Economy |An expert reveals the reasons for the return of the dollar’s ​​price rise.. What is the relationship

Today, Wednesday (July 17, 2024), the economic and financial affairs specialist, Nawar Al-Saadi, revealed the reasons for the return of the rise in the dollar exchange rate in local markets.

Al-Saadi said in an interview with Baghdad Today, “The rise in the price of the dollar in Iraq is due to a group of complex and intertwined factors, the first of which is the decision of the Central Bank of Iraq to stop dealing in the Chinese yuan after the US Federal Reserve accused Iraq of inflating remittances, which directly affected the local market.”

He explained that “this decision prompted traders and companies that were relying on the Chinese yuan in their commercial transactions with China to resort to the US dollar as an alternative, which increased the demand for the dollar and raised its price. In addition, the US sanctions imposed on some Iraqi banks reduced the flow of dollars to the market, which reduced the supply and increased the demand for it.”

The economic and financial expert added, “The rise in the price of the dollar naturally leads to an increase in inflation rates in the country, which negatively affects the purchasing power of Iraqi families and increases the complexity of the economic situation.”

The past two weeks have witnessed a significant increase in the exchange rate of the US dollar against the Iraqi dinar, with the 100 US dollar denomination reaching more than 150,000 dinars.

On Monday (July 4, 2024), the Central Bank of Iraq issued new instructions regarding granting US dollars to travelers, indicating that these instructions will come into effect starting from July 14.

According to the statement issued by the bank, it was directed to Rafidain, Rashid, and Iraqi Trade Banks, exchange companies currently operating at airports, and exchange companies of category  A and  B , that “in order to ensure that travelers receive cash dollars and to prevent exchange companies from passing improper transactions, it was decided to set 7/14/2024 as the final date for starting the mechanism of granting dollars to travelers at airports exclusively.”

According to the Central Bank, the aforementioned banks and exchange companies operating at the airport are entitled to a fixed commission of (15,000) dinars from the customer for each transaction, and the exchange companies outside the airport collect it for the benefit of the companies and banks operating at the airport, according to a mechanism determined between the two parties, the banks and companies operating at the airport and the exchange companies outside the airport.  LINK

Al-Sudani Stresses The Need For Real Reforms In The Economy And The Correct Direction Of Resources

Prime Minister Mohammed Shia Al-Sudani stressed the need for real reforms in the economy and the correct direction of resources, while stressing the need for private sector companies to adhere to the retirement and social security law for workers. The

Prime Minister’s media office stated in a statement: Prime Minister Mohammed Shia Al-Sudani chaired a meeting of the Ministerial Council for the Economy, during which the most important decisions related to economic affairs were discussed, and work within the framework of the basic determinants of financial and administrative reform included in the government program.

He added that the meeting hosted a group of businessmen specializing in the oil industries, as His Excellency affirmed the government’s support for the active private sector, and its belief in its ability to support the Iraqi economy by providing job opportunities, and establishing a national industry that meets the needs of the local market, indicating that there are practical steps to achieve this support, as it is the only option for the government to cover the needs of citizens, and achieve the requirements of reconstruction and services, in implementation of the government program.

Al-Sudani stressed the need for private sector companies to adhere to the retirement and social security law for workers; In order to expand their care in this sector, and increase the number of insured persons, stressing the importance of carrying out real reforms, and directing resources in the right direction, so that reliance on oil revenues does not continue as the sole source of income, and meeting the requirements of the operational and investment budget.

The statement continued that the Council discussed the work of the Diwani Order Committee (24573 in 2024) on studying the economics of oil and gas in the country, leading to the adoption of showing the real costs along the value chain, according to economic foundations.

He continued that “it was decided, during the meeting, to find a mechanism for marketing petroleum products expected to increase in the coming years, and to audit the quantities of petroleum derivatives supplied to factories and plants by the Financial Supervision Bureau, as well as to know the size of the current support for factories, and the amount of benefit achieved from it, in addition to evaluating factories according to production capacity and actual production and the extent of compliance with controls.

He continued by saying: It was also decided that the government support provided to companies would be based on the products, the number of insured workers, and the factory’s ability to export according to a specific mechanism. A committee was formed that includes the Ministries of Oil and Industry, the Investment Authority, and National Security to follow up on the work of the factories and verify the information. It was also decided, during the meeting, to grant brick factories a period of one and a half years to convert their accreditation from black oil to liquefied gas. LINK

International Oil Companies Involved In Oil Smuggling Network In Kurdistan Region

Money  and business  Economy News – Follow-up  More than a year has passed since the Kurdistan Region was banned from exporting its oil through oil pipelines, but crude oil is still flowing from the region on tanker trucks towards the border with Iran.

She told Reuters, in a report translated by “Al-Eqtisad News”, that “there are more than 1,000 tanker trucks transporting at least 200,000 barrels per day of Kurdish oil to both Iran and Turkey.”

Although the price of crude oil smuggled from the semi-autonomous northern region is reportedly around $40 a barrel in these shady deals, the trade is lucrative, especially when compared to the difficulties the Kurdistan Regional Government has experienced after being deprived of oil revenues over the past year.

Reuters estimates that oil smuggling generates revenues for the region of about $200 million per month.

These estimates came after the World News Agency correspondents contacted more than 20 people, including oil engineers, oil industry sources, traders, government officials, politicians and diplomats.

Some of them said that the oil smuggling was likely taking place with the knowledge of the provincial and federal governments. When the oil reaches Iran, it is loaded onto ships at Iranian ports in the Gulf, such as Port Imam Khomeini and Bandar Abbas, or transported by land to Afghanistan and Pakistan.

The ban on oil exports to Turkey, which amounted to about 450,000 barrels per day, from the territory of the Kurdistan Region of Iraq via the pipeline, came in March 2023 due to disagreements over who should issue permission to export Kurdish oil.

The ruling, issued by the International Chamber of Commerce in March 2023 after a dispute between Turkey and Iraq over Kurdistan’s oil, deepened the region’s wounds. It ruled in Iraq’s favor, and prevented Turkey from allowing Kurdish oil to be exported through the Iraq-Turkey pipeline and the Turkish port of Ceyhan without the approval of the Iraqi federal government.

After this decision, the Iraqi Oil Marketing Company SOMO became the sole owner of the right to sell crude oil produced anywhere in Iraq.

Reopening the pipeline to Ceyhan on Turkey’s Mediterranean coast does not appear to be a priority for politicians in Baghdad.

Norway’s DNO, a six-member oil company in the Kurdistan Petroleum Industry Association (APIKUR), said in November 2023 that international companies operating oil fields in Kurdistan would not produce oil for export until payments and future terms of sales and purchases were clarified.

While some companies have started to resume oil production for the local market, oil industry sources told Reuters that local buyers, who are allowed to buy crude, are selling the oil through middlemen who then export it without the knowledge of international companies about the resale.

Estimates from various Reuters sources range from 200,000 barrels per day (bpd) to more than 300,000 bpd. The smuggled oil is being added to Iraq’s oil supply. Iraqi officials have privately suggested that the trade is one of the reasons why Iraq, OPEC’s second-largest producer, has so far failed to cap its output under the OPEC+ deal.

The Iraqi government has not committed to the current cuts, despite its continued pledge that it will show better commitment in the future.

Compensation plans have been put in place for both Iraq and Kazakhstan, which also failed to meet their quotas. In the period from January to March 2024, Iraq produced 602,000 barrels per day above its quota, according to OPEC estimates.

Iraq has been capped at 4 million barrels per day (bpd). But Iraq pumped 4.189 million bpd in June, down 25,000 bpd from May, OPEC secondary sources said in their latest monthly report this week. That’s still about 200,000 bpd above the OPEC+ target.