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By John Lee.

The head of Russia's LUKoil has said that the company plans to start production at Iraq's Block 10 at the end of 2022 or in 2023.

Vagit Alekperov (pictured) told a Reuters that output will start at 30,000 barrels per day (bpd).

The field is being developed by LUKoil (60%) and Inpex (40%)

(Source: Reuters)

By John Lee.

Iraq's Oil Minister, Ihssan Abdul-Jabbar Ismail, has announced the start of experimental operations at the Yamamah reservoir in the West Qurna 2 oil field, with the aim of increasing output from the reservoir from 10,000 barrels per day (bpd) to 350,000 bpd.

When fully implemented, the development would bring total production at the field to 800,000 bpd.

The Minister praised the work of Russian company Lukoil, which is developing the field.

(Source: Ministry of Oil)

By John Lee.

On 25 May 2021, Foreign Minister, H.E. Mr. Fuad Hussein received a copy of the credentials of H.E. Mr. Elbrus Kutrashev, the Ambassador Plenipotentiary of the Russian Federation to Baghdad.

The two sides held talks on ways to improve bilateral relations between the two countries, and the importance of enhancing cooperation opportunities at various levels to meet the aspirations of the two peoples.

Ambassador Kutrashev has previously worked at the Central Office of the Russian Ministry of Foreign Affairs, and in Russian diplomatic missions in Iraq and Syria.

(Sources: Iraqi Foreign Ministry, Russia-Islamic World)

By John Lee.

Iraq is reportedly in talks with Russia, France and the United States regarding the construction of three civil nuclear reactors.

According to The New Arab, the Head of the Iraqi Radioactive Sources Regulatory Authority (IRSRA) said that several preliminary meetings had been held to study the feasibility of setting up the reactors.

More here.

(Source: The New Arab)

By John Lee.

The Chinese company Sinopec (China Petroleum & Chemical Corporation) has won a contract to develop the Mansuriyah gas field in Diyala.

The field, near the Iranian border, is expected to produce 300 million standard cubic feet (Mmscf) per day of gas, which will be used for electricity generation.

In 2010, an agreement had been signed for the field to be developed by Turkish Petroleum (TPAO) (37.5%), Iraqi Oil Exploration Company (25%), Kuwait Energy (KEC) (22.5%), and Kogas (15%). This consortium stopped development in 2014 due to security concerns, and the agreement was reportedly cancelled in 2020.

Under the new 25-year deal agreed on Tuesday, Sinopec will have a 49-percent interest in the field, with Iraq's state-owned Midland [Middle, Central] Oil Company having 51 percent.

The contract may be extended for an additional five years.

According to the Ministry of Oil, Sinopec's bid was he lowest submitted.

(Source: Ministry of Oil)

By Ahmed Mousa Jiyad.

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

Iraq and the China-Iran Comprehensive Cooperation Program

The China-Iran Comprehensive Cooperation Program (CICCP) was signed on 27 March 2021; two days later the CICCP's direct impacts on Iraq began emerging and one of such impacts seems to benefits both Iraq and Iran!!

A few days ago I completed a detailed preliminary assessment of CICCP document. The assessment was written in Arabic entitled "China-Iran Comprehensive Cooperation Program: Tactically Important Strategically Impacting if Implemented", it was circulated widely and posted on many websites.

The assessment uses composite methodology of three researches approaches (Text analysis, SCOR (Strength, Challenges; Opportunities and Requirements) and facts/evidence based) and comprises an introduction, three parts and concluding remarks. Part one provide brief review of CICCP document structure: preamble, articles, annexes, effective date and term of the deal, coordinating and supervising authorities. Part two, provides detailed assessment of eight fundamental topics/ areas of cooperation, from the perspectives of the political economy of bilateral relations and geopolitical considerations. Part three provides the direct official reactions to CICCP from Iraq, USA, Arab Gulf States/Saudi Arabia and Russia.

The political economy perspectives are related to the following basic issues: The first relates to the nature of bilateral relations in terms of sovereign independence or dependency and hegemony; the second is whether the principle of "mutually beneficial" is also equitable; the third concerns the structuring of the Iranian economy on whether the deal will eventually deepens the dependence on the export of raw materials, oil and gas, or introduces the required and desirable structural changes horizontal, vertical and knowledge-based levels; and the fourth is about the financial and banking independence, monetary and currency issues pertaining to funding investments and trade exchange.

The geopolitical considerations were addressed at four levels, starting from the domestic (national for both countries), continental (Asian from China to Syria), regional (West Asia / Middle East) and international levels.

The assessment argues that the timing of signing and announcing CICCP is tactically motivated and important, while its proper and timely implementation could be a game-changer and thus strategically impacting; but, as usual, reality seldom coincides with expectations.

This brief intervention focuses on the direct current evidenced impacts on Iraq. Interested readers are kindly invited to read the Arabic version of my detailed initial assessment through the web-links mentioned at the end of this article.

In a remarkable speed and substance CICCP has already prompted both Iraq and the US to react!

First; after the current prime minister, Mustafa al-Kadhimi, denied, rather harshly, in a press conference on November 18, 2020, the existence of an Iraq-China agreement by saying, 'You know there is no China agreement, why are you promoting these lies?', he returned to authorize, on March 30 - that is, only three days after the signing of CICCP, "to start implementing the Chinese agreement"!!

While I do not find it necessary, now, to discuss what has happened between Iraq and China since the government of Haider al-Abadi, I find it useful to remember the statement by the Prime Minister's Financial Affairs Adviser, Dr. Modhir Muhammad Saleh, on March 29, 2021, that the "Iraq-China agreement" became effective on October 18, 2020, and then he affirmed the "cooperation framework agreement ... and the final accounting and oil annexes were signed on September 23, 2019." So why has not been published to this day any official document on this agreement / cooperation framework agreement, nor any of its annexes or memoranda of cooperation/ understanding related to it!!??

But there is a document at the Ministry of Finance entitled "Export Credit Insurance Cooperation Framework" between the China Export & Credit  Insurance Corporation and the Iraqi Ministry of Finance) dating back to May 11, 2018 (that is, before the date of the agreement signed by former Prime Minister Adel Abdul Mahdi) !!!!

It is worth mentioning that 2021 State Budget Law includes a few infrastructure projects worth 1.803 trillion Iraq Dinnar to be funded, presumably by the above mentioned 2018 framework; since there is no new framework agreement officially published by the Ministry of Finance, nor approved by the Council of Ministers, nor legislated by the House of Representatives/ the Parliament. Moreover, even if such agreement is ratified and activated it utilization will be differed to future state budget for 2022 or even 2023 because of the national election scheduled for October this year.

Apparently, CICCP was a wakeup call for the Iraqi government but it is in reality too late for 2021 budget funding.

But on the other hand, the Iraqi Premier rushed for quick visits to Saudi Arabia and the UAE, immediately after signing CICCP; is there a relationship between the two events? Time will only tell!!!!

Second, among direct reactions by the US administration and as far as Iraq is concerned relates to Iraq-Iran interests. Just two days after signing the CICCP the U.S. renewed and extended the Iraqi exemption from the practices of maximum US pressure on Iran from 45 to 120 days; a waiver to avoid penalties for buying natural gas and electricity from Iran. This exception entails two positive consequences for both Iraq and Iran: the first is to ensure the continued supply of Iranian gas to generates electricity; this what the Iraqis suffer from its shortages especially the heated summer is on the doorstep, and the second is that Iraq pays Iran's accumulated dues for importing gas and electric power (which constitutes about a third Iraq's production of electricity) as the total of those receivables were mentioned in the 2021 budget, about 1688 billion Iraqi dinars.

Third, another important reaction by the US administration was its quick decision to hold a new round of strategic dialogue with Iraq; the discussions began on April 7, and mainly relate to the issue of US forces remaining in Iraq and the Strategic Framework Agreement signed in December 2008. (This agreement and related matters face strong opposition and many important, influential, legal and judicial challenges, especially after the Trump administration assassinated two leading heavy weight individuals, Abu Mahdi Al-Muhandis (Iraq) and General Qassem Soleimani (Iran), on January 3, 2021 near Baghdad airport).

It is worth noting that energy cooperation is one of the eight topics included in the said strategic framework agreement. Evidence suggests that the previous round of the Iraqi-American Committee for the Coordination of Cooperation in the Field of Energy, which was held, virtually remotely, on January 18 of this year was brief and did not include any important issues or noticeable impacts or new achievements. Hence, it did not attract attention from domestic or external media. Even the two ministries, i.e, Oil and Electricity, that should be directly involved, hardly mentioned anything on their websites on that latest meeting. Will CICCP invigorate Iraqi-American cooperation for the benefit of the energy sector in Iraq?? Who knows, will see!!!

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq's Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By John Lee.

On a recent visit to the Russian republic of Tatarstan, Iraq's Oil Minister Ihssan Abdul-Jabbar Ismail attended a presentation that the headquarters of the oil company Tatneft.

The Iraqi delegation also visited the Taneco Oil Refining Complex, the Kama Tyres manufacturing plant, and the Nizhnekamsk Truck Tyre Factory.

Nail Maganov, General Director of PJSC TATNEFT:

"Our Company has had a long-standing partnership with the Republic of Iraq. Our professionals have participated in the construction of 700 wells in the West Qurna, North Rumaila and Luheis oil fields, as well as in other projects.

"Tatneft has unique competencies in the Upstream and Downstream, the use of digital technologies in the industry. We are confident that our experience and knowledge could find their application in the Republic of Iraq as well, and we are ready to continue cooperation with our Iraqi partners in areas of interest to them".

(Sources: Ministry of Oil, Tatneft)

By John Lee.

The Iraqi government has launched what it describes as "an exceptional programme" to lift the requirement to obtain entry visas prior to arrival in Iraq.

The new scheme will apply to citizens of:

• Countries that are permanent members of the UN Security Council (USA, UK, France, the Russian Federation and the People's Republic of China);
• European Union countries: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands
• Japan, South Korea, Canada, Australia, New Zealand and Switzerland.

Citizens of these countries will be able to pay to obtain a visa on arrival at Iraq's airports and land and sea border crossings, but must comply with all Iraqi preventive health measures as decided by the Higher Committee for Health and National Safety.

Other countries may be added to the list based on Iraq's economic and other needs.

(Source: Govt of Iraq)

By John Lee.

The Russian Direct Investment Fund (RDIF), Russia's sovereign wealth fund, has announced the approval of the Russian Sputnik V vaccine against coronavirus by Iraq's Ministry of Health.

Iraq has become the 45th country in the world to register Sputnik V.

The vaccine was registered under the emergency use authorization procedure.

(Source: RDIF)

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

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

Market Review: "Market Roars Back to Life"

The market, after January's 9.3% sell-off, resumed the rally that was ignited by the 22.6% devaluation of the Iraqi Dinar (IQD) against the USD in late December, ending February with a bang! The market, as measured by the Rabee Securities RSISX USD Index, ended the month up 25.7%, and is up 14.1% for the year.

February saw a resumption of the trends that drove the index's rally of 8.7% (in local currency terms) in the immediate aftermath of the currency's devaluation, in which both daily turnover and foreign buying increased meaningfully month-on-month.

However, the crucial difference this time is that these trends lasted the whole month, and their momentum was sustained throughout. Average daily turnover, excluding block transactions, increased 189% over the prior month and 145% over the average of the prior 12 months (first chart below). A similar pattern, but less dramatic, was the resumption of foreign buying in both absolute terms and as a percentage of total buying (second chart below).

(Source: Iraq Stock Exchange (ISX), AFC Research, data as of February 25^th)

While foreign buying in the leading names in the banking, consumer, and telecom sectors initiated the rally, it was local buying that extended and sustained it throughout the month. In particular, the Bank of Baghdad (BBOB) was up 69.2%, Baghdad Soft Drinks (IBSD) was up 30.7%, and AsiaCell (TASC) was up 24.6% - these three stocks accounted for over 90% of the index's gain and for the bulk of the daily turnover in the market.

Among the banking sector, BBOB's rally was joined by the low-priced Gulf Commercial Bank (BGUC) in which 4 successive increases in the minimum trading increment resulted in a 21.4% increase in BGUC. Other leading banks lagged significantly, such as Mansour Bank (BMNS) which was up 5.3%, the National Bank of Iraq (BNOI), up 2.4%, and the Commercial Bank of Iraq (BCOI), up 2.3%. While IBSD was joined by Al Mansour Pharmaceuticals (IMAP), up 15.2%.

The initial post-devaluation rally in late December and the strong follow-through in February suggests that that the market is primed for a rally following a brutal seven-year bear market - that even after its February gain, the market, as measured by the Rabee Securities RSISX USD Index, is still down by over 63% from its 2014 high.

The market's narrow breadth notwithstanding, the fact that the gains were made by the leading names in their respective industries is promising for the rally's continuation. For such a continuation to be sustainable, it should unfold over the next few months and come with a broadening of market breadth as other stocks begin to contribute to the market's recovery from its deep downturn. However, this recovery's pace is likely to be uneven with plenty of zigs and zags along the way.

It was argued here, post the currency's devaluation that:

"While the devaluation is an adverse event, the reaction of the equity market and the increased foreign participation indicates that the change is positive for equities. While the missing pieces of Iraq's re-rating are many and will take time to materialize, this positive reaction to the devaluation suggests that the event might start the process of Iraq's re-rating - which from a long-term perspective is positive for the equity market."

One of these missing pieces is the role that oil prices play in the foreign perception of Iraq contributing to foreign fund inflows, and more significantly, the role oil prices play in driving Iraq's economy and thus corporate profits.

Oil prices by the end of February staged a remarkable recovery of over 300% from the depths of the price collapse last April, in which the COVID-19 induced worldwide lockdown magnified an earlier crash in prices brought on by the price war between Russia and Saudi Arabia. This recovery was driven by the reversal of these same forces to hopes of a successful COVID-19 vaccination roll-out, and by extra production cuts over two-month of a further 1 mln barrels a day by Saudi Arabia, bolstering the remarkable cohesion of the OPEC+ agreement to cut oil production by an estimated at 12% of world oil supply last April 2020 - an agreement driven by self-interest and commercial logic just as was argued here last March soon after the initiation of the price war that:

"... while both combatants on paper have the resources to wage the price war, yet the effects of the 2014 price-war on both were profound which led to an unimaginable alliance in the first place. Given that effects of a new price war will be equally profound, it seems logical that political considerations will ensure that such war does not last, and that just as political reasons led to the price war, that subsequent ones will end it."

The availability of more than one effective vaccine for the COVID-19 pandemic bolsters the potential for a synchronised developed world economic recovery in the second half of 2021 and into 2022 - a recovery supported by unprecedented worldwide fiscal stimuli to the global economy, as well as continued adherence of OPEC+ to the production cuts - cuts that should last into year-end with a potential extension into 2022. This combination would argue for Brent crude prices to average in the range of USD 50-60 per barrel in 2021, and a range of USD 60-70 per barrel in 2022 - a case more promising than, but which nevertheless builds on the case made here in April 2020 that:-

"The known nature of the virus precludes a return to full normalcy when global lockdowns are expected to ease from mid-summer onwards. Combined with the unknown nature of the new normal as the world learns to deal with and ultimately contain the virus, the return to a pre-virus oil demand picture is unlikely within the next 12 months. But, in six to nine months demand for oil should recover from the extreme lows of April and trend upwards to a small drop from base-line demand by year end.

However, with a return to some sort of post-lockdown normalcy in early 2021, low oil prices should stimulate demand, and coupled with the massive worldwide fiscal stimuli to the global economy should begin to recover. Following a time-lag, as demand absorbs the stored supply, the supply-demand picture should be tilted in supply's favour, and oil prices will trend higher - likely to a price range of USD 45-55 per barrel for Brent crude."

Brent Crude Prices 2016-2021

(USD per barrel)

(Source: Bloomberg, data as of March 1^st, 2021)

Such a scenario is extremely positive for Iraq and its equity market given the country's extreme dependence on oil revenues, which historically constituted over 90% of government revenues. Given the dominance of the economy by the state - as the largest formal employer, and through its direct and indirect control of the largest economic activities - means that higher oil revenues will feed into increased consumer spending and to a revival in said economic activities.

Such a revival will sustain the recovery in economic activities that have returned to levels meaningfully above those that prevailed just before the nationwide lockdown last March, as seen from Google mobility data (below chart). In particular, activities in the crucial sectors of retail and grocery have recovered to between 20-60% above the levels that prevailed pre-lockdown. The sharp decline at the end of February is due to the new rolling lockdowns from Friday's to Sunday's, cutting the workweek to four days, in response to the emergence of a potential new wave of the pandemic.

(Baseline is the median, for the corresponding day of the week, during January 3^rd - February 6^th 2020,

Source: Google, data as of February 21^st)

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

Mr Tabaqchali (@AMTabaqchali) is the CIO 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 non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

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.