite Iraqi National Alliance and the Kurds.

The delay will provide these factions with more time to complete their negotiations regarding the prime ministerial position and the dispensation of ministerial portfolios. This gambit worked in 2006, when the opening session of parliament lasted for 60 days. When the session finally closed in May 2006, most of the issues had been agreed and the other milestones on the government formation track were met in quick succession. This is probably how the process will unfold this year as well. It may be difficult to complete all negotiations before the start of Ramadan around 11 August, making it possible that there will be no government before the time Ramadan ends in mid-September.

Prime Minister Maliki continues to seek re-nomination for the premiership through his Shia allies and the Kurds. His ostensible allies, the Iraqi National Alliance, continue to seek to unseat him and replace him with Iraqi National Alliance politician Adel Abd’al-Mahdi. Maliki’s strategy is to point to his cohesive bloc of 89 State of Law list members and his very high personal voting tally to highlight his credentials, whilst using his remaining time in government to offer inducements to potential allies and to string out the government formation process to outlast his adversaries.

Iyad Allawi’s Iraqiyya movement appears to be fragmenting and weakening, with elements entering into dialogue with Maliki and the Iraqi National Alliance over ministerial positions. Iraqiyya negotiators have agreed to participate in a “national partnership government.” Allawi’s group are unlikely to be an “insider” partner in the government, and will instead be splintered, with some elements falling outside the government and others given ministerial positions to buy them off.

On 29 June, Prime Minister Maliki and former Prime Minister Allawi met for a second time, though no further information was forthcoming as to the progress on the formation of the next government. It is in both parties interest to seek cooperation; for Maliki it could win back the confidence of the Sunni electorate thus giving his unity government more credence and for Allawi it could offer him proper inclusion in the government through the designation of key roles for him and other key Iraqiya members. However, the testing relationship between the two leaders could jeopardise any future deals.

Baghdad

The Islamic State of Iraq, an Iraqi offshoot of Al Qaeda, has claimed responsibility for the simultaneous double Vehicle Borne Improvised Explosive Device outside the Trade Bank of Iraq in the Mansur district. Open sources quoted a spokesman for the group mocking the weak security surrounding the area, suggesting that the bank was targeted in order to de-legitimise the government by demonstrating its inability to protect or maintain core services. A similar motive can be observed in recent attacks on electricity infrastructure across Iraq. The bank’s association with efforts to attract foreign investment are also thought made it an appealing target for insurgents who are vehemently opposed to such endeavours.

At Camp Taji the threat levels for kidnapping and Indirect Fire remained high in accordance with reports of insurgent movements near Taji. On 26 June an Indirect Fire Attack using 107mm rockets impacted four times on the base though no casualties were reported. The Iraqi Army Quick Response Force recovered four 107mm rockets and nine Improvised Rocket Launchers at the launching site south east from Taji.

No attacks were reported against Private Security Details and Route Irish and the International Zone and Baghdad airport did not witness any incidents. There were no officially recorded EFP attacks in the capital (although there was an ineffective Explosively Formed Projectile attack against USFI in the Abu Ghraib area).

Basra Province

There were two attacks against United States Forces Iraq patrols, the first took place on 24 June on Route Topeka, the second on 25 June when an Explosively Formed Projectile was used in the north of the city; this is only the second Explosively Formed Projectile attack in the city this year.

Local nationals continued to demonstrate against the government following on from last week’s protest about the dire lack of electricity. Security operations in the City were stepped up and the demonstrations passed without incident. These rallies could continue into next week, though they are likely to die down now that the resignation of the Electricity Minister, Karim Wahid, has been accepted.

Local reporting has stated that the Sadrist militia, the Mahdi Army, have been attempting to bring people onto the streets in protest against the government, although their efforts are proving unsuccessful at present. This move by the Sadrist militia is likely to be part of the wider political strategy to undermine Prime Minister Maliki and force him to stand aside.

US Forces and Iraq Security Forces and their associates will continue to be targeted by insurgent elements with Improvised Explosive Devices and Explosively Formed Projectile attacks on Main Supply Routes and Indirect Fire attacks against the Basra Contingency Operating Base.

Basra's governor has announced projects totalling more than 50 billion Iraqi dinars ($42m), according to a report from AK News.

"Many projects will be implemented and financed from Basra's budget at a cost of more than 50 billion Iraqi dinars. The first project is to establish an industrial city for 40 billion dinars that includes industrial parks of various sizes," Shiltagh Abboud said.

"The other main project is an irrigation project that starts from Kuteiban river at the Iranian border and then to the Faw; the value of this project is more than ten billion Iraqi dinars. There is another project that is importing 200 electricity generators from an Iraqi company in Diyala province."

About his recent visit to Amman and London, Shiltagh Abboud said that he "arranged with the mayor of London for a British and Jordanian delegation to visit Basra in late June to discuss investment opportunities.

AAIB View

William Wakeham, Managing Director of A.A.I.B. Insurance Brokers, a specialist company focusing on Iraq, comments: The building of an industrial city for 40 billion dinars illustrates the progressive vision of the local politicians in furthering support for the business sector and raising growth and development activity.

The role of industrial cities (and special economic zones) in assisting economic development is a widespread practice in the Middle East and elsewhere. The aspirations helping to drive the creation of industrial cities, besides the net financial results, include economic regeneration, better social cohesion, an enlarged, skilled labour force and greater political engagement.

It will be interesting to see further details of the Basra project in terms of the size and zoning of the city, what basic infrastructure will be put in place, the sorts of services, products and businesses that the city will seek to attract, and what sorts of financial and non financial incentives may be offered to companies setting up there.

These may include specialist business advice, streamlined licensing and permit procedures, tax incentives and free use of property for certain periods. Preferential treatment for private investors can be an important factor in the level of success achieved. Also, we also need to be mindful of how overall economic development policies and procedures, stemming from the central government in Baghdad may help to shape the industrial city.

A major campaign kicked off in Basra on Sunday to clamp down on the theft of electricity from the grid.

Basra police chief Maj. Gen. Adel Dahham, speaking in a statement to "Eye Media" on the role of security services, said "military and police forces worked with the electricity departments in a campaign to stop abuse of the power network. Illegal wires tapping into the national system were removed in the areas of Ma'qal and the outskirts of Jiblah. The campaign is continuing in the area of Jumhoriya."

(Source: Eye media company)

The Basra Provincial Council has allocated an additional ID300 billion [$250m] to rehabilitate the power network in Basra. “This is a temporary and quick solution for the power problem in Basra,” the council’s head told Aswat al-Iraq news agency on Wednesday. He noted that agreements have been obtained to construct four new gas-driven power stations in Basra, each with a capacity of 500 MW. “Basra needs 1,200 MW,” the source stressed. He pointed out that all the four new power stations will be devoted to Basra exclusively

A spokesperson from AAIB Insurance Brokers, a company specialising in Iraq commented, “this move shows that the authorities are fully aware of the dangers stemming from insufficient supplies of electricity and that they are taking actions to address the root issues. Within Iraq we can expect to see this spend to be followed by more, larger budget allocations targeted at the power sector as part of a strategic response to the current challenges faced.

The issues of power shortages have been well documented. We know that insufficient power supplies can help foster civil unrest, hamper economic activity and necessitate costing imports to help meet the demand.

The insurance market is able to support construction and engineering projects of this type, but the number of companies willing to do this is limited. We have found that providing the right risk level of detail when approaching insurers, such as project specification and cost, project schedule, contract wordings etc helps us to obtain the types of insurance needed and enable coverage of Contract Works, Machinery, Plant etc plus cover for various liability exposures.

(Source: IRNA)

IRNA, the Iranian news agency, reports that the Islamic Republic of Iran is willing to supply electricity to northern Iraq.

The managing director of Kurdistan's electricity department said the Iranian electricity distribution company will supply electricity to the Iraqi national grid at the border town of Bashmag, in northern Iraq.

"According to an agreement inked between the two sides, the Iranian company will supply 500 to 1,000 kw of electricity to the Iraqi national grid at Bashmaq," Mohammad Mostafa Najafian said.

Bashmaq is a border point between Iran's Kurdestan province and Iraqi Sulaimaniyah.

National Overview

The number of incidents reported nationally showed a slight decrease from 145 last week to 123 incidents this week.  Marked fluctuations in incident levels have become characteristic of the security picture in 2010 as security force initiatives reach the more difficult stage of trying to uproot the foundation of insurgent groups in Iraq.

A slight rise in the use of Explosively Formed Projectiles (EFP’s) was recorded this week, up to eight from five last week. Out of the eight detonations country wide, seven occurred in the Baghdad area and one in the South Central region.  There were no officially reported Vehicle Borne Improvised Explosive Devices (VBIEDs) in Baghdad during the review period, with the majority of VBIED attacks taking place in the north, which saw the biggest increase in overall activity, with 16 reported incidents compared to six for the previous week. These levels are still comparatively low when compared to the north central region, though it is assessed that there is an enduring residual threat in the province of Ninevah which encompasses Al-Qaeda strongholds such as the village of Amil in Mosul.  Security gains in hotspots like this will be harder to attain as local communities remain fearful of insurgent threats and wary of the combined security forces operational efficacy.

The north central region saw a big decrease in officially reported incidents, going from 62 last week to 37 this week, dropping by almost half.  Baghdad saw a drop in officially reported incidents from 54 to 42.  Both the north central region and the capital city are likely to remain the focus of insurgent efforts, though recent incidents do not suggest an increase in the level of sophistication of attacks.

The spate of assassination attacks indicate that Iraq is witnessing a period of score settling among different factions, particularly between the anti-Al Qaeda Sahwa militia and Al-Qaeda insurgents.  The ready availability of weaponry and the weakness of the federal administration will likely see this period of unsettling incidents extended over the next few months.  It is worth noting that these incidents are not explicitly linked to the current political situation and therefore will not necessarily decline following the conclusion of the current parliamentary negotiations.  The increase in criminal activity, witnessed again this week with a second attack on a bank in Baghdad on 20 June is likely to continue as insurgents seek to acquire alternative funding whilst destabilising Iraq’s fragile security.

Elections Overview

Political negotiations have been lacking in progress during the review period as parliamentary wrangling over the key posts, notably that of Prime Minister, remains fraught as the main factions struggle to reach a compromise.  The effect of this extended period of political limbo has been felt throughout the country as the electorate suffer sweltering heat and a lack of basic services.

The south and south central regions have witnessed popular protests against the lack of electricity in particular in Basra where residents are forced to endure up to twenty hours without electricity.  At least one protestor was reportedly shot dead by police forces responding to the unrest in Basra on 19 June.  Heavy handed police treatment of protestors coupled with neglect at the hands of parliamentary representatives has angered Iraqi civilians who have begun to single out ministers for accountability.  The electricity minister Karim Waheed has handed in his resignation though Al-Maliki has yet to accept it, stating frankly that Iraq could be in for another two years of limited electricity supply and Waheed has the level of experience required to tackle the problem.

Iraq’s Foreign Minister Hoshyar Zebari summarised the public mood towards the political difficulties by saying, “People are tired of the lack of services, lack of action, and all this debate on television about government formation and positions.  The public sense is one of anger and tiredness.”  Many Iraqis view the new “Super Shiite coalition” with suspicion as they cite Iranian influence as well as an abandonment of the secular vision epitomised by Iraqiya for a religious alliance urged on by the Shiite cleric Ayatollah Al Sistani.  Iraqiya leader Allawi has not alleviated these concerns, as he has publicly spoken about the threat of assassination attempts against him, supposedly verified by American sources, which he claimed could be sponsored by Al-Maliki’s allies.  These political disputes are exacerbating public discontent whilst providing insurgents with a window of opportunity to reassert their strength by carrying out headline grabbing attacks.

Baghdad

The capital city witnessed another attack on a bank during the review period as twin car bombs exploded in a car park of a private bank in central Baghdad on 20 June killing at least six people and wounding 42.  The building housing the bank was heavily damaged in the blasts and two of the dead were police officers guarding a nearby Interior Ministry office that issues Iraqi ID cards.   Iraqi Security Forces (ISF) have reinforced security measures around potential targets of robberies such as goldsmiths and jewellers in anticipation of further criminal activity.  This perceived crime wave could be indicative of a change in insurgent tactics, techniques and procedures towards organised crime.

At Camp Taji the threat levels for kidnapping and Indirect Fire (IDF) remained high in accordance with reports of insurgent movements near Taji and the area witnessed two Small Arms Fire (SAF) attacks.

No attacks were reported against Private Security Details and Route Irish and the International Zone and Baghdad airport did not witness any incidents.  There were no officially recorded EFP attacks in the capital (although there was an ineffective EFP attack against USFI in the Abu Ghraib area).

Basra Province

The level of security remained stable in Basra province with only a few incidents reported this week.  There was however a significant increase in civil unrest as Basrawis expressed their dissatisfaction with the provision of basic services, in particular at the dire level of electricity supply as temperatures rose to around 130 degrees Fahrenheit.  The death of two protestors further antagonized local communities who are likely to persist in their demonstrations, despite the recent resignation of the Minister of Electricity.

The head of Basrah’s provincial council, Jabber Amin, announced on 21 June that he would be pushing for greater autonomy from Iraq’s central government for Basra in an attempt to allay concerns over the neglect of local issues.  Previous efforts to achieve more independence for Basra have failed to secure enough support and Basrawis fear that the provincial council will struggle to maintain security and services without American assistance.

US Forces and Iraq Security Forces and their associates will continue to be targeted by insurgent elements with Improvised Explosive Devices and Explosively Formed Projectile attacks on Main Supply Routes and Indirect Fire attacks against the Basra Contingency Operating Base.

As the new Iraqi parliament remained deadlocked on the formation of a new government, frustrated Iraqis took to the summer streets in protest at the government's failure to provide an adequate and reliable supply of electricity.

With peak temperatures of nearly 50C (120F), and many Iraqis still getting less than six hours of electricity per day, it is easy to understand their anger.

According to the Iraqi Foreign Minister, Hoshyar Zebari, “what we saw in Basra on Saturday was a warning. It was the writing on the wall. The anger [the demonstrators] showed was extraordinary”, he said.

For many, both within the country and internationally, these events highlight the urgent need to invest in basic infrastructure, and the potential consequences of neglecting the needs of the population.

While some may find it distasteful to call this crisis an opportunity, it is very clear that there is a huge demand to be met, and not just regarding the provision of power. A recent report claimed that it is not unusual for government agencies to return their allocated funds to the Treasury because they are unable to spend them. The reason: the non-availability of contractors to do the job!

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