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By Simon Watkins for the OilPrice.com. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Russia Takes Control of Iraq's Biggest Oil Discovery for 20 Years

The Eridu field - part of Iraq's Block 10 exploration and development region - is the biggest oil find in Iraq in the last 20 years, and Russia wants to control all of it, alongside its chief geopolitical ally, China.

Click here to read the full report.

By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund.

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

Assessing the Risks of a Wider Middle East Conflict

The market, as measured by the Rabee Securities US Dollar Equity Index (RSISX USD Index), was down 3.4% in October, and up 73.3% for the year. After a scorching four-month run in which the RSISX USD Index was up 43.7%, the market was ready for a pull-back. However, when it came, the pull-back was both short and shallow.

Average daily volume for the month was down by 22.2% versus that of the prior four months, while the market was in a range of up 2.0% to down 4.3%, with the declines driven by buyers holding back on chasing stocks as in the prior months.

These muted activities were reversed on the last day of October, with the banking sector resuming its momentum, which continued into the first few days of following month. By the end of the fifth trading day of November, the market had erased its October losses and is now higher than September's close (chart below).

While a few days do not make a month, the return of the banking sector's momentum and market leadership supports the investment thesis for the banking sector and the recent fundamental developments that gave it a boost, as discussed in "Banks to Fuel the Market's Next Phase" - especially in the current context in which global markets are assessing the risks of a wider Middle East conflict.

Rabee Securities US Dollar Equity Index

(Source: Rabee Securities, AFC Research, data as of November 7^th)

A wider Middle East conflict that would destabilise the region with repercussions for the world economy have been the subject of intense media coverage and extensive analysis over the last few weeks (*). Consequently, the current flurry of the U.S.' diplomatic initiatives aims to avoid such a conflict, and reinforces the ongoing behind-the-scene activities of the countries in the region, working with the main world powers in seeking to contain the conflict. It's difficult to forecast how the ongoing Gaza invasion and conflict containment initiatives will unfold over the coming weeks, however, the contours of an-emerging post-conflict world order, irrespective of its conclusion, are becoming increasingly clear.

The sharply contrasting responses of the West versus those of the Global South, to the unprecedented humanitarian crisis that is unfolding in Gaza, have crystalised the divide between them that materialised post the invasion of Ukraine. This divide is solidifying an emerging unbalanced multi-polar world in which power is diffused unequally between multiple powers, as was evident from the Global South's responses to the West's sanctions on Russia following the invasion of Ukraine. Most notably, in the diversion of Russian oil and gas from Europe to Asia and the subsequent changed supply-demand dynamics of energy markets, with their ongoing implications for the global economy that extend far beyond these markets.

In the meantime, oil markets, as measured by Brent crude futures contracts, are discounting elevated oil prices (yellow line-chart below) that are very close to those that they were discounting immediately following the invasion of Ukraine (red line-chart below). The key difference between the two is that the latest expectations are at the end of two weeks of back-to-back oil price declines in which oil markets have begun to discount a contained conflict, and which were reinforced by events that lowered the fears of a wider Middle East conflict. As such, there are not a great deal of supply-hit fears built into these expectations, and so they are a realistic indication of the near-term price expectations of this emerging unbalanced multi-polar world.

Market Expectations for Future Oil Prices

As measured by Brent Futures Contacts (USD per barrel)

(Source: Wall Street Journal, AFC Research, data as of November 6^th)

The current environment has implications for the risk-reward profile for investments in Iraq's equity market. On the risk part of the equation, the potential escalation of the ongoing invasion of Gaza into a wider Middle East conflict could threaten the relative stability that has marked Iraq over the last few years, irrespective of its distance from the conflict or of the non-existent possibility that it would be drawn into it as a combatant. While on the reward part of the equation, the changed geopolitical landscape of a multi-polar world is very positive for Iraq's economic outlook, given its extreme leverage to oil prices. Current expectations of Brent crude prices of USD 83 per barrel (/bbl) in 2024, and USD 79/bbl in 2025, would provide the government with the wherewithal to follow through with its expansionary three-year budget for 2023-25. The budget's sizeable liquidity injections into the non-oil economy should drive economic growth that would feed into meaningful growth in corporate profits, which in turn would sustain the market's current rally, as discussed here last month.

Notes:

(*) Foreign Policy Podcast featuring Kim Ghattas and Steven A. Cook on the chances of a broader conflict, 3^rd November 2023. https://foreignpolicy.com/podcasts/foreign-policy-live/regional-reverberations-from-israels-war-on-hamas/

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

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist 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 Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council. He is also a board member of Capital Investments, the investment banking arm of Capital Bank in Jordan.

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.

By John Lee.

Russian oil firm Lukoil has signed an agreement extending its contract at Iraq's West Qurna 2 oilfield by 10 years, taking it to 2045.

Full statement from Lukoil:

The representatives of PJSC LUKOIL and Basra Oil Company signed a Supplementary Agreement to the contract on the development and production of oil at the West Qurna-2 field. The singing took place in Baghdad. The agreement provides for better conditions and prolongation of the service contract for 10 years (until 2045), investments into further development of the project, and gradual doubling of the field's output with plateau level reaching 800 thousand barrels per day. This will result in an increase in the economic efficiency of the West Qurna-2 project.

The field development plan envisages bringing new multi-well pads into production, commissioning oil treatment facilities and complex gas treatment facilities for the Yamama formation, construction of export pipelines and water flooding units, as well as expansion of the tank battery.

The development of the West Qurna-2 project under the Supplementary Agreement will promote creation of new jobs for Iraqi citizens. Under the agreement LUKOIL also aims to construct social infrastructure facilities for the locals.

The conclusion of the Supplementary Agreement is a next step in the long-term strategic partnership between LUKOIL and the Ministry of Oil of Iraq, as well as confirms the parties' commitment to continue their joint work on the development of the energy sector of the country.

(Source: Lukoil)

By John Lee.

During his official visit to the Russian Federation, Deputy Prime Minister for Energy and Oil Minister, Hayan Abdul Ghani, met with Alexander Dyukov, Chairman of Gazprom Neft's Board of Directors, along with other company officials. The Russian Ambassador to Iraq, Elbrus Kutrashev, also attended the meeting.

The discussions primarily revolved around bilateral cooperation prospects and the development of joint projects aimed at enhancing Iraq's oil and energy industry.

According to a statement from Iraq's Ministry of Oil, this collaboration serves mutual interests. Among the attendees were Ali Maaraq, the Ministry's Deputy for Distribution Affairs, Hamdan Awijil, Ministry Advisor, and Hussein Kazem Laibi, General Director of the Maysan Oil Company (MOC).

Representing Gazprom Neft were Vadim Yakovlev, Deputy General Director, Renat Bakitov, Executive Director of Gazprom in Iraq, Vyacheslav Nikonurov, Head of International Relations, and Konstantin Abramov, International Relations Officer.

This meeting took place during the official visit of the Deputy Prime Minister for Energy and Oil Minister to the Russian Federation. It underscores the commitment to enhancing cooperation between Iraq and Russia in the energy and oil sectors.

Gazprom Neft operates the Badra oilfield in Wassit province, in eastern Iraq.

(Source: Ministry of Oil)

By John Lee.

Iraqi Prime Minister, Muhammad Shiaa Al-Sudani, arrived in Moscow on Tuesday for a meeting with the President of the Russian Federation, Vladimir Putin, as part of his official visit to the country.

According to a statement from the Media Office of the Iraqi Prime Minister, the meeting included discussion of the development of the oil industries sector and the presence of Russian oil companies in Iraq.

The Kremlin said in a statement:

"The energy sector is certainly the main aspect of our collaboration. Our largest companies operate rather successfully in your country. Our companies have invested a total of about $19 billion, and our collaboration, already quite effective in this area, is only going to expand.

"We coordinate our work within the OPEC + format, and we are doing this rather successfully in order to stabilise the situation on global markets. On the whole, we are enjoying much success, and I hope that we will continue working in this manner moving forward."

More here and here.

(Sources: Media Office of the Iraqi Prime Minister, The Kremlin)

By John Lee.

Dr. Qahtan Taha Khalf, the Ambassador of the Republic of Iraq in Moscow, met with Alexey Repik, the President of Business Russia, on Tuesday.

Business Russia describes itself as "an All-Russia Public Organization which represents the interests of private non-resource businesses - local industry leaders."

During the meeting, they discussed ways to enhance trade and industrial relations, explore investment opportunities, and increase trade between the two countries.

Additionally, they addressed the Development Road Project and the potential for leveraging the expertise of leading Russian companies in residential complex construction.

(Sources: Ministry of Foreign Affairs, Business Russia)

By Amnesty International. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Iraq: Release Kidnapped Scholar

The Iraqi government should take steps to ensure the immediate and unconditional release of Elizabeth Tsurkov, a US-based scholar who was kidnapped in Iraq on March 21, 2023, four organizations including Amnesty International have said.

Tsurkov, a dual Russian and Israeli citizen, is a doctoral student in the Politics Department at Princeton University in the US. New Lines Magazine reported that she was in Iraq conducting field research on Shia movements in Iraq when she was kidnapped in the Karrada neighborhood of Baghdad. Her family said that she had emergency spinal surgery to treat a herniated disc eight days before she was abducted.

"Elizabeth Tsurkov's abduction falls within a pattern of targeted kidnappings in Iraq by state-affiliated and non-state actors, all carried out with impunity," said Adam Coogle, deputy Middle East director at Human Rights Watch. "The Iraqi government is responsible for doing everything it can to ensure her safety and release and for holding her abductors accountable."

More here.

By Simon Watkins for the OilPrice.com. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

The Real Reason Russia Is Ramping Up Oil Production In Iraq

With the future of independent oil supplies from the KRI looking highly precarious, Russia is moving firmly into the last phases of its plan for Iraq, as highlighted by serious discussions over the past two weeks for it to increase its presence in the country's oil fields.

Click here to read the full report.

By John Lee.

An Iraqi government spokesman has said that Iraq is considering reviving plans to use an oil export pipeline through Syria.

Following Prime Minister Muhammad Shia'a Al-Sudani's visit to the country last month, Basem Al-Awadi told the state-owned Iraqi News Agency (INA) that Iraq is ready to discuss with Syria the development of the oil pipeline leading to the Syrian port of Baniyas (Banias) on the Mediterranean Sea, in the event that conditions in Syria improve.

He added that Iraq has contributed to Syria's return to the Arab League, that it opposes the economic sanctions imposed on Syria, and that it is working to ensure Syria's economic recovery.

The pipeline from Kirkuk to Baniyas has not been operational since 2003. An initial agreement was reached in 2010 to build two new pipelines, one for lighter crude, and one for heavier, with further details announced in 2011, but this was not implemented.

According to a recent article from Iraq Business News (IBN) expert blogger Ahmed Mousa Jiyad, the Syrian pipeline has several advantages, but also many risks.

The Syrian regime, backed by Russia and Iran, has been accused of widespread atrocities during the ongoing civil war in country.

(Source: Iraqi News Agency)

By John Lee.

Mr. Hayan Abdul Ghani, Deputy Prime Minister for Energy and Minister of Oil, welcomed Mr. Ivan Romanovski, Lukoil's Vice President for the Americas, Africa, and the Middle East, along with the accompanying delegation, including Mr. Alexey Yakovlev, General Manager of Lukoil Middle East Limited, and the company's Baghdad office director.

During the meeting, they discussed the development plans for the West Qurna 2 oil field in Basra province.

The meeting was attended by Mr. Basim Mohammed Khadhir, Deputy Minister for Extraction Affairs, Mr. Ali Ma'araj, Deputy Minister for Distribution Affairs, and the Assistant Director of the Oil Contracts and Licensing Department.

(Source: Ministry of Oil)