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The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

There are many interesting aspects to the recent departure by Vice-President Tareq al-Hashemi from Erbil in the Kurdistan Regional Government (KRG) area of Iraq to Doha, the capital of Qatar.

Among those aspects is one that has yet to receive the attention it deserves: The means of travel used by Hashemi – who is sought by the central government in an alleged criminal case - from Erbil to Doha. Most accounts simply state that Hashemi arrived in Doha on 1 April en route from Erbil. Some Kurdish interior ministry officials even went on record saying they had no knowledge about Hashemi’s departure.

The picture of Hashemi arriving in Doha, published by the website of the vice-president, is clear enough. It shows Hashemi stepping out of a Qatar Airways jet, apparently onto a red carpet and with ministers waiting to welcome him.

So, Hashemi arrived with Qatar Airways. It is true that they have announced plans for an Erbil–Doha service. But that service will not commence until May. Also, it will be operated by Airbus 320s. The aircraft on the picture looks slimmer than an Airbus, perhaps more like a Bombardier?

The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Arab League summit in Baghdad is over and it is time to take stock.

Given the essentially international character of the summit in Baghdad, it is natural to start with the regional implications. And, in many ways, the degree of representation at the level of heads of state is a useful indicator of how things went. Altogether, 10 countries were represented by their rulers: Tunisia, Libya, Sudan, Djibouti, Somalia, Comoros, Palestine, Lebanon and Kuwait in addition to Iraq.

In one way, those who came to Baghdad can be crudely summarized as the “Maghreb Spring” countries (Tunisia, Libya), the very poor in need of any help they can get (Comoros, Sudan, Somalia, Djibouti, Palestine), and “others” not so easily classified (Kuwait and Lebanon). The absence of most of the GCC leaders can be attributed to continued aversion to the Maliki government in Iraq, whereas the failure of the rulers of Egypt and Yemen to show up may reflect the messiness of their own domestic situations as much as any clear policy on Iraq.

But there is more to this than the apparent preference of poor republics for building ties with the new Iraq. True, the gap between Iraq and the Gulf countries remains wide, but if the Iraqi government can build ties with non-GCC countries, it could form an alternative regional bloc within the Arab League. The one obvious disappointing absence for Iraq in this respect must have been that of Algeria.

Iraq has asked its Arab neighbours to forgive its pre-invasion debts, urging them to follow the United Arab Emirates and Algeria which have already written off what they were owed, according to Reuters.

"We've asked Saudi Arabia, Kuwait, Qatar, Libya, Jordan, Sudan, Egypt and Morocco to help Iraq in closing up its debt situation," Iraqi Finance Minister Rafie al-Esawi [Rafie al-Issawi, Rafi Hiyad al-Issawi, Rafia al-Issawi] said on the first day of the Arab League Summit in Baghdad.

The Paris Club of 19 rich creditor nations agreed in 2004 to write off 80 percent of some $40 billion debt to help Iraq recover from the 2003 U.S.-led invasion. Debt forgiveness talks with non-Paris Club nations are still under way.

"It needs more cooperation from Arab countries regarding the cancelling of debt," Esawi said, thanking the UAE and Algeria for agreeing to cancel 100 percent of debts.

Iraq's external debt was between $130 billion and $140 billion in 2003, much of which was settled through the 2004 Paris Club agreement.

That deal required Iraq to seek similar settlements with all its other creditors. But some commercial creditors won legal judgements and have refused to comply with the settlement.

Saudi Arabia last year was owed $30 billion by Iraq and Kuwait is owed around $22 billion in additional to war reparations for the 1991 Iraqi invasion of Kuwait.

China has written off 80% of the debt it was owed by Iraq.

(Source: Reuters)

Korek Telecom hopes to launch a third-generation (3G) network later this year, but is waiting for the Iraqi government to allocate the necessary spectrum, the operator's chief executive said on Wednesday, according to Reuters.

The company, in which France Telecom and Kuwait's Agility own stakes, claims a 70 percent market share in Kurdistan.

Yet its overall share of Iraqi mobile subscribers is just 13 percent and launching 3G, which would allow for faster Internet connections on mobile phones, could help it win customers from 2G operators Asiacell, an affiliate of Qatar Telecom, and Zain Iraq, part of Kuwait's Zain.

"The promise of the regulator and the ministry is that we should have 3G soon, so we are waiting for them to figure it out," Ghada Gebara, Korek chief executive, told Reuters by telephone. "They are serious about it, so it's just a question of time."

"We already have the right to use any technology we want in our licence, the idea is to get the right frequency," she said.

The government has yet to decide whether it will charge a fee for the new spectrum, Gebara said, adding extra fees would raise tariffs and slow down investment in new technologies to increase internet penetration.

"The more money you pay, it's the customer that will pay," she said.

(Source: Reuters)

At the end of last month the Egyptian investment bank EFG-Hermes announced that it would begin offering equity swaps on ISX-listed shares to institutional investors. (See this story.) This new product has the potential to bring about a dramatic increase in foreign participation in the Iraqi stock market.

An equity swap allows an investor to earn the return on the underlying name without actually owning any shares. The issuer of the swap mimics the performance of the stock by doing trades in its own account that parallel clients' buy and sell orders while simultaneously debiting or crediting their cash accounts by the corresponding settlement amounts.

Swaps have three main advantages. First, they replace local counterparty risk with that of the issuer. Second, they eliminate the need for a custodian bank. Third, they can greatly simplify the investor’s back office and audit work.

In a market like Iraq, these are all important considerations. Many foreign institutions will be unwilling to accept the risk of dealing directly with Iraqi brokers. So far no one is offering custody services for ISX-listed shares, which means that many funds cannot invest at all. (See this post for more on custodian banks.) And even when the Iraq Securities Commission finally gets around to issuing custodian banking licenses many investors are still going to find dealing with EFG-Hermes to be a lot less trouble administratively.

In fact, even in markets like the UAE, Qatar, and Kuwait—all of which have custodian banks—many foreign investors continue to prefer swaps solely for the sake of ease of settlement and execution.

The lack of a custodian for ISX-listed shares is suddenly starting to look like a red herring. Institutions no longer need to wait for this problem to be sorted out. Now they can start trading in the time it takes their own legal and compliance departments to review the EFG-Hermes swap agreement. (This is a non-ISDA document so this process may take a bit longer than it otherwise would.) Some may be ready to take the new shortcut to Iraq as early as the end of this month.

Qatar Airways has announced further expansion of its rapidly-growing international network with five new passenger routes, more cargo services and capacity increases to a number of destinations served direct from the airline’s Doha hub.

Among the new routes are two new destinations in Iraq – the northern city of Erbil and capital Baghdad.

Both routes will be served four times a week, using Airbus A320 aircraft.

The Erbil-Doha route will start in May, while the Baghdad-Doha route will start in June.

(Source: Qatar Airways)

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 8st March 2012).

Please click here to download a table of listed companies and their associated ticker codes.

ID1,343 / $1,474,  +0.3% (weekly change). The number of weekly traded shares was 16.1 bn and the weekly trading volume was ID25.8bn ($21.8mn).

ISX Company Announcements

• This week United Bank (BUND) announced its 2011 annual report. (Please see the table [1.1] (pg:5))
• Iraq’s central bank has reportedly placed private bank, Warka Bank under guardianship to supervise it through insolvency. According to the report from Reuters, Mudher Kasim, deputy governor of the central Bank of Iraq, said: “We gave Warka a chance to have Standard Chartered to be a partner but that did not happen, so there was nothing we could do as a financial authority, but to intervene as a guardian. He said the central bank would appoint a new temporary administration to run Warka Bank, which would be given a month to appoint an auditor to determine how to restructure it and whether it needs to sell assets to raise capital. (Iraq-Business News)
• Al-Mansour Bank (BMNS) held its General Assembly (GA) meeting on Mar. 6, 2012. In this meeting, shareholders approved the board decision to increase the capital from ID100bn to ID236bn through 51% bonus issue and 85% rights issue. Rights issue will be only paid by the major shareholder, Qatar National Bank (QNB) and its share in the bank will reach 51% from 23%. In addition, BMNS decided to distribute 7.12% cash dividend to shareholders.
• Mosul Bank (BMFI) held its GA meeting on Mar. 5, 2012. Shareholders decided to increase the capital from ID75bn to ID100bn by around 13% bonus issue and 20% rights issue.
• Sumer Commercial Bank (BSUC) will hold AGM on Mar. 15, 2012 to discuss 2011 financial statements and capital increase through rights issue. ISX suspended trading of BSUC starting Mar. 8, 2012.
• Ishtar Hotel (HISH) will hold AGM on Mar. 22, 2012 to discuss 2010 financial statements. ISX will suspend trading of HISH starting on March 15.
• Al-Mansour Pharmaceuticals Ind. (IMAP) will hold AGM on Mar. 31, 2012 to discuss 2011 financial statements and cash dividend ratio. ISX will suspend trading of IMAP starting on March 24.

For the full RS Weekly Bulletin in PDF go to:  www.rabeesecurities.com.

Iraq is demonstrating its unique position in the Middle East again, flexing its new diplomatic muscle to resolve an oil exporting crisis between the West, OPEC and Iran, according to this article from NIQASH. But who’s behind these efforts: Iran, the US or Iraq itself?

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

As the current head of OPEC, Iraq is testing its diplomatic mettle further, by mediating between the oil exporters in the Gulf countries, the EU and neighbouring Iran.

The crisis that Iraq is dealing with involves Iran and Saudi Arabia and oil exports from throughout the region. Recently, the countries of the European Union agreed to impose sanctions on Iran’s oil exports, banning the signing of any long term oil export contracts come July 1, 2012. The move was intended to put pressure on Iraq because if its plans to build up nuclear capacities.

And the July deadline was supposed to give the EU members nations time to find alternative supplies. However Iran then decided to cease oil exports to the UK and France earlier, as way of increasing pressure on the Europeans, pre-empting their ban – although apparently the gesture was largely symbolic as both nations had already stopped buying Iranian oil.

The other thing that Iran has done is threaten to close the Hormuz Strait, one of the most important shipping channels in the world; around one fifth of all crude oil passes through the narrow shipping channel, which lies between the Gulf of Oman and the Persian Gulf.

The Basra Investment Commission has approved a $100 million waste plant to be built by Dow Chemical's Kuwait branch, according to AKnews.

The company, which already has plants in Kuwait, Saudi Arabia and Qatar, will enter Basra and invest in water purification projects and will consider providing environmental solutions, professional consultation and technical services.

Waste and industrial water will be treated and recycled, converting polluted river water and high saline ground water into safe water for drinking and irrigation.

Tawfiq al-Manei, company adviser and director of the International Bureau of Consultancy and Economic Studies, said: "We chose Basra because of its multiple benefits, most importantly the geographical location for the State of Kuwait.

"The rate of waste in Basra reaches to 2,000 tons a year which makes us in dire need for such projects to recycle and treat waste and improve the environmental situation in Basra."

(Source: AKnews)

Reuters, citing banking sources familiar with the matter, reports that Qatar Telecom (Qtel) plans to buy out a private equity partner's 19-percent stake in Iraqi telecoms operator Asiacell.

Qtel, the Gulf state's former monopoly, has a 30-percent stake in Asiacell, Iraq's number two operator, while its partner MerchantBridge owns 19 percent.

Morgan Stanley is reportedly assisting Qtel in the process, while London-based MerchantBridge is being advised by Credit Suisse.

In October, Asiacell appointed HSBC and Morgan Stanley to manage an initial public offering in Iraq. A potential sale of MerchantBridge's stake was likely to happen before the IPO, the sources said.

(Source: Reuters)