Market Review: Elections, the Economy and the Stock Market
Posted on 23 May 2018 .
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: The Elections, the Economy and the Stock Market
A key aspect of the Iraq investment opportunity is arbitraging the delta between real and perceived risk. The perceptions of the widely covered parliamentary elections fit within this arbitrage opportunity in that they miss the mark by a wide margin.
The May elections did not result in an overall winner with an outright majority (165 seats among the parliament’s 329 seats) enabling the formation of a government. Instead, they produced winners and losers who will eventually form a coalition government. At the lead is Sairoon, a coalition of Shia cleric Muqtada Al Sadr, Communists and Liberals, with 54 seats; followed by Fateh, a coalition of the political arms of the Popular Mobilisation Units (PMU’s), with 47 seats; finally, Nasr, the Prime Minister’s (PM) coalition, with 42 seats.
The rest are made up of: five different coalitions each with 18-25 seats; four coalitions each with 4-6 seats; and finally, a gaggle each with 1-3 seats. The next step would be the formation of an alliance of coalitions that would, on the first day of the new parliament by end of June, have the largest number of seats to enable it to have a PM with a chance of forming a government. The whole process should take a few weeks but, in the past, it took a few months.
The winning coalitions, irrespective of their lead player, are all cross-sectarian unlike the prior ethno-sectarian monolithic blocs that dominated over the past 14 years – a division that was the root cause of Iraq’s political and social instability since 2003. Moreover, for the first time since 2003 there was a strong mass opposition to these ethno-sectarian monolithic blocs that manifested in an active non-participation movement. This led to an election participation turnout of 44.5%, which in turn had huge effects on the seats won and lost by the different coalitions.
Drilling further into the leading blocks shows neither they nor their leading players conform to simplistic assumptions. For example, Muqtada Al Sadr is often described as a firebrand cleric who is anti-secular, anti-Western and pro-Iran as a result of his leading role in Iraq’s dark history since 2003. Yet, at least outwardly, he went through a transformation to a firebrand cleric who is anti-Iran and anti-its proxies in Iraq, whose alliance with Communists and Seculars kept the 2015 pro-reform demonstrations alive and relevant.
Moreover, he was a leading player in rebuilding Iraq’s relationship with Saudi Arabia and the UAE - both received him in their capitals in 2017 to further this rebuilding. The second leading coalition, Fateh, a grouping of the political arms of the supposedly pro-Iranian PMU’s, although not all are, is led by Iranian-allied Bader Organization. Yet Bader has been a part of every Iraqi government since 2005, responsible for the Ministry of the Interior, and as such a major part of the next phase of Western support for Iraq in rebuilding its security apparatus in the long-term fight against ISIS.
The most visible fruit of which has been the decline of violence since the end of the Mosul campaign and in the first violence free elections (see chart below). Finally, the Naser coalition which is led by the PM and while much admired for leading the fight against ISIS, he suffers from perceptions of failure to address the demands of the demonstrators since 2015. Although an unfair criticism given the overriding priority to deal with the ISIS invasion, it was behind much of the reason for his collation’s third place showing. Nonetheless, his chances of returning as a PM capable of leading a workable government are high.
UN Casualty figures for Iraq November 2012 - April 2018
(Source: United Nations Assistance Mission for Iraq (UNAMI), for 8 months from 2015 UNAMI, in some cases, could only partially verify certain incidents)
Optimists see the potential for a coalition governing with a clear reform agenda and with a proper opposition in parliament providing a check on the government. The pessimists however see a repeat of the prior coalition governments that were made up of all groupings in parliament, and thus no real change to the failures since 2003. However, irrespective of who would be right, a few things are clear that would have implications for Iraq’s economy, the investment opportunity in Iraq and the stock market.
The combination of the lead by Sadr’s coalition, the continued pro-reform demonstrations since 2015, and the large active non-participation movement together imply that the upcoming government would need to address the issues at the heart of the public’s anger. This would be the provision of services and reconstruction, which require much needed overdue investments in the country’s infrastructure and the reconstruction of the liberated areas.
The new oil price dynamics have a huge positive implication on Iraq’s ability to provide funds for this massive investment spending estimated at USD 88bn over the next five years. Current estimates for the country’s budgets for 2017-2022 are based on Iraqi oil price assumptions of USD 45.3/bbl in 2017 and increasing to USD 47.1/bbl by 2022. These estimates would result in a cumulative deficit of USD 17.6bn, thereby increasing the debt load, necessitating borrowing to fund the deficit and restrict the ability to fund reconstruction. This implies the need for outside aid and investment to fund reconstruction.
However, different assumptions based on the new oil price dynamics would provide a vastly different picture. For instance, using realized prices of Iraqi oil of USD 49.2/bbl for 2017, and assuming Iraqi oil prices of USD 60/bbl for 2018, then declining to USD 51/bbl in 2022, would produce a cumulative surplus of USD 47.4bn instead of the earlier assumed cumulative deficit of USD 17.6bn. In other words, this equals a turnaround of USD 65bn in potential available funds.
While, an assumption of an oil price of USD 64/bbl for 2018, then declining to USD 55/bbl by 2022 would produce a cumulative surplus of USD 78.2bn, or a turnaround of USD 95bn in in potential available funds.
Granted some of this windfall will result in higher government spending, especially on populist measures which would be detracting from the funds available for infrastructure investment. Though this would nevertheless be a large positive for consumer confidence and economic activity, all of which would ultimately support the earnings profile of consumer service providers and the banking sector.
In the immediate term, given the impossibility of forecasting future oil prices out to 2022, if Iraq’s oil price was to hold the YTD average for the remainder of 2018, it would convert the IMF 2018 projected deficit of USD 9.5bn into a surplus of USD 10.9bn. This means a turnaround of USD 20bn in potential available funds. Coupled with a slight positive variance to 2019 projections, this would provide Iraq with enough fiscal flexibility to start directly funding the immediate needs for reconstruction. This changed fiscal position would further allow it to comfortably access debt markets at reasonable rates to build upon this reconstruction. The potential addition of regional investments led by Saudi Arabia, as discussed here in the past, could lead to a self-reinforcing investment cycle.
The stock market’s action in the weeks before and after the elections has been business as usual and very much followed the same themes discussed over the last few months. This is an indication of how much negative news the market has discounted over the last three years that saw the index, as measured by the RSISUSD Index, decline -68% from its 2014 peak to the 2016 bottom.
Through 22nd May the market was down -3.9% for the month, bringing the year to date gains to +5.8%. The daily market action has been almost identical to that of the prior month with the same low turnover, the same buying in the selected leading stocks and the same selling in the banks based on the same fears.
The response of the currency to the elections for the most part matches that of the market with the market price of the Iraqi Dinar (IQD) weakening versus the USD in the days around the elections but returning to the same levels at the start of the month. The upshot, is that the premium of the market price of the IQD over the official exchange rate increased from 1.2% at the end of April, reaching 2% just before the elections and is now back to 1.2%.
The issue that continues to dominate the market is the timing of the return of liquidity as a result of the expansionary effects of higher oil prices and the end of conflict. As discussed here in the past, the observed time lag between Y-Y changes in oil revenues and Y-Y changes in M2 has been about 7-9 months which suggests that M2 growth should see improvement over the next few months as the chart below implies: it shifts the Y-Y percentage change in M2 back by 9 months versus the Y-Y percentage change in oil revenues. However, it is complicated by the additional time taken up by pre and after elections, and the additional time needed for the formation of the new government. All of which will delay this recovery but would likely result in a large back-end loaded return of liquidity.
Oil Revenues Y-Y change (green) vs M2 Y-Y change (red)
(Source: ISX Central bank of Iraq, Iraq’s Ministry of Oil, AFC.)
(Note: M2 as of Jan. with AFC est.’s for Feb & Mar, Oil revenues as of Mar with AFC estimates for Apr & May)
As argued here in the recent past, the backdrop continues to be positive: historically the equity market, as measured by the RSISUSD Index, has tended to follow oil revenues with a time lag of 3-6 months as the chart below shows.
Iraq’s Oil Revenues (green) vs the RSISUSD Index (red)
(Source: Iraq’s Ministry of Oil, Rabee Securities, Iraq Stock Exchange, AFC)
(Oil revenues are as of Mar with estimates by AFC for Apr & May)
Given the time lag involved and the delay over the formation of the new government, this will probably unfold over the next few months and the recovery will likely be in fits and starts with plenty of zig-zags along the way. This continues to underscore the opportunity to acquire attractive assets that have yet to discount a sustainable economic recovery.
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). 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.
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[1] Source of current estimates on Iraq (deficit, oil price, revenues etc) are from the IMF Iraq Country Report No. 17/251 (http://www.imf.org/~/media/Files/Publications/CR/2017/cr17251.ashx). Updated assumptions are the author’s calculations based on the above source
Posted in Ahmed Tabaqchali, Investment 2 Comments
Election leaves Iran Scrambling to Preserve Influence
Posted on 22 May 2018 .
By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
The Sairoon (On the Move) Alliance formed by Muqtada al-Sadr and the Iraqi Communist Party is ahead in the preliminary results of the Iraqi elections. More than 90% of the votes in all of Iraq's provinces have been counted so far, with the exception of Dahuk and Kirkuk, where counting was postponed.
Sairoon has so far secured 54 out of a total of 329 parliamentary seats, while the Al-Fatah Alliance, formed by the Iranian-backed Popular Mobilization Units, has won 44 seats, followed by 39 seats for Prime Minister Haider al-Abadi's Al-Nasr Alliance. The State of Law Coalition led by former Prime Minister Nouri al-Malik has secured 25 seats, and the Al-Wataniya Alliance of former Prime Minister Ayad Allawi has obtained 22 seats.
The results have raised the chances that the Sairoon Alliance will form the largest bloc in the next parliament, which will be tasked with appointing the prime minister and forming the next government. Sairoon leaders rushed to express their desire to put together the largest bloc and voiced their opinions on the next government's shape and inclination.
“The door is open” for Sairoon to work with any of the rival blocs, said Dhia al-Asadi, head of the political bureau of the Sadrist Movement, on May 14 after the announcement of the preliminary results of the elections. “Sairoon has the right to claim the post of prime minister,” he said. On May 16, Sadr, the head of the Sadrist Movement, confirmed his wish to form a government of technocrats free of partisanship and sectarianism.
In a May 14 tweet, Sadr hinted at the alliances and broad nature he hopes will characterize the new government. Using a play on words derived from the meaning of various political entities' names, he wrote: “We are Sairoon (On the Move) with Hikma (Wisdom) and Al-Wataniya (Patriotism) to make the people's Iradah (Will) our demand, to build Jilan Jadidan (a New Generation), to witness Taghir (Change/Gorran) toward reform and for the Al-Qarar (Decision) to be Iraqi," continuing the puns with, "So we raise the Bayariq (Banners) of Al-Nasr (Victory), and to make Baghdad, the capital, our Hawiyatuna (Baghdad is Our Identity) and our Hirakuna (Democratic Movement) move toward the formation of a paternal government from among technocratic Kawadur (Cadres) free of partisanship.”
Sadr used parenthesis in his tweet to denote various Iraqi political entities, including Abadi’s Al-Nasr, Ammar al-Hakim’s Hikma and Allawi’s Al-Wataniya alliances, and others — excluding the Iranian-supported militia Al-Fatah Alliance and Nouri al-Maliki’s State of Law Coalition.
If Sadr can achieve an alliance that includes the aforementioned forces, he would form the largest bloc and isolate his rivals, the Al-Fatah Alliance and the State of Law Coalition.
Arab powers opposing Iran, led by Saudi Arabia, welcomed Sadr's victory and expressed hope that it will undermine Iran’s influence in Iraq. Thamer al-Sabhan, the minister of state for Arabian Gulf affairs at the Foreign Ministry and a former Saudi ambassador to Iraq, commented on Sadr’s tweet and retweeted, “You are really Sairoon (on the move) with Hikma (wisdom), Wataniya (patriotism) and Tadhamon (solidarity). You have taken Al-Qarar (decision), toward Taghyir (change) to have Iraq raise the Bayariq (banners) of Al-Nasr (victory), to [secure] independence, Arabism and identity. I congratulate Iraq for having you."
Some Sunni Arab forces, including the Al-Qarar Alliance led by Khamis al-Khanjar, also welcomed Sairoon's victory. Khanjar even voiced his desire to ally with it. Abadi congratulated Sadr on his victory, which could imply a desire to ally with him.
But this does not prevent Sadr's rivals from seeking to sideline Sairoon by forming a larger bloc in a rival axis.
State of Law Coalition spokesman Abbas al-Musawi expressed skepticism May 16 that some electoral lists (in reference to Sairoon) will be able to form a government, stressing that “historic leaders” will be the key drivers in this matter. State of Law Coalition parliament member Mohamed Sahyoud said May 15 that efforts are near completion to form an alliance between the State of Law, Al-Fatah and Al-Nasr coalitions, which would secure more than 100 seats and account for the largest bloc in parliament. If this occurs and the bloc gets support from some Kurdish and Sunni forces loyal to Iran, the next government could be formed by the axis opposing Sadr.
Al-Monitor learned from sources who asked not to be named within the State of Law, Al-Fatah and Al-Nasr coalitions that the commander of Iran's Quds Force, Qasem Soleimani, who has been in the Green Zone in Baghdad since May 14, is leading efforts to strike an alliance deal between the State of Law Coalition's Maliki and Al-Fatah Coalition leader Hadi al-Amiri, and then to encourage Al-Nasr's Abadi and Al-Hikma's Hakim to join this alliance. If Soleimani succeeds, this could prevent Sadr from forming the largest bloc.
Soleimani was said to have proposed that these alliances refrain from nominating any of their leaders. Other names are being put forward as a consensus prime minister, including Muhammad Shayya al-Sudani, who is one of the Dawa Party leaders and the minister of labor and social affairs in Abadi’s government.
An earlier report by Al-Monitor indicated that negotiations by Soleimani in Erbil led to an agreement with the Kurdistan Democratic Party not to support Abadi as prime minister. Nechirvan Barzani, the prime minister of the Kurdistan Regional Government (KRG), revealed upcoming plans for a visit by a KRG delegation to Baghdad to participate in talks aimed at forming the next government.
Hisham al-Rekabi, who heads Maliki's media office, said May 16 that all discussions to form the largest bloc “will be completed within the next 48 hours.” Dawa Party leader and parliament member Kamel al-Zaidi spoke of “semifinal” understandings between the State of Law and Al-Fatah coalitions, in addition to current attempts to include other [parliamentary] blocs in this larger bloc. Zaidi added, “There are ongoing contacts with the National Union Front and Barham Salih's party, as well as with Sunni political authorities to form an alliance that guarantees a national political majority.”
On May 15, US State Department Spokeswoman Heather Nauert answered a question about Soleimani’s interference in the ongoing consultations to form the Iraqi government. “That is certainly always a concern of ours, but we have a great deal of trust and faith in the Iraqi people and whoever ends up governing, whatever the structure is, the governing of that country going forward,” she said.
Iran appears to be in a hurry to strike a deal between its loyalists for fear of Sadr's success in dominating the next government, which would curb its influence in Iraq.
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Moscow’s Iraq Strategy: Make Lots of Friends
Posted on 11 May 2018 .
By for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.
Moscow’s interest in the Middle East and the growing Russian presence in the region go beyond Russian involvement in the Syrian civil war. For several years Russia has been building partnerships with various regional powers, and Iraq — with parliamentary elections only days away — has been a priority.
The Soviet Union helped Iraq industrialize its economy and was the country’s largest weapons provider until the union collapsed in 1991. Iraq’s invasion of Kuwait and the subsequent Western sanctions against it interfered with the Russia-Iraq weapons relationship. Then, after the US-led coalition’s overthrow of Iraqi President Saddam Hussein in 2003, Iraq got most of its weapons from the United States.
Under President Vladimir Putin, Russia has been trying to gradually rebuild its ties with Iraq on numerous levels. Moscow sees Iraq’s May 12 parliamentary elections as an opportunity to breathe new life into relations to create a comprehensive partnership.
In 2014, as Islamic State militants neared Baghdad and the Iraqi government couldn’t immediately receive the arms it needed from the United States, Moscow jumped on the opportunity to provide “without delay” the weapons and equipment needed, including aircraft. Maxim Maximov, Russia’s ambassador in Iraq, later commented that the deliveries represented a long-term commitment.
“We have always said that we are ready to give this country various types of assistance in strengthening its army,” Maximov said in a February interview with Interfax. “The Russian military industry has already provided the Iraqi government with a massive installment of weapons that proved their efficiency in battles against [IS], including MI-35M and MI-28N helicopters, Su-25 jet aircraft, Kornet-E anti-tank guided missiles and other military products.”
Some vital 2017 contracts for T-90 tanks are now being filled. There have been reports that Iraq is going to buy Russian S-400 surface-to-air missile defense systems, but Iraq’s ambassador to Moscow, Haidar Hadi, has denied that possibility.
Russian energy companies operating in Iraq are another critical tool for Moscow. These companies had been in Iraq long before the United States invaded in 2003 and had bid on oil and gas projects. Currently, there are two companies developing such projects in Iraq: Gazprom Neft Middle East and Lukoil.
Business for Russia's Rosneft corporation is still uncertain. The company had contracts in the Kirkuk oilfields with the Kurdistan Regional Government, but when Baghdad overtook Kirkuk last year, the Iraqi Oil Ministry renounced those deals. Negotiations are still possible according to Russian business media reports, but the company has not confirmed the news.
Iraq is important for Russia not only as an economic and trade partner, but also as a factor in influencing regional policy. Russia clearly understands that its possibilities in the country are limited, as Iran and the United States are the main foreign players with direct influence on Iraq. Saudi Arabia, which took a number of steps to reinforce its influence in the country in the past year, still lags behind.
China, Iraq’s key economic partner, keeps a rather low profile regarding Iraq’s domestic politics. What’s important for Russia is that Iran partially and cautiously supports Baghdad’s collaboration with Moscow and the United States doesn’t openly oppose it.
That said, it’s not quite accurate to think Tehran is the one inviting Moscow to Iraq, hoping to create a counterbalance to Washington. In recent years, Baghdad politicians have increased their ability to implement independent foreign policy, and relations with Russia have been important to Iraqi officials. Russia, in turn, doesn’t seek to intervene in Iraq’s internal matters and basically operates by building pragmatic relationships with any government looking for such an arrangement. This approach helps Russians forge important political and business contacts.
For its part, Baghdad supports strengthening Moscow’s positions in an exchange that creates a new point of influence in the country potentially able to balance both Iran and the United States. Iraq thus gets a broader space for maneuvering among all the interested parties.
Certain areas of cooperation that Russia and Iraq have been exploiting have tangible potential. Military sales and energy cooperation are the most obvious ones, but Moscow is also becoming what it sees as a “natural ally” of Iraq in the fight against terrorism.
Since Russia, Syria, Iran and Iraq formed an information-sharing group in 2015, Russia has sought to deepen this area of cooperation through joint operations against radical groups. Russian lawmaker Ziyad Sabsabi has coordinated activities within that group to rescue Russian children whose parents joined IS from Iraq and Syria.
The fight against IS will gradually shift from the front line to broader counterterrorist initiatives, and Russia will be there to experience new forms of engagement with Iraq.
Institutional interaction between Moscow and Baghdad is already rather comprehensive. In addition to the counterterrorism information center and the rescue group, there’s a Russian-Iraqi action group for cooperating in the power industry and a Russian-Iraqi commission on trade, economic and scientific cooperation — a key coordinating intergovernmental body.
Russia takes advantage of all of these formats to interact with Iraqi and Kurdish governments as well as with the highest-level political leaders and contacts among “unofficial players” in the region.
Based on Maximov’s recent meetings, one can see Moscow’s attempts to maintain contacts with virtually all important actors — from major politicians in Iraqi Kurdistan such as Massoud Barzani, Iraqi Secretary-General of the Council of Ministers Mahdi al-Alaq, Vice President Nouri al-Maliki and National Wisdom Movement leader Ammar al-Hakim, among many others.
Therefore, while Russia’s strategy in Iraq aims to develop of all kinds of relationships with Baghdad and stresses support of the country’s territorial integrity, it is also multifaceted, seeking to engage with virtually all players from the country’s leadership to the leaders of the Popular Mobilization Units.
This path is meant to provide the policy flexibility necessary to maintain and increase cooperation regardless of who holds power after the upcoming elections.
Posted in Iraq Industry & Trade News, Iraq Oil & Gas News, Politics, Security Comments Off on Moscow’s Iraq Strategy: Make Lots of Friends
Saudi Food Company to enter Iraqi Market
Posted on 30 April 2018 .
By John Lee.
The Jeddah-based company plans to supply pasta, dates, chilled coffee, burgers, tuna and canned fruits to Iraq.
It is part of the Basamh Trading and Industries Group.
(Source: Goody)
Posted in Iraq Industry & Trade News Comments Off on Saudi Food Company to enter Iraqi Market
Saudi Arabia eyes Anbar for Potential Investments
Posted on 26 April 2018 .
By Omar al-Jaffal for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.
Saudi Arabia is considering investing in 2.5 million acres of agricultural land in Iraq's western province of Anbar, which has suffered both economically and otherwise after the bitter war to regain control of the province from the Islamic State. If such an investment is made, it would be facilitated by the Saudi-Iraqi Coordination Council, which was formed in October.
The Iraqi Ministry of Commerce announced the potential investment in a brief statement to the press April 4, but did not disclose any further details on the matter.
Iraqi-Saudi relations have remarkably improved since mid-2017, particularly after Iraqi Prime Minister Haider al-Abadi visited Riyadh in October. During that visit, an announcement was made on establishing the Saudi-Iraqi Coordination Council, in the presence of Abadi, Saudi King Salman bin Abdul-Aziz Al Saud and then US Secretary of State Rex Tillerson.
The council aims to develop economic relations at all levels between Iraq and Saudi Arabia after nearly three decades of estrangement. It also seeks to open land borders, encourage investments, review the customs cooperation agreement and study the establishment of a trade zone.
The Ministry of Commerce’s media office declined to provide Al-Monitor with any details on the potential Saudi investment in Anbar.
However, Yahya al-Mohammadi, a member of the Anbar provincial council, told Al-Monitor that officials in Anbar were indeed in contact with the Saudi Embassy in Baghdad, adding, “Provincial officials have noticed a Saudi desire to broadly invest in Anbar.”
Meanwhile, Salman al-Ansari, chairman of the Washington-based Saudi American Public Relation Affairs Committee, told Al-Monitor that the investment project in Anbar “will be launched soon.”
A Iraqi political source told Al-Monitor on condition of anonymity about the nature of the investment project in Anbar, its economic feasibility, and all related security and political aspects.
The source said the prospective investment will largely be "in the area of Nukhayb, which lies on the borders of the province of Karbala and is also adjacent to the Saudi border.” The project "aims to build fields for breeding calves, as well as producing dairy products and drinking water.” Large dairy companies will likely be established, mimicking a number of successful projects in Saudi Arabia.
The source did not deny the security objectives behind the project. “This area is lacking in security," he said. "It is located on Saudi Arabia's border, and the two countries are trying to turn it into a labor-intensive business center, which brings stability to it rather than it posing a permanent threat to both countries.”
He said that, politically, “Saudi Arabia certainly seeks to expand in Iraq, but will not follow the Iranian example, which occupies the Iraqi market without employing the labor force in Iraq.” Saudi Arabia, he said, "seeks soft dominance in Iraq by creating jobs for Iraqis," which will make its "presence and influence in the political scene acceptable within the Iraqi society."
Nukhayb has long been a disputed area between Anbar and Karbala. Nukhayb is administratively affiliated with Anbar province, but Karbala demands that it be annexed to its administrative borders. Security tension is common there, but the area has been relatively stable for nearly two years now.
Mohammadi denied “an actual start of investment operations in Anbar.” He said, “Saudi Arabia and Iraq only discussed the projects put forward,” noting that “this is due to the security and political instability in Iraq.”
In fact, not many political forces and Shiite factions welcome the idea of Saudi Arabia coming to Iraq and establishing business operations there. This rejection was demonstrated in March, when the media reported an upcoming visit to Iraq by Saudi Crown Prince Mohammed bin Salman and, in response, Shiite factions and parties organized protests in a number of cities in Iraq.
Some Iraqi parliamentarians from Shiite blocs are seeking to pass a law similar to the American Justice Against Sponsors of Terrorism Act to sue Saudi Arabia for allegedly allowing its citizens to enter Iraq and commit acts of terrorism on its territory.
Mohammadi ruled out the possibility that this would intimidate Saudi Arabia and stop it from launching projects in Anbar. “The Iranian-Saudi conflict has a wide impact on the countries of the region," he said, "but Iraq’s neutral policy has been boding well so far, and I hope it continues to achieve what is in the interest of Iraq.”
Addressing whether Saudi Arabia fears for its investments in Iraq from pro-Iranian factions, Ansari said, “Saudi Arabia does not fear anyone and is capable of protecting its interests by all means, be it in the region or anywhere in the world.”
Iraq needs a very balanced policy in dealing with its conflicting neighbors Iran and Saudi Arabia, a fact that ought to be taken into account when either of these two countries wants to invest in Iraq, especially since both Iran and Saudi Arabia believe that investments are also a gateway to influence Iraq's political situation.
Posted in Investment Comments Off on Saudi Arabia eyes Anbar for Potential Investments
Saudi Arabia looks to Expand its Footprint in Iraq
Posted on 25 March 2018 .
By Ali Mamouri for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
Following Iraqi Prime Minister Haider al-Abadi's two visits to Saudi Arabia last year, Saudi Crown Prince Mohammed bin Salman is set to visit Iraq soon, according to Iraqi parliamentarian Saadoun al-Dulaimi.
Although neither Riyadh nor Baghdad have officially announced the visit, Dulaimi said in a March 12 tweet that Prince Mohammed will spend two days in Iraq, first meeting with Abadi in Baghdad to "sign agreements," followed by a visit to Najaf to meet religious leaders.
Saudi Arabia was scheduled to reopen its consulate in the oil-rich city of Basra, which is adjacent to Iran, in March, but this was delayed for administrative reasons. Some reports say that Mohammed may open the consulates in Basra and Najaf, the Shiite religious center that is home to top Shiite clerics, during his upcoming visit to Iraq.
Meanwhile, the Saudi Embassy in Iraq is in the process of setting up the consulate office at the Sheraton Hotel in Basra. The consulate was closed in 1990 in the wake of the Gulf crisis that erupted during the regime of Saddam Hussein, and remained closed as a result of tensions in Saudi-Iraqi relations.
The Saudi kingdom opened a consulate in Erbil, the capital of the semi-autonomous Kurdistan Region of Iraq, in early 2016.
The decisions to expand Saudi Arabia’s diplomatic representation in Iraq come as part of a broader framework to strengthen the official political relations between the two governments. Saudi Arabia is seeking to establish economic and social bridges between the two countries in various fields.
Abdul Rahman al-Shahri, head of the Saudi delegation responsible for the establishment of the consulate in Basra, said that these measures are carried out to “provide services and incentives to both religious pilgrims and economic delegations between the two countries.”
Abdul Aziz al-Shammari, Saudi ambassador to Iraq, said in a statement in January, “Saudi Arabia is mostly interested in developing relations between the two countries in all areas that serve their aspirations.”
In late February, a friendly soccer game was held between Saudi Arabia and Iraq in the city of Basra, the first between the two countries in three decades. The game was attended by Saudi delegations and a large crowd of Iraqi fans.
The media office of Abadi said in a statement March 5 that the prime minister had received a phone call from Saudi King Salman bin Abdulaziz Al Saud, in which the latter pledged to build a soccer stadium in Baghdad for 100,000 spectators. It was later announced that Saudi Arabia would increase the number of seats to 135,000.
The statement said that “King Salman expressed his readiness and commitment to expand the positive relations between Iraq and Saudi Arabia at the economic, commercial, popular and cultural levels, as well as all levels of interest to both countries.”
Saudi companies, most recently the Saudi Basic Industries Corporation, one of the world's leading petrochemicals companies, have been opening offices in Baghdad and Basra to expand economic exchange between the two countries.
Saudi Arabia is focusing its attention on Basra because it is the richest city in Iraq with the country's largest oil fields and gateway to the Persian Gulf. It is also the most populous city after Baghdad, is adjacent to the Iranian border and home to an overwhelming majority of Shiites who share the same tribal and ethnic origins with Saudi tribes. In addition, many Saudi and Basra families are linked through marriage.
Saudi Arabia is also receiving Shiite figures who are viewed as independent of Iran. These include Sadrist movement leader Muqtada al-Sadr, who visited Saudi Arabia last year and met with King Salman and Prince Mohammed. He was warmly received amid much fanfare.
Saudi news sites, most notably Al-Arabiya, are refraining from criticizing supreme Shiite cleric Ali al-Sistani, because his views are independent from those of Tehran and has broad influence among Iraqi Shiites.
All this has been a matter of concern for Iran, which has allegedly mobilized parties to raise banners in Basra condemning the opening of the Saudi Consulate and the various economic and sporting activities.
The State of Law Coalition led by former Prime Minister Nouri al-Maliki, who is close to Iran, opposes Saudi Arabia's opening of a consulate in Najaf.
Iraq is seemingly determined to pursue rapprochement and cooperation with Saudi Arabia, and is organizing regular visits by political, economic and media delegations. These included Abadi’s visit to Saudi Arabia last October, during which the memorandum of establishment of the Saudi-Iraqi Coordination Council was signed to develop relations between the two countries.
Interior Minister Qasim al-Araji also visited Saudi Arabia last year, and Abadi insisted on receiving Saudi delegations even if they were not high level. In February, for instance, he received the Saudi media delegation that visited Iraq at the invitation of the Iraqi Journalists Union.
In October, Saudi Arabia resumed its flights to Iraq after 27 years, and it opened in October 2017 its border crossing in southern Iraq to expand economic travel and increase tourist and religious travel between the two sides.
The first initiatives to expand relations between the two countries were directly sponsored by the United States with Secretary of State Rex Tillerson attending the meeting of the establishment of the Saudi-Iraqi Coordination Council in Riyadh in October.
The Iraqi-Saudi rapprochement appears to take place in the context of the new US policy that followed the support garnered by President Donald Trump from the US allies in the region to form a united front to counter Iran's rise in the Middle East.
Saudi Arabia has seemingly made great progress in achieving rapprochement with Iraq and expanding its areas of influence within the last year. Such rapprochement is likely to get stronger should Abadi manage to keep his seat for another term in the elections scheduled for May.
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AMAR Foundation Strenghtens Financial Committee
Posted on 21 March 2018 .
The Board of the AMAR International Charitable Foundation is to expand and strengthen its Finance Committee.
It will now be chaired by leading financial businessman and AMAR supporter, Mr Michael Boardman. The present Chairman, Mr Chris Frost is standing down, but will continue to advise AMAR in a different capacity.
Jonathan Ayres, the Chief Financial Officer of United Trust Bank, who has been a member of the committee for the last five years, will also stand down.
Mr Boardman will be joined on the committee by Mr Hadi Damirji, Mr Gavin Wishart, and Mr Siddik Bakir.
AMAR Chairman, Baroness Nicholson of Winterbourne; Board President, Professor Theodore Zeldin; and Board Vice-Chairman, Damon Parker, will continue in their roles on the committee.
Mr Boardman has more than 25 years’ experience of capital markets, financial management and reporting, valuation and business analysis. For 18 years he worked at Nomura Securities, the global investment banking and investment management company.
As a Managing Director responsible for Emerging Markets and a senior member of Nomura’s Global Finance team in Europe, he advised, structured and executed capital markets transactions and was personally responsible for raising over US$30 billion, in public and private markets.
For the last seven years, he has been Group CFO of Sindicatum Sustainable Resources, a high growth developer, owner and operator of renewable energy projects in the emerging markets of Asia.
Mr Boardman has been a regular speaker at industry events organised by the London Stock Exchange, Micex, Borsa Italiana and Euromoney and has published several articles about listings and public markets.
Mr Wishart, who is also a Board member of AMAR’s sister organisation, the Iraq Britain Business Council, worked at senior level in banking across Asia, the Middle East, Africa and UK during a career spanning 37 years.
Most recently he was Regional Head, Financial Institutions, Europe and Americas at the National Bank of Abu Dhabi, and before that was Chief Executive Officer, leading Baghdad, for Standard Chartered Bank.
Mr Damirji founded Optitune Plc in 2001,and is an Executive Board Member of the Massachusetts Institute of Technology’s Sloan School of Management. He was the Deputy Chairman of Trinity Group Ltd from 2007-2012 and CEO of Trinity Strategic Advisors from 2007 to 2008.
Mr Siddik Bakir is a Senior Oil Market Analyst at Saudi Aramco’s Strategy and Market Analysis Department in Saudi Arabia.
Previously, Siddik was based in London where he worked as a Senior Energy Analyst for the Middle East and South Asia and an Upstream Energy Consultant at IHS (IHS Markit).
Commenting on the Financial Committee changes, Baroness Nicholson said today:
“You can see from the bio data of the new members that the committee has been hugely strengthened. AMAR has always been rigorous in it financial dealings and we intend that always to be our trademark.”
“We believe we now have a fantastic committee to ensure the Board has the strongest possible financial leadership and support.”
(Source: AMAR)
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Saudi Arabia to Fund Iraqi Football Stadium
Posted on 07 March 2018 .
By John Lee.
Saudi Arabia’s King Salman has promised to build a football stadium in Iraq.
The news followed a friendly match between the two countries’ teams in Basra last week.
The Iraqi-Saudi Ministerial Coordination Council met on Monday to discuss the measures needed to improve cooperation in the economic, investment, cultural and other sectors.
(Sources: Asharq al-Awsat, Reuters)
Posted in Construction & Engineering In Iraq, Leisure and Tourism in Iraq Comments Off on Saudi Arabia to Fund Iraqi Football Stadium
Saudi's SABIC "in talks" to join Nebras Petchem Project
Posted on 04 March 2018 .
By John Lee.
Saudi Basic Industries Corp (SABIC) is in talks to join Iraq's Nebras petrochemical project, according to a report from Reuters.
An advisor to Prime Minister Haider al-Abadi told the news agency at the CWC Iraq Petroleum Conference in Berlin that talks are at advanced stage at ministerial level.
He said SABIC would enter as a fourth partner in the project, along with Shell and the Iraqi oil and agriculture ministries.
(Source: Reuters)
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Saudis to Open Basra Consulate; Iran Opens Border To Iraqis
Posted on 26 February 2018 .
This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
By Saleem al-Wazzan.
As Saudis Prepare To Open Basra Consulate, Iran Opens Border To Iraqis
Iraqis can now visit a special visa-free zone in neighbouring Iran, over the border from Basra. Some locals see the open border as a cynical economic and political move that helps Iran, but not Iraq.
An Iraqi passport is one of the most difficult in the world. Only a handful of countries will allow Iraqis to travel there without applying for a visa a long time in advance. But now, Iraq’s next-door neighbour, Iran, has opened some of the areas closest to Basra to Iraqis, that they may access without a visa.
The decision has been greeted with both enthusiasm and cynicism in Iraq. Locals in southern Iraq have often made pilgrimages into Iran for religious and medical reasons and they welcome the decision, even though it only applies to the areas of Khorramshahr and Abadan, which lie directly on the border. Meanwhile local businessmen say it’s a commercial decision that will mainly benefit Iran.
The decision has been made and now Iran is only waiting for the Iraqi government’s go-ahead, Ahmed Sayhaboush, head of mission at the Iranian consulate in Basra, said. He explained that the decision was made in the interests of encouraging friendly relations between the two countries.
Passports will still be stamped at the border, the head of communications at the Iranian consulate, Mohammed Ismail, explained. Iraqis will be able to stay in the visa-free border areas for up to a month and during that time, they can obtain a visa to travel further into Iran if they wish. There will be special crossing points in Khorramshahr and Abadan. Many Iraqis on religious pilgrimage like to go to the shrine of Imam Reza in the city of Mashhad, for example, but this is well out of the visa-free area.
The border authorities have decided to limit the entry times of Iraqis wishing to cross into the visa-free zones to between 6am and 5pm daily, Ali Yousef, a spokesperson for the Basra council, explained further.
“The Iranian move will increase the number of people moving between the two countries and this will benefit both nations” Jabbar al-Saedi, the head of the security committee on Basra’s provincial council, said. “We have however stressed the need to follow up on security controls to prevent any illegals crossing the border.”
One local from Basra, Mohammed Marhoun, believes that the visa-free zones will be good for business. He says he has already purchased a house and an apartment in Khorramshahr and says the process was relatively uncomplicated, compared to the bureaucracy he faced in Iraq. The number of visitors from Iraq into Iran means that there is more construction in border areas to accommodate visitors. The only problem, Marhoun said, was that one did have to have an Iranian name on the deed.
And he is not the only one utilising this opportunity, Marhoun points out. “Members of the provincial council and MPs from Basra have also invested in real estate in the visa-free zones,” he noted. “But they don’t want anybody to know about these investments, which are now being managed by Iranians.”
While businesspeople like Marhoun and investors in real estate might be pleased, there are some observers who are not so enthusiastic. They believe that the move will only benefit Iran in the long run.
It’s just another way to deplete Iraq’s currency reserves and to encourage more consumerism among Iraqis, says Nabil Jaafar Abdul Redha, a professor of economics in Basra. “Even if Iraq now allows Iranians to enter Iraqi cities without a visa nothing will change because there are no local products to be sold to them,” Abdul Redha argues. “So, the Iraqi economy is the loser in this process.”
“Iraqis might benefit from being able to go to Khorramshahr or Abadan and buying Iranian goods at slightly lower prices,” he concedes. “But overall, this does not benefit Iraq.” The main problem is that Iraq doesn’t produce much other than oil – it remains what is known as a rentier economy, one that is basically dependent on exporting oil to fuel its economy. Most manufactured goods are imported, in exchange for the money the oil raises.
“Our economy is not as diversified as Iran’s,” Abdul Redha tells NIQASH. “So, any commercial exchange with our neighbours – that includes Iran, Turkey or Saudi Arabia – tends to be one sided.”
There has been an influx of Iranians into Iraq in recent years for religious reasons. But that doesn’t outweigh the trade balance, he adds.
“The number of Iraqis entering Iran every day numbers between 2,000 and 3,000,” posits Abdel-Saheb Saleh, deputy head of an association for Basra’s businesses. “If we estimate that each of them will spend between US$100 and US$500 over there, that’s a good income for Iran.”
Saleh thinks the visa-free areas could be a positive for another reason. Iraq has been isolated for a long time due to security and political issues, Saleh says. This could be seen as a positive message to other regional governments who block the entry of Iraqis. “For example, a visa to visit Kuwait costs US$1,800 on the black market,” he complains.
Meanwhile local man, Ahmad Fadel, a civil society activist who recently visited what will be the visa-free zone, isn’t that impressed. For one thing, he says, the Iranian border guards treat the Iraqis crossing into their country badly. For another, there’s not much in Khorramshahr or Abadan that could really attract tourists. “The cities have poor infrastructure,” he notes.
And Fadel has another theory as to the reason behind the visa-free zones. He believes it may also be the Iranian reaction to Iraq’s new détente with Saudi Arabia, a country the Iranians tend to see as a geo-political rival. Saudi Arabia is about to reopen its consulate in new premises in Basra; it closed the original one way back in 1990.
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