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In March ISX-listed Qimma Financial Investment (VQUF) announced that Warka Bank’s majority shareholder, Saad Al Bunnia, had appointed it to “begin a formal auction process following a due diligence report carried out by Price Waterhouse Coopers.” The announcement, which was posted on Qimma’s website, went on to say that Mr. Bunnia was “interested in entertaining offers” from banking groups “such as Russia’s Alfa Bank or UK-based Standard Chartered.” (Hat tip to “Kickabuck” for sending me this link.)

It’s hard to know what to make of this. For starters, while the one-paragraph announcement is worded like something copied from a news agency, it does not appear to have appeared anywhere else. Oddly, it also does not even explicitly say what Mr. Bunnia is selling, though presumably this would be a majority stake in the bank. And if an auction were being organized, you’d think that Warka itself would have made some official statement to this effect.

The mention of Alfa Bank as a possible buyer gives the story a ring of truth however. It seems a funny thing for someone to make up—why not just claim that Citibank might bid? And it’s also easy to believe that the Russian lender would be interested in an Iraqi acquisition. With cash and book equity both over USD 3 bn at the end of 2010, it shouldn’t be hard for it to take up the unsubscribed shares from Warka’s failed rights issue. (There's more on the rights issue here and here.) Its owners should also have little trouble seeing opportunity in a country that, like Russia in the 1990s, has huge unexploited oil reserves and is in the midst of becoming reintegrated into the global economy.

Another point in favor of the story: Alfa Bank is not without Iraqi connections. It has a close relationship with Russian natural gas giant Gazprom, which leads the consortium that won the Badra oil field concession in 2009. In 2002, the two companies entered into a strategic cooperation agreement including, among other things, “the implementation of joint projects,” “provision of short-term financing to Gazprom,” and “the participation of Alfa Bank in project financing schemes for Gazprom.”

For over a year, rumor had it that Standard Chartered would be taking over Warka. After such a long time, however, you have to wonder if perhaps the British bank isn’t really that interested after all. Could a Russian bank turn out to be a better match?

Iraq is not just a nodding donkey.

The country's progress can be seen not just in its growing population of oil wells, nor even merely in its breeding building sites. It can also be admired in its rapid expansion in education.

Najaf, a city of around 600,000 people south of Baghdad, is to build 15 more schools, according to the National Media Center. Although three have funding from the World Bank, most are local government projects.

Basra University has entered into a joint agreement with the University of Oregon in the USA. This will help develop English language skills, as well as bringing petroleum engineering and geology to Basra, Iraq's largest port town with two million inhabitants.

Al Muthanna University in Samawah, a city south-east of Baghdad with a population of around 130,000, is teaming up with Russian universities for a scientific and cultural exchange. The Russian universities are Altai State Technical University, Ufa State Petroleum Technological University, and the Moscow State Geological University.

Iraq is also renewing academic ties with Egypt, reports AKnews. Egypt is going to open branches of its universities in Iraq, and the two countries are going to exchange visits of students and teachers.

(Sources: National Media Center; AKnews; Encyclopaedia Britannica)

Shares in Heritage Oil Plc (LSE: HOIL), the independent upstream exploration and production company with operations in Iraqi Kurdistan (pictured), were unchanged on Wednesday following the release of its interim management statement.

Highlights

• Rig contract to drill the Miran West-3 well in the Miran Block, Kurdistan, was signed in April and the well is scheduled to spud in July 2011
• Exploration drilling to commence on Miran East in Q4 2011
• 3D seismic survey over the entire Miran structure is ongoing
• 2D seismic survey is planned to cover southern parts of the Miran Block
• Work programmes progressing in Tanzania, Mali and Malta
• Development scenarios are being reviewed for Kurdistan which include phased development of oil, condensate and gas to satisfy local markets/end users and address export options
• Drilling operations have commenced on the first horizontal well in the Zapadno Chumpasskoye Field, Russia, which is expected to provide a material increase in production
• Production in the first quarter of 2011 averaged 431 bopd
• Share buy back programme has begun with 2,070,631 Ordinary Shares acquired to date and held in treasury
• Arbitration proceedings have commenced in London against the Government of the Republic of Uganda (the "Ugandan Government")
• Annual General Meeting to be held on 20 June 2011

Heritage Oil Plc (LSE: HOIL), the independent upstream exploration and production company with operations in Iraqi Kurdistan, has announced that it is commencing with immediate effect, a buy back programme to spend up to $100 million to acquire its Ordinary Shares, as the Board of Directors (the "Board") considers that the current share price is trading at a significant discount to the intrinsic, underlying value of the Company.

Heritage shareholders passed a resolution at the last Annual General Meeting on 17 June 2010, allowing the Company to buy back up to 28,786,693 Ordinary Shares, representing approximately 10 per cent. of the Company's voting share capital. Heritage has been unable to commence a buy back programme until now as the Company has been in trading black-out for either operational or corporate reasons since the resolution was passed.

With the regulatory black-out having been lifted, the Board is now implementing with immediate effect, a share buy back programme of up to $100 million. Heritage announced recently that it had approximately US$600 million of cash at year end, excluding amounts reserved in connection with the tax dispute in Uganda. The Board, which collectively owns over 30% of the share capital, believes that the buy back of shares is a worthwhile investment and in the best interests of the Company and its shareholders.

The Company has a strong balance sheet with which to make the purchases whilst also progressing with current work programmes and continuing to seek further opportunities to add value. The Company is actively identifying prospects in 2011, through acquiring or processing seismic in Tanzania, Mali and Malta whilst also continuing with the appraisal of the Miran field in Kurdistan. Further wells will also be drilled on the Zapadno Chumpasskoye Field in Russia which could add a material increase to production levels.

Tony Buckingham, Chief Executive Officer, commented:

"The sale of the Ugandan Assets in 2010 has provided Heritage with a strong balance sheet and available cash. The recent share price performance following the discovery of the Miran gas field in Kurdistan neither reflects the underlying value of the assets nor our belief in the longer term prospects of the Company. The buy back of shares is in the best interests of the Company and its shareholders."

The Russian Gasprom Oil Company has began implementing the 1st phase of southeastern Iraq’s Badra oil field in Wassit [Wasit] Province, the Province’s Media director said on Sunday, according to Aswat al-Iraq.

“Gazprom’s team charged with executing the Badra oil field, 90 km to the east of Kut, has began the first phase of implementing the project,” Majid al-Itaby told the agency.

He said the first phase of the project has covered the ending of the engineering plans and the geological survey, to extract oil at the beginning of next year.

“Iraq’s South Oil Company had signed a contract with four international oil companies -- the Russian Gazprom, Turkish TPO, Korean Kogas and the Malaysian Petronas -- to develop the Badra oil field for U.S.$100 millions,” Itaby said, adding that the Company would extract oil from a 170 square km area in Badra township.

(Source: Aswat al-Iraq)

The Czech Republic is planning to offer Iraq a number of light attack aircraft and help Baghdad to modernize its helicopter fleet, Czech Foreign Minister Karel Schwarzenberg said, according to a report from the Russian news agency RIA Novosti.

Czech Prime Minister Petr Necas will visit Iraq on May 23-24 to promote closer economic cooperation with Baghdad and sign an agreement on mutual protection of investments.

"The Czech Republic will offer Iraq L-159 combat aircraft (pictured), and we are also ready to take part in the upgrading of Iraqi helicopters," Schwarzenberg said on Monday after a meeting with Iraqi Foreign Minister Hoshyar Zebari in Prague.

The single-seat L-159 ALCA is a light multi-role combat aircraft designed for a variety of air-to-air, air-to-ground and reconnaissance missions.

The jet was developed in the late 1990s by Aero Vodochody on the basis of the proven airframe design and aerodynamic configuration of the L39 Albatros and L59 family of combat trainers.

The aircraft is equipped with an advanced multi-mode radar for all-weather, day-and-night missions and can carry a wide range of NATO-standard payloads including air-to-air and air-to-ground missiles and laser guided bombs.

The Czech Defense Ministry announced in January that it planned to sell 36 L-159 ALCAs that the Czech military does not need.

(Source: RIA Novosti)

Shares in Heritage Oil Plc (LSE: HOIL) fell 4% this morning following the announcement of its results for the twelve months ended 31 December 2010.

All figures are in US dollars unless otherwise stated.

2010 Operational Highlights

·   Discovered the largest gas field in Iraq in the last 30 years

·   Highly productive Jurassic reservoir intervals tested in the Miran West-2 well at a restricted cumulative flow rate of over 75 million cubic feet per day ("MMscfd")

·   Estimated gross P90-P50 in-place volumes of 6.8-9.1 Trillion Cubic Feet ("TCF"), with a P10 upside of 12.3 TCF for Miran West

·   Management estimates Heritage has mean net risked contingent and prospective resources in Miran West and Miran East of 744 million barrels of oil equivalent ("MMboe"), based on a 75% working interest

·   Miran development options being considered with first export production targeted for 2015 using planned regional infrastructure

·   Achieved nearly a twelvefold increase in contingent resources from 53 MMbbls to 605 MMboe following the successful testing of hydrocarbons

·   Completed 3D seismic acquisition offshore Tanzania; data currently being processed

·   Further development work in Russia, production increased 65% in 2010

2010 Financial Highlights

·   Completed the disposal of interests in Block 3A and Block 1, Uganda, (the "Ugandan Assets") for which Tullow Uganda Limited ("Tullow") paid a cash consideration of $1.45 billion, including $100 million for a contractual settlement, and Heritage received and retained $1.045 billion

·   Cash at year end of $598 million

·   Special dividend of 100 pence per share paid in August 2010

Outlook

By Tom Cleveland, market analyst for Forex Traders, exclusively for Iraq Business News. Forextraders.com is an online resource for the foreign exchange market.

“Buy on the rumor, sell on the news” is a time-honored investment phrase that is oftentimes more confusing than the wisdom it attempts to impart. The meaning relates primarily to company securities that appreciate in expectation of a big news announcement. Early speculation drives ups the price, such that when the real announcement is made, most investors sell on the news to take their profits, often driving the price down, rather than up. “Pump and Dump” stock frauds also follow a similar scenario, but in this case, criminals benefit and investors lose.

A similar situation has been building for years, some say as many as eight years, surrounding the potential “revaluation” of the Iraqi Dinar. As the rumor would have it, the Iraqi economy has stabilized, and the potential for enormous foreign currency reserves from increased oil exports will drive the value of the Dinar to unconscious levels versus the U.S Dollar. The government authorities will be forced to revalue the currency from 1,175 to 3 per Dollar, resulting in an outrageous windfall for anyone owning stockpiles of the currency. Does something here sound a little too good to be true?

In actuality, the Iraqi Dinar, or “IQD”, is a “controlled” currency. The central bank of Iraq determines the exchange rate and must support that rate by maintaining adequate foreign currency reserves to handle capital flows across its borders. The IMF permits countries with a transitional economy to implement currency controls in order to stabilize their economy during its redevelopment phase. Presently, international banks will not accept the Dinar, and it is not traded on any forex exchange. Actual purchases can be made through currency dealers that have been authorized to buy and sell banknotes that are already in circulation.

Reuters reports that France's grain export lobby has invited an Iraqi delegation to visit the country as it tries to break into what has become one of the world's major wheat import markets.

The move followed the signing last year of a letter of intent between France Export Cereales and Iraq's grain board on establishing cooperation.

Jean-Pierre Langlois-Berthelot, president of the export lobby, told the Reuters Global Food and Agriculture Summit, "it's a very important market in this region. We have to be there [Iraq]".

France Export Cereales is confident French wheat will meet an official forecast for record shipments of 12.6 million tonnes outside the European Union this season, which would leave the country with adequate stocks of 2 million tonnes, he said.

French wheat has benefited this season from the absence of Russia and to some extent Ukraine in export markets after drought hit their harvests last year.

Langlois-Berthelot said rising food demand in Africa offered strong long-term export prospects but that the French grain sector would have to improve quality criteria such as moisture and protein levels in order to compete.

(Source: Reuters)

In a recent interview on EU's energy security with World Security Network Foundation (WSN), former Austrian Chancellor Dr. Wolfgang Schüssel (pictured) said that Europe should also diversify sources of energy supply by looking, for instance, to the Kurdish Region of Iraq.

Europe is heavily dependent on Russia for its energy supply, especially natural gas, which was described by Schüssel as “a reliable and serious partner, but also sometimes a tough partner”.

Kurdistan has been described as a major supplier of natural energy, but instability in Iraq and disputes between the regional and federal government could make it difficult for supplies from the region to reach Europe.

Currently, Kurdistan has a capacity of 100,000 bpd and is expected to develop its fields to increase the output to 200,000, according to the  Kurdistan Regional Government's (KRG) Minister of Natural Resource, Ashti Hawrami, according to AKnews.

Based on Hawrami's statement, the Iraqi government has included a provision in the 2011 budget of Iraq binding the KRG to exporting 150,000 bpd or the region's 17% share in the general budget will be cut accordingly. Kurds have rejected the bill.

Europe needs additional pipelines and alternative energy sources. The Kurdish part of Iraq may become alternative partner of Europe, explained Dr. Schüssel.

(Source: AKnews)