Iraq Exchange Rate
The target rate of 1260 is what the Central Bank of Iraq is looking at achieving.
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The target rate of 1260 is what the Central Bank of Iraq is looking at achieving.
As I have been posting all along about the situation in Kirkuk; Iraq with the implementation of the ever so slow of happening Article 140 which is due in December 2007. The referendum on Kirkuk that is written in the Iraq’s Constitution, there is no word on funding for this program as of yet from the central Baghdad government. PM Maliki keeps either stalling or pressure from the Shia militias to not fund or help with any administrative help such as with volunteers or workers to make this happen.
One would have to ask why the central government in Baghdad appears to not want to fund the referendum stated in the Iraqi Constitution and why no support for it. Maybe the central government in Baghdad is seeing things in the Kurds more specifically inside the dealings and the workings of the Kurdish Regional Government (KRG) that would cause to not give funding to the KRG in support of the referendum in December 2007.
It is most likely that if the KRG wish to see the referendum go forward they most likely would have to fund it themselves. No problem there with the several oil contracts the KRG has signed in the last year with other small foreign oil companies that are currently drilling for oil in the north, all with disapproval from the central Baghdad government I might add; So much for Iraq unity.
The Kurds have been very vocal that the city of Kirkuk belongs to them and have been positioning them selves by moving to Kirkuk from either within Iraq or outside of Iraq and settling in and around the city so when the census is conducted it will show that the Kurds are the majority. If the Kurds are the majority most likely will have most of the government seats within the city of Kirkuk.
The Kurds would be able to control decisions made within city government and most importantly the money, either from taxes and or oil sales from the largest oil field just outside of Kirkuk; Which by the way is the largest known oil field inside Iraq. Remember, 10 percent of Iraq has only been explored for oil deposits and this was several years ago most likely post sanction. Maybe perhaps there is another undiscovered large oil field in Iraq waiting to be discovered.
Kirkuk will be the major political and economic showdown the central Baghdad government will have to face and maybe don’t want to deal with it at this time. There are more important issues such as disarming the militias, de-baathification, investment projects, amendments to the Iraqi constitution, Oil Investment Law, Foreign Investment Law and most importantly the rules to this law of which investors play by, and so on and so on.
As central government Baghdad is dealing with all these issues and being in the world spotlight and I did forget one more thing and that is Security. Meanwhile, as the central government in Baghdad is dealing with these issues the KRG is positioning themselves to seize the disputed territories in the North, mainly, the city of Kirkuk.
Baghdad is not the only one concerned about the richest city in Iraq. The Turkish government is also deeply concerned about the future prospects of the KRG being led by Masud Barzani, who proclaims to be the Kurdistan Regional President.
Just recently a report was written by the Turkish Intelligence Agency describing the plans of Masud Barzani who is going forward with plans to bring the city of Kirkuk into the fold of the KRG.
The report went on to say that the goal of the KRG is to establish domination over the petroleum and natural resources in Northern Iraq and in this case specifically the city of Kirkuk.
The report was sent to different cabinet members inside the Turkish government and warned the condition has matured for Kirkuk to join the KRG led by Masud Barzani. Something the Turkish officials and the intelligent community to include the military are not too happy about.
There is another government that is concerned about the future plans of for Kurdish lands and the increase of economic strength of what that territory represents.
It would be reasonable to expect that agreements have been made between Iran and Turkey in regards to carving up the Kurdish region. The Iranians would not sit idle by and watch Turkey start a military operations in Iraq. To counter what the KRG is doing Iran would likely conduct there own military operations in the north to protect their own interests.
Recently the Iranian military has fired artillery shells inside northern Iraq battling rebels who the Iranian government believes are against the Iranian government interests.
The Turkish report talks about the Kurdish Region Draft Petroleum Law that is currently being drawn up by the Kurdish administration.
Noticing the Kurdish Regional Government “has come to the point of acting like an independent state by leaving the Iraqi central government out of the loop”
In the proposed Kurdish Petroleum Law the KRG will be able to enter petroleum agreements with third countries, and would be able to assume total control over the northern Iraq region to include the Kirkuk-to-Yumurtalik oil pipeline.
According to the new petroleum law the residents of Kirkuk will be joined to the Kurdish Region even before the constitutional referendum in December 2007 and could enter into oil contracts before then like they have been within the last 12-18 months.
The Iraqi Kurdish Region Draft Petroleum Law, which will be sent very soon to the Kurdish Parliament, refers to “existing oil field” and “future oil field.”
The new law goes as far as defining what is an existing, a future oil field and includes the “disputed territories” such as the city of Kirkuk.
The draft proposal makes the Kurdish Regional Government as the sole authority in petroleum operations to include the disputed areas as Kirkuk and in future fields.
The oil fields that have been in production prior to 22 August 2005 and produced 20,000 barrels of oil per day for 12 months are considered an “existing oil Field” and the other potential fields are “future oil fields.”
Below are some of the points of interest that are in the Kurdish Region Draft Petroleum Law. Again this is just a draft proposal.
a) The Kirkuk referendum: The draft entails that, in the event of the Kurdish Regional Government's concluding that people living in disputed territories, and especially Kirkuk, will decide in a referendum that these territories be linked with the Kurdish region, it will be able to enter into the petroleum contracts that it wishes in disputed territories, including Kirkuk, even before the referendum is held.
b) Petroleum operations independent of the Iraqi government: It is stated in the draft that the Kurdish Regional Government has the right to enter into agreements with neighboring countries independently of the Iraqi government, and that no legal or administrative arrangements of the Iraqi government will be valid in petroleum operations in the Kurdish region or the disputed territories.
c) Pipelines: Control over all the existing petroleum operations in the Kurdish Region, as well as over all related infrastructure, such as pipelines and refineries, is left to the Kurdish Regional Government.
d) Share of petroleum: The draft also calls for the Iraqi Central Government to give a share of the petroleum income from the country as a whole to the Kurdish Regional Government. Otherwise, it provides for the Kurdish Regional Government's being able to sell directly the petroleum produced in its own region and in disputed territories.
The draft also seeks to guarantee not only the future, but the past as well. The draft, which notes the petroleum revenues that the Kurds had not been able to benefit from in the past, calls for payments to be made, for a certain period, based on this past income.
e) Agreements: The draft stresses that all the agreements that have been made in the Kurdish Region are valid. It provides for the Kurdish Regional Government to intervene in all agreements that the Iraqi government has made in the Kurdish Region and in Kirkuk until the date on which this law goes into effect. And it stipulates that the approval of the Kurdish Regional Government be obtained for all agreements that will be made following the law's entering into effect.
After reading the draft proposal you would have to ask yourself why is the KRG willing to alienate them from the central Baghdad government? The KRG wants to control everything that has anything to do with the petroleum and natural resources of northern Iraq. If the draft becomes law the Turkish report goes on to say
"It is evaluated that they will take into their direct control those fields in disputed areas, and particularly Kirkuk, which have been understood to contain petroleum by means of exploration carried out by Iraqi administrations in the past, but in which production has not yet begun; that they may bring under their control all the petroleum infrastructure in Kirkuk, as well as the Kirkuk-Yumurtalik Oil Pipeline; that they may, before the referendum is held, enter into petroleum agreements involving all the disputed territories, including Kirkuk, as well as future fields; that they may seize all the fields in disputed areas, including Kirkuk, by using as a pretext the disagreements with the government of Iraq over the distribution of revenues obtained from the existing oilfields; and that they will, by shutting the government of Iraq completely out of petroleum operations, act like an independent state."
In the proposed draft law the KRG mentions about a company called the Iraqi State Oil Trust Organization (SOTO) that does not currently exist and does not go into any details of what this institution will be doing. Maybe managing all the oil revenues through them instead of the National Oil Company based out of central Baghdad government.
This draft proposal would like to cut out the central Baghdad government out of any authority dealing with the oil resources the Kurdish Regional Government has control over. According to the draft law they would like to arrange agreements involving the Kirkuk oil fields even though the Kirkuk referendum has not been completed. The KRG is already thinking that Kirkuk belongs to the Kurds and no one else.
The Kurdish Parliament has created a new Ministry called the Ministry of Peshmerga in which the irregular fighters approximately 180,000 report to Masud Barzani. This would be something the central Baghdad would have to consider when dealing with the Kurds. Kurdish interest are defended by an irregular army of almost 180,000 strong. This is a powerful bargaining chip that can be used to sway or get what the Kurds want by using the irregular Peshmerga forces as a political weapon should the Central Baghdad Government balk at what the KRG is trying to push onto Baghdad.
Time will tell what will happen between Baghdad central and the KRG in regards to Kirkuk. I am sure it is on the back of Central Baghdad minds. However, with so many other important issues confronting the Central Baghdad Government Kirkuk will have to wait for now until a time at which Baghdad can lessen there work load.
Let me put this in perspective for you in regards to militias and irregular army forces. The Firebrand Cleric/Commander Moqtadar Al-Sadr controls about 10-12 thousand militia fighters in and around Sadr City, 30 Iraqi Parliament seats, 6 Cabinet posts of the current new Iraqi government administration.
Masud Barzani, Kurdistan Regional President, along with 180,000 Peshmerga Forces which is larger then the US Military has in the entire country of Iraq, refuses to fly the National Iraqi Flag in Northern Iraq, is replacing the Iraqi National Anthem with a Kurdish anthem, drafting a petroleum law and financial investment law ahead of the Central Baghdad Government.
I will let you think that over for a second.
The KRG just like the central Baghdad government is not immune to internal problems and government infighting, they also have their own problems. It doesn’t get the media attention that Baghdad Central government receives.
Media reports coming out of Baghdad and Iraq go in cycles, sometimes a lot of information is being released and at times there is none to be read that we haven’t and read over and over such as IED’s and our US Military being killed and wounded.
It is going to be interesting 2007.
BASRA, Iraq, Jan 5 (Reuters) - An American civilian contractor and two Iraqi translators have been taken hostage near the southern Iraqi city of Basra, a security source and police in Basra said on Friday.
As I predicted last November 18 (actually last June in private conversations with the owner of the Baby Biltmore) that the current PM Maliki would be replaced and now with his Wall Street Journal interview he admittedly states that he wishes to end his term as PM even sooner.
Most in the Iraqi Parliament would agree PM Maliki is ineffective and needs to be replaced if Iraq is ever going to improve. Someone that will move to disband the militias or go to battle against them and not be beholden to them as PM Maliki has repeatedly showed some favoritism in the past.
This is going to be hard to do, replacing the PM with someone that will go up against the Militias who control and strongly influence the Iraqi government. Such as the Firebrand Shia Cleric/commander who as of right now controls six Cabinet seats in PM Maliki government and 30 seats in the Iraqi Parliament.
Remember PM Maliki promised a reshuffle of his cabinet by the end of the year, well he is hoping that he is one of them. Noticed that no one has been shuffled as of yet. Maybe the PM is thinking if he can’t be shuffled then no one gets shuffled.
I still hold that PM Maliki will leave office and will step down by Valentines Day. I could be wrong and he stays on at the detriment of the Iraqi people who suffer from not having an effective government that they had elected in December 2005.
Iraq before the sanctions and before the Iraq and Iran war was the premier Arab country in the Middle East and were number one in a lot of areas and Industries. They can achieve more and have the best economy in the region just have to get past the current situation. The positive spot in all this is that Iraq’s economy will continue to grow despite the violence that plagues it daily and this is not publicized enough.
In 2007 I expect the economy to grow faster as the Banking infrastructure improves, the Electronic Trading of the Iraq Stock Exchange goes online in June 2007, the International Compact is signed later in the year, the final installment with the Stand By Agreement (SBA) in March 2007 by the International Monetary Fund (IMF), More Oil production and Oil sales, the increased in value of the Iraqi Dinar. I think you get the picture.
In any case the year 2007 for Iraq will be exciting and very much looking forward to Iraq achieving its greatness it had achieved long ago in the Arab region.
The invasions of Iraq in the 1990’s the first Gulf war and followed by the economic sanctions thereafter have blocked the Iraqi banking industry to progress with the rest of the world.
Al-Rafidain Bank and State owned Al-Rashad Bank have 90 percent of the Iraqi banking sectors deposits and assets and all the previous regime debts rendering virtually insolvent. Iraq now has 32 banks, including seven from the public sector, 21 traditional banks, and four private Islamic Banks. These private banks serve as the foundation to Iraq’s financial infrastructure and the cornerstone of its newly emerging economy.
The deposits at these banks total $9.8 Billion dollars from private sectors, public sectors, and Iraqi Central Government. The Banks have an overall paid capital of 872.8 Billion Iraqi dinars, equivalent to $587.7 Million US Dollars.
The banking sector in Iraq still faces problems from previous sanctions and since the invasion in 2003. The banking owners and CEO’s have attempted to promote the Iraqi banking industry. However, setbacks have occurred due to the decreasing security situation in Iraq.
This has caused the Iraqi banking industry to fail with obtaining new up to date technology and banking industry standards. The Iraqi banks currently have several weaknesses that are stopping and slowing the modernization of the Iraqi Banks to position themselves in the 21st Century.
1. Lack of technical capabilities.
2. Inability to offer advanced services.
3. Familial domination at most of the banks steeped in suspicion and driven by the desire to maintain a monopoly.
4. Absence of overall strategies and plans brought about by the lack of fresh investment capital.
Each bank location in Iraq currently serves 46,632 persons, before demographic dissection (0 to 16 years old), and yet still a ratio unheard of in the modern world.
A number of Arab and Western banks have obtained licenses from the Central Bank of Iraq (CBI) allowing them to open branches. Several foreign banks have entered into partnerships with local Iraqi banks.
Bahraini Bank owns 51 percent of Baghdad Bank
HSBC owns 70 percent of Dar Al-Salam Bank.
A Bahraini private Bank owns 49 percent of the Iraqi Commercial Bank.
A Qatari Private Bank owns 75 percent of Al-Mansur Bank.
National Bank of Kuwait (NBK) owns 85 percent of Credit Bank.
The Jordanian Import and Export Bank own 49 percent of Al-Ahli Bank (Iraq Civil National Bank).
A Private Saudi/Iraqi owns Tigris and Euphrates Bank.
The CBI is allowing more foreign banks into Iraq pending license review and approval. The CBI has stated in the past that more foreign Banks will be opening branches inside Iraq in the near future granting more favorable status to those international Banks who partner with local Iraqi Banks.
Foreign Banks bring more to the table then start up capital to the intended Iraqi Bank. They bring expertise and knowledge and are able to train the Iraqi counterparts in modern Banking.
Another noticeable weakness when dealing with an Iraqi Bank is the lack of computer Banking skills and the inability to conduct banking business in the English language. Considering the number of potential foreign investors and a large portion who would be English speaking and attempting to invest in either the Banking sector and or the Iraq Stock Exchange (ISX). English speaking bank employees and managers would greatly enhance the banking experience and gain more customers.
The Iraqi Banks are working on training their bank employees in modern Banking technology and learning the English language. This is sometimes published in local media outlets has recent as a few months ago when over 20 employees from one Iraqi Bank attended a workshop learning new Banking techniques in Bahrain.
Other banks are training employees and are not publishing this due to security reasons for their employees and for competitive reasons. Keeping in mind that the security situation dictates the training times and locations. If the Iraqi Bank were able to send their employees out of the country to receive their training then this would leave the bank with limited staff to continue with day-to-day banking operations in Iraq. Very few Iraqi banks are in a position to send employees abroad for training; most training is conducted in country.
It is widely known that Iraqi business owners have suspended their business activities and no longer ask for loans and at the same time Banks hesitate to extend loans as a result of the insecurity in the country and the risk of loans defaulting would be high. Extremely high default rate exists from loans granted to high ranking members of the Baath Party during the tenure of the previous regime.
The interest rates on banking loans are 12% to 14% and most banks deposit their assets in the Central Bank and obtain high interest rates daily and short-term interest rates on unencumbered monies.
Some banks extend personal loans and that the Al-Rafidain Bank has extended 157 Billion Iraqi Dinars in personal loans and also other types of loans are extended to Iraqi’s. Loans are also extended to the Industrial sector and other sectors including the real estate sector. The Real Estate bank has been recently reactivated and is extending loans to Iraqi’s for housing purposes. Though relatively inactive now this newly reorganized government bank should see a significant rise in its lending activities as the Iraqi government disburses newly funded housing grants.
As soon as the new Investment Law is enacted, the Iraqi government will invite international companies to carry out large construction projects. In October last year 11 Iraqi Banks form a company called the Iraqi Bank of Development to extend loans for small and medium projects and is very hesitant to extend loans at this time due to the deteriorating security concerns.
Recently the Central Bank of Iraq (CBI) was considering raising the capital to start a new Bank up from 50 Billion Iraqi Dinars to an undisclosed amount and now has placed this decision on hold. The CBI is attempting to encourage bank mergers between Banks.
Bottom line is that Banking in Iraq is dependent on the security situation getting better so the industry can have the opportunity to be on par with there Arab neighbors. The Iraqi banking sector is ripe for the picking for the investor because the industry is so severely undervalued.
Deputy Parliament Speaker Khalid al-Atiyah confirming that the Parliament will discuss and endorse the 2007 budget after Id al-Adha.
Central Bank Expert predicts Deficit in 2007 Budget.
Finance Ministry Signs Agreement with Malaysia to settle Iraq’s debts.
Central Bank confirming relative improvement in inflation.
The Finance Minister said Iraq has signed agreements with 52 countries in order to decrease 80 percent of Iraq’s debts.
10bn dollars have been allocated to implement investment projects next year.
Newspapers reporting quickly decreasing demand on the dollar in Iraq’s Central Bank auction.
Talib Muhsin Abu Ju’laylah, director of the General Department for Taxes, saying that his department has achieved revenues worth 250bln Iraqi dinars this year.
The planning and development Cooperation Minister Ali Ghalib Baban saying that the International Monetary Fund Paris Club has pledged to write off 21 Billion dollars of Iraq’s debt.
Been reported a severe drop in demand of the US dollar in the local Iraqi local markets.
The Council of Ministries has ratified the national housing project, which has been allotted $1 Bln from the 2007 budget. The first phase of this project, housing units will be provided to those who suffered under the former regime including families of martyrs, political prisoners, displaced families, government employees, and disabled persons. The second phase of the project will include all those who wish to obtain housing units.
The Finance Ministry urges all Ministries to deal in Iraqi dinars exclusively.
The Ministry of Finance Jabr said the Iranian government presented to his country a 1 Bln dollar loan to be paid back over a 40-year term, including a 10-year grace period.
The loan will be used to construct schools, hospitals, roads, railroads, lay oil pipes, and transfer electrical power to different parts of the country.
The Council of Ministers has ratified a decision to allot a $2 billion budget for the Electricity Ministry’s 2007 investment plan.
The Planning and Development Cooperation Minister Ali Ghalib Babn said the 2007 investment budget has reached 12.5 trillion.
The Industry Minister signed contracts with other Ministries worth over 300 Billion Iraqi dinars.
Baghdad Mayor announced over 1 billion Iraqi dinars allocated for implementation of several projects to improve Mayoralty Performance.
An official source at Iron and Steel State Company in Basra denies the receipt of 150 Million dollars for rehabilitation of Company.
Pepsi Company has signed an agreement to sponsor the Iraqi Football Team officially.
The Agriculture Ministry confirming the allocation of 1.5 billion Iraqi dinars for the removal of the Nile Flower from the Tigris River.
The fuel prices are unsubsidized and causing the fuel crisis to escalate in country.
The South Oil Company (SOC) has completed agreements to invest in three oil fields in Dhi Qar Governorate, whose production capacity is estimated at 530,000 barrels per day. The oil fields are Al-Nasiriyah Field, whose production capacity of 300,000 barrels per day, Al-Gharraf Field which has a production capacity of 120,000 barrels per day, and Al-Rafidayn Field, whose production capacity 110,000 barrels per day.
The Oil Ministry is conducting talks with US companies to construct an oil refinery near Karbala.
Iraq seeks to purchase 2.5 million tons of fuel in the first half of 2007.
The Iraqi Cabinet has approved the new Pension Law that will be valid 1 January and will also distribute Social Protection Network allowances after IED.
The Deputy Prime Minister Barham Salih, said he supports the private sector and the Iraqi government will pay each employee who moves from the public sector to the private sector an additional salary for two years equivalent to 50 percent of his original salary. Also the Ministry of Trade has begun distributing 27,000 tons of rice to the branches of the state company for food trade in Baghdad and across the governorates to be delivered to Iraqi citizens participating in the Food Ration Card Program.
An official from the Petroleum Products Distribution Company said the recent shortage of petroleum products to insufficient production and the delay of receiving shipments of oil derivatives from neighboring countries. The official stating that the shipments of petroleum products from Kuwait have been held up for over 38 days but was prevented from doing so by US forces which have blocked the highway.
Deputy Oil Minister Ahmad al-Shamma announced the Japanese Government has ratified a decision to grant Iraq 50 billion Japanese Yen for the development of oil export installations at Iraq’s southern ports. The fund will be used to lay an underwater pipeline connecting to the city of Faw to Basra oil port. Also stated this is project will raise export capacity of crude oil, which currently stands at 1.6 million barrels per day, by 1.5 million barrels per day.