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By Ruth Lux, Managing Director of political risk consultancy Strategic Analysis.

The security situation in Iraq has significantly declined over the last week. Mosul and Tikrit fell to the Islamic State of Iraq and the Levant (ISIS), an al-Qaeda off-shoot, and Tal Afar, in the Nineveh province, was seized on Monday.

Additionally, Baquba, only 37 miles from Baghdad, was briefly over-run by the militants. ISIS have engaged the Iraqi army in Diyala and Salahuddin provinces and reportedly now control up to 75% of the Baiji oil refinery, the largest in Iraq. This oil refinery is 210 km north of Baghdad and should the militants follow-through on their threat to cut off domestic oil supplies, an already fragile domestic situation will be exacerbated.

The Kurds have benefitted from this security vacuum and the Iraqi army’s inability to secure the country. They have moved their peshmerga forces into areas claimed to historically be part of Iraqi Kurdistan and are unlikely to withdraw. The presence of the peshmerga is undoubtedly securing oil-rich Kirkuk and the Mosul dam, which provides Baghdad with its water supply, however, some critics identify this move as opportunistic.

The deteriorating security environment in Iraq has also bolstered the Kurdish region’s position with regards to its’ revenue-sharing agreement with Baghdad. The Kurdish region has been eager to identify export routes for its crude oil and on 5th June Turkey and Kurdistan signed a 50 year oil export deal.  With Baghdad facing more pressing security concerns, the Kurdish region is unlikely to face the usual backlash entailed in acting without the authorisation of the federal government.

The Kurdistan Regional Government (KRG) has actively sought export routes for its crude oil and its latest oil export deal with Turkey meets this objective. Kurdistan has proven oil reserves of 45 billion barrels, with production capacity quickly rising and expected to reach 1 million barrels per day (bpd) in 2015, compared to the current level of 400,000 bpd.

By John Lee.

The Ministry of Science and Technology announced that it will launch a satellite for research purposes on 20th June from a base in the north of Russia.

Built in conjunction with La Sapienza University in Rome, the "Tigrisat" satellite (pictured) will also detect dust storms over Iraq.

It weighs just 4 Kg and measures 10 x 10 x 30 cm.

(Sources: Aswat Al Iraq, Ministry of Science and Technology)

By Nassir al-Hassoub for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The official spokesman for the Iraqi Oil Ministry, Assem Jihad, announced that the licensing contracts with international oil companies bound them to formulate systems to invest in associated petroleum gas, stressing that Iraq has what it takes to be on the list of countries exporting natural gas by 2019.

The Ministry of Oil and the Ministry of Electricity have been trading accusations during the past two weeks, following the decrease in electricity supplies. The Ministry of Electricity confirmed that this is due to the failure of the Ministry of Oil to meet the requirements of natural gas in thermal power plants.

Under a contract that was signed on July 22, 2013, and was the first of its kind, the Iraqi Ministry of Electricity bound the Iranian Ministry of Oil to supply it with natural gas. The agreement will provide Iraq with 5 million cubic meters of gas per day for the next three years at world market price. The contract, which is subject to renewal, is seen by Iraq as the perfect solution to the problem of round-the-clock electricity supplies for Iraqis.

“There is a problem in the quantities of natural gas associated with oil extraction,” said Jihad. In an interview with Al-Hayat he said, “Iraq has failed to invest in this wealth [i.e. associated petroleum gas] throughout the past few years. The gas is being totally burned with a waste of 700 million cubic feet [per day], which is seen as high record.”

By John Lee.

Minister of Foreign Affairs, Hoshyar Zebari received on May 21, 2014, Ambassador of the Republic of the Russian Federation, Elia Morgnov.

During the meeting, the Russian Ambassador congratulated the Iraqi people for the success of the legislative elections, hoping to achieve progress and prosperity of Iraq.

The two sides discussed bilateral and international cooperation between the two countries and the ongoing political developments in the international arena.

The Minister renewed the Iraqi government's keenness to ensure the requirements for the work of the accredited Diplomatic Missions in Baghdad.

The meeting was attended by Undersecretary for Multilateral Relations and Legal Affairs, Head of Europe Department and the Director of the Minister's Office.

(Source: MoFA)

By John Lee.

Writing in Forbes, correspondent Christopher Helman has written an autobiographical study of Lukoil CEO Vagit Alekperov (pictured) and the company's long term ambition in developing the giant West Qurna 2 field in southern Iraq.

Helman notes the stunning scale of the endeavor, which has spanned several decades including a deal with Saddam in 1997 which never came into fruition because of sanctions.

The piece is titled a little too sensationally for this IBN blogger, noting the current "chaos" in Iraq which is indisputable in parts of the center and west of the country.

However, the situation in Ninewa, Diyala and Al Anbar which Helman describes is very different from that of West Qurna 2, located hundreds of miles away in the comparatively calm south.

Aside from that, it is an informative piece about an incredible endeavor, taking a wider geopolitical view. With 120,000 bpd initial production and a potential production capacity of 1.2 million bpd, the story of West Qurna 2 is something to behold.

The field has an estimated 20 billion barrels of estimated recoverable reserves, something Alekperov described as having vital strategic importance to Lukoil. Read the whole piece here.

(Source: Forbes) 

By John Lee.

Russia's Lukoil is considering joining a joint venture with Russian state-owned exploration and production company Zarubezhneft to develop the Nassiriya oil field and help build an associated refinery.

The next round of talks on the project with the Iraqi government is expected this summer, LUKoil CEO Vagit Alekperov (pictured) stated earlier, according to Itar-Tass.

The company recently commenced production at the West-Qurna 2 project in southern Iraq.

(Source: UPI, Itar-Tass)

By John Lee.

Russia is preparing to deliver a new batch of highly-sophisticated military helicopters to Iraq late June, according to a report from Kuwait's KUNA.

The new batch will include Mi-35 (pictured) and Mi-28NE 'Night Hunter' attack helicopters, and is part of the $4.2 billion deal signed in 2012.

To date, Baghdad is reported to have received only four Russian-made Mi-35 aircraft from the total of 43 gunships agreed in the contract.

(Source: KUNA)

Thales has been awarded a contract to provide an Integrated Security System (ISS) for the West Qurna-2 oil field development located 65 km northwest of Basra in Southern Iraq.

This contract has been signed with LUKOIL Mid-East Ltd, a subsidiary of the Russian oil company LUKOIL.

Thales will design and deploy the Integrated Security System over the security perimeter surrounding the West Qurna-2 area, protecting LUKOIL Mid-East personnel and assets, including well pads, central processing facilities, gas treatment facilities, produced water treatment, all related offsites and utilities, storage tanks and living camps.

Thales´s Integrated Security System will include a number of innovative technical solutions as well as a command & control centre to assure supervision and control of day-to-day security operations and comprehensive protection from operational incidents and threats.

Thales is also part of the international consortium that was awarded another contract by LUKOIL Mid-East Ltd at the end of 2013 for spare parts supply and maintenance assistance at the existing and future security installations of LUKOIL´s West Qurna-2 oil field development.

Dominique Gaiardo, Vice President Protection Systems, commented:

“These two contracts are important milestones because they are Thales’s first deals with LUKOIL, Russia’s largest privately owned oil business group and a major international, vertically integrated oil & gas company.

"In addition, these awards continue to confirm that Iraq is an important geographical market for Thales.”

(Source: Thales)

By John Lee.

An investigation by Reuters has found that Iraq has purchased $195 million worth of small arms, ammunition and infantry kit from Iran, in addition to artillery ammunition.

The move will likely unnerve some observers in the US, but analysts are still divided over the extent of Iranian influence in Iraq.

Touted by an unnamed State Department spokesperson as a violation of the UN arms embargo against the Iraq's eastern neighbour, the purchase has not surprised some observers of improved ties between the two countries.

For some time now, Iran has been supplying adjacent Iraqi provinces with gas and electricity, and Iranian companies have won a number of contracts in Iraq from the energy sector to construction.

Iraq has not denied the validity of the claims however, and argues it is a necessary measure due to delays in US arms exports. Iraq continues to fight a robust and revived insurgency in the north and west of the country, and officials have claimed the purchase is an essential security measure.

The scale of the deal is likely to be more of political significance as much as tactical necessity. Iraq's recent arms purchases from the US and Russia have totalled billions of dollars. In 2013, Iraq signed a $1.1 billion deal with South Korea to buy FA-50 light fighter jets, following a similar $1 billion dollar deal with Czechoslovakia.

(Source: Reuters)

By John Lee.

Chinese Foreign Minister Wang Yi met his Iraqi counterpart Hoshyar Zebari in Baghdad in a rare Chinese high level diplomatic mission to Baghdad.

The two men discussed increased Sino-Iraqi cooperation in areas such as oil development and arms sales. Until recently, Iraq has been frustrated by slow deliveries of weapons systems from the US and turned to Russia for major arms contracts to combat terrorism and build conventional forces.

Iraq remains a country of major strategic importance for the major Asian oil consumer, but Baghdad is pursuing a diversified foreign policy in terms of relations with the major world powers.

(Source: Al Manar TV)