Monday Evening Iraq Economic News Highlights 7-18-22
Al-Kazemi’s Advisor Clarifies A News Published By The Official Media About The Exchange Rate Change
Shafaq News/ The advisor to the Iraqi Prime Minister, Mustafa Al-Kazemi, issued today, Monday, a clarification regarding a news published by the official newspaper about the change in the exchange rate of the dollar against the dinar.
Haitham al-Jubouri, in a clarification received by Shafak News Agency, said that Al-Sabah newspaper published the title of an interview it conducted with us in which we talked about an economic vision that would increase non-oil revenues and attract diversified investments, which would inevitably give strength to the Iraqi dinar, given that the price of the dinar depends on the offer. demand and sustainable economic development.
He added, “I was surprised that the headline of the news differs from this content mentioned by the same person who interviewed us in the body of the news, reasoning that the headline should be attractive.”
Al-Jubouri, who was the head of the Finance Committee in the previous parliamentary session, explained that “what was published about the government’s intention to restore the exchange rate is contrary to the truth of what we have stated. Rather, the government is engaged in fundamental reforms in the financial and economic affairs that would create the desired development.” LINK
Al-Kazemi’s Advisor On His Statement On The Exchange Rate: The Title Of The Published News Is Incorrect[/Size]
Baghdad / Obelisk: Adviser to the Prime Minister Haitham al-Jubouri, 07/18/2022, clarified his statement regarding the existence of a vision to restore the dollar exchange rate.
Al-Jubouri said in a statement received by Al-Masala: Al-Sabah newspaper published the title of an interview it conducted with us in which we talked about an economic vision that would increase non-oil revenues and attract diversified investments, which would inevitably give strength to the Iraqi dinar, given that the price of the dinar depends on supply and demand and on the existence of economic development. sustainable.
He added: But I was surprised that the title of the news differs from this content mentioned by the same person who conducted the interview with us in the body of the news, explaining that the title should be attractive.
He explained that what was published about the government’s intention to restore the exchange rate is contrary to the truth of what we have stated. Rather, the government is working on fundamental reforms in the financial and economic affairs that will create the desired development.
The government newspaper, Al-Sabah, quoted in its issue today, the Prime Minister’s Advisor for Economic Affairs, Haitham Al-Jubouri, as saying: We have a vision to restore the dollar exchange rate, standardize employee salaries, and transfer four ministries to a self-financing system.
The Minister Of Oil Sets The Date For The Start Of Pumping Crude Oil To The Karbala Refinery
Energy Economy News – Baghdad Today, Monday, Oil Minister Ihsan Abdul-Jabbar set the date for the start of pumping crude oil to the Karbala refinery, noting that the refinery will reduce the import of oil derivatives by 60 percent.
Abdul-Jabbar said in a statement, “The ministry and the government are keen to increase the national production of petroleum products and stop their import,” noting “the importance of achieving this goal by starting production from the Karbala refinery before the end of this year, in addition to the completion of the ( FCC ) project in refineries. The South, and a group of projects to rehabilitate the Al-Samoud refinery in Baiji during the next few years.”
The minister added, during his visit to the Karbala oil refinery project, that “the refinery will cover the actual need for local consumption, in addition to reducing the import of oil derivatives by 60 percent.” Great because of the import of fuel.
He added, “The Karbala refinery project is the latest project in the refinery sector in Iraq with a capacity of 140,000 barrels per day, which includes modern and integrated refining systems and its production enjoys international specifications, so we are keen to speed up production operations from Karbala refinery despite the economic conditions and health challenges.”
He pointed out that “the refinery is an important step to meet the local need for consumption, followed by other steps when rehabilitating the Al-Samoud refinery in Baiji and the FCC project in the South Refineries Company in Basra, and the sum of these projects will lead to achieving self-sufficiency in the production of oil derivatives.”
The Minister of Oil explained that “next October will witness the start of pumping crude oil to the refinery, expressing his hope that the total operation of the refinery will begin gradually.”
The statement continued, “The minister held a meeting with the companies executing the project, during which he was accompanied by the Undersecretary for Liquidation Affairs Hamid Yunis, confirming the provision of all kinds of support to expedite the completion and operating procedures for the refinery.”
For his part, the Undersecretary for Liquidation Affairs Hamid Younis said that “the refinery was established according to the latest specifications and advanced technology to produce high-quality oil derivatives, and the visit comes within the field visits to follow up on the completion rates in the project.”
He pointed out that “the first phase of operating the refinery will be before the end of this year, and the second phase will be at the beginning of next year to produce light products, which will have a positive impact to meet the needs of local consumption.”
The General Manager of Al-Wasat Refineries Company, Ayed Jaber Omran, said that “the company has prepared the technical and engineering staff and included them in training courses to operate the refinery.” LINK
A Law Clarifies The Possibility Of Baghdad Demanding Financial Compensation From Oil Companies Withdrawing From Kurdistan
2022/07/17 Baghdad The legal expert, Ali Al-Tamimi, explained, today, Sunday, the possibility of demanding compensation from the oil companies operating in Kurdistan from the federal government in the event that the latter insists on its efforts to cancel its contracts in the region .
Al-Tamimi told (Baghdad Today), that “in the results of the contracts, international companies return to the Kurdistan region of Iraq in compensation for the damage and not to the central government, meaning that the region is the one who will pay the companies’ compensation in full .”
He added, “Iraq is a federal country, not a confederation, and SOMO has exclusive jurisdiction in exporting oil, and the decision of the Federal Court is binding and has become, and it is not possible to go to international courts, as this decision relates to the sovereignty of the state exclusively .”
Al-Tamimi continued, “The Federal Court’s decision to cancel the oil and gas law in the Kurdistan region makes the oil and gas law in the region nullified for violating the constitutional provisions in accordance with Articles 110, 111, 112, 115, 122 and 130 of the constitution .”
He pointed out that “the law obligated the regional government to hand over oil imports retroactively from the date of concluding the contracts and to allow the Ministry of Oil and the Office of Financial Supervision to view these contracts. In the case of volumes, these funds will be deducted from the 17% allocated to the region .”
And he indicated that “the Federal Court relied on Article 111 of the Constitution that oil and gas belong to the Iraqi people, and therefore the management of oil and gas is from foreign trade and is within the jurisdiction of the central Iraqi government in accordance with Article 110 of the Constitution.”
As for the concept of the current fields contained in Article 112, Al-Tamimi said about them, they are “produced, explored and developed fields according to the most acceptable interpretation, and not only the produced fields, as the Kurdistan Region sees.”
And the American international legal company Gibson Dunn, commenting on the problems between the Iraqi Ministry of Oil and oil companies operating in the Kurdistan region, announced that these companies can file cases in international courts, and demand tens of billions in compensation from the Iraqi government, if the latter insists on its efforts to cancel its contracts. in the Kurdistan region .
The company said in a statement received (Baghdad today), that “taking into account the articles of the Iraqi constitution and the oil and gas law in the Kurdistan region, the file of oil companies operating in the Kurdistan region is strong, to the extent that allows them to file cases against the Iraqi government.” Gibson Dunn stressed in her comment that “the Iraqi government will face major legal problems, and will have to pay billions of dollars in compensation.”
The company added that “the Kurdistan region is part of Iraq in all circumstances, and Iraq must abide by international laws, especially since the Iraqi Ministry of Oil has become a threat to the work environment of oil companies in the Kurdistan region.”
The company indicated that the Iraqi Oil Ministry’s steps “contradict international laws and the decisions of the Organization of the Islamic Conference, of which Iraq is a member,” stressing the need for “the Iraqi government’s commitment to guaranteeing the rights of foreign investors.”
The crisis over oil reached between the two governments; Federalism in Baghdad and the Kurdistan Region, advanced stages of complexity, with the Kurdish Judicial Council declaring the Federal Court unconstitutional.
The Kurdish oil file has been managed since 2014 according to a formula of understandings concluded during the period of the government of Prime Minister Haider al-Abadi, obligating the region to hand over a percentage of its extracted oil or its revenues, or to deduct a percentage of the revenue values from the region’s share in the budget. The disputes reached their climax after the Federal Court issued a decision on February 15, in which it considered the oil and gas law enacted in the regional parliament contrary to the constitution.
And the court’s decision obliges the region to hand over its entire oil production to Baghdad, and to allow the concerned federal authorities to “review all its oil contracts,” but Erbil rejected the decision, so that the Federal Oil Minister, Ihsan Abdul-Jabbar, announced on May 7 that the talks had stalled, and that practical measures had been taken to compel the companies. Foreign women working in the region to cancel their contracts with Erbil and conclude them with Baghdad.
And earlier, the Iraqi Oil Ministry issued a clarification regarding the position of the international oil companies operating in the Kurdistan region, northern Iraq, towards the decision of the Federal Court .
And the ministry’s statement said that, in response to a number of questions addressed to it by the international and local press, regarding the position of American oil services companies operating in the Kurdistan region, towards the decision of the Federal Court,
“We affirm that the companies (Schlumberger, Big Hughes, and Halliburton), which are considered It is one of the sober international companies in the field of oil services, and according to its official addresses to the ministry, it confirmed not to submit to new projects in the region, in compliance with the decision of the Federal Court, and the directives of the steering committee formed in the Ministry of Oil .
The statement added that the companies, referred to above, are “now in the process of liquidation and closing of existing tenders and contracts .”
The ministry confirmed that, according to this pledge, these companies “do not own a commercial entity or other companies operating in the region, whether through their trademark or others, or on their behalf, in a manner that does not violate the decision of the Federal Court, or intersect with the ministry’s directives.” LINK
Barzani Goes To Baghdad: Trouble In The Kurdish Oil And Gas Sector
DOUGLAS A. OLLIVANT JULY 18, 2022 A recent Federal Supreme Court decision in Iraq has put a legal stake in the heart of Kurdistan’s oil and gas sector — the financial lifeline of the region. Only one man has the power to fix this. Masoud Barzani — the 75 year-old former president and de facto patriarch of the Kurdistan region — must go to Baghdad and cut a political deal.
Only Kak Masoud has the gravitas, the relationships, the respect, and the political capital to make this happen. Should Masoud choose not to take this opportunity or — worse yet — should his health begin to fail him, it is difficult to see how the crisis in this critical sector will be resolved.
The Kurdistan region of Iraq has had a bumpy history with its parent government in Baghdad. Though the Kurdish provinces have been de facto separated from Iraq since the end of the first Gulf War in 1991, the 2005 Iraqi Constitution established it as a semi-autonomous region. That document left a great deal of ambiguity as to exactly which rights and privileges would be accorded to the region, a lacuna that resonates to this day.
The rocky relationship has been highlighted by continual fighting — usually rhetorical but occasionally literal — on issues such as the so-called “disputed territories,” most notably the oil-rich province of Kirkuk, relations between the Kurdish Peshmerga and the security forces of federal Iraq, budget sharing from the federal budget for the Kurdistan region and, most bitterly, the legal standing of its oil and gas sector.
The disputes with Baghdad have also been deeply contoured by various international interests. The United States has been generally supportive of the Kurdistan Regional Government and especially the ruling Kurdish Democratic Party — though not to the point of independence, as painfully demonstrated in 2017 when federal Iraqi forces retook control of Kirkuk from the Kurdistan Regional Government’s Peshmerga forces that had assumed control as part of the fight against ISIS.
Turkey has been deeply conflicted, as it has a historic suspicion of the federal arrangement of the Kurdish Regional Government but is also the largest benefactor of its oil and gas sector.
In fact, Turkey exercises almost total control over the Kurdistan region’s oil and gas sector, as it owns the pipelines inside Turkey and the exporting port of Ceyhan, an important source of hard cash as the Turkish lira continues to collapse. Iran maintains deep ties with both the major Kurdish parties, but is deeply hostile to the Kurdish Democratic Party’s rumored ties with Israel — to the point of using missiles for emphasis.
Finally, both China and Russia see the area as a possible point of expansion into the region. Russia owns much of the Kurdistan region’s internal pipeline and Chinese firms appear anxious to engage in projects in the region. Of course, international sanctions on Russia complicate their involvement.
The Kurdistan regional oil sector was primarily built under Masoud’s nephew, former Prime Minister Nechrivan Barzani from 2012-2019 and pumps between 400-500 thousand barrels per day of oil. But the status of the Kurdish oil and gas sector is now complicated by two legal difficulties.
The first — an arbitration challenge by Baghdad at the International Chamber of Commerce with Ankara about the legality of the Kurds putting oil into the international pipeline without approval from the Iraqi State Oil Marketing Organization — is still pending. But the second, a lawsuit brought in 2014 by the federal Government against the constitutionality of the region’s oil law, was finally decided by the Supreme Court in February of this year. Why the decision — pending for years — was made at this particular moment remains a point of argument and speculation.
But the Supreme Court has declared the Kurdish oil law unconstitutional, mandating that the Kurdistan Regional Government turn over all oil produced to the federal government, giving Baghdad the right — though not the obligation — to invalidate contracts entered between Irbil and various oil and oil services companies.
Legally, this decision turned on the interpretation of Articles 110 and 111 of the Iraqi constitution, which deal with ownership and control of the production and export of Iraq’s natural resources — most notably oil. Without getting too deep into a contested constitutional question (those who wish to dig further may read here), both sides have legitimate arguments. The Federal Government’s case rests on the clear mandate given in Article 110, while the Kurdish case rested on its interpretation of exceptions to the rule given in Article 111.
In short, the constitution is very ambiguous on this matter, probably by design, and the court had to choose which article — and therefore which government — to favor in its decision.
The decision also occurs in the shadow of the Kurdistan Regional Government’s ill-fated 2017 Independence referendum. In the wake of an overwhelming victory in the non-binding referendum, Baghdad used federal Iraqi forces to re-establish control over Kirkuk province — technically part of federal Iraq but disputed. The loss of this province made independence non-viable, particularly as Baghdad, with Turkish cooperation, demonstrated how quickly the KRG could be isolated.
The court has since made a series of other decisions implementing the February ruling. Just days ago, four oil contracts signed by the Kurdistan Regional Government were quietly annulled. Further, many corporations are responding to the change in the legal status quo and numerous western firms — Baker Hughes, Schlumberger, and Halliburton prominently among them — have begun to disentangle themselves from Kurdish oil projects.
Other national firms — most prominently Turkey’s Genel, but also Russian and Chinese firms — may use a different calculus, but for those firms that are from part of the “liberal world order,” Baghdad’s decision is the relevant legal framework. The exception here is Chevron, which continues to operate in the region.
As a super-major, it may either be willing to ride out the legalities and continue to work in a gray market situation, or it may simpler be taking a slower, wait-and-see approach to decision making.
Despite a countersuit by the Kurdistan Regional Government and supportive rulings in its own provincial courts, the consequences of the legal ruling by the Supreme Court are now beginning to multiply, threatening the long-term viability of the entirety of the Kurdish oil and gas sector. While Baghdad does not have the ability or desire to send police forces into the north to enforce its decision, it has no need to.
As the pre-emptive actions of the oil services companies show, the combined threat of international legal action and “blacklisting” from the (much larger) oil sector of southern Iraq will quickly result in many, perhaps most, international firms departing the region. While the legal regime has not yet threatened the transporters and buyers of Iraqi Kurdish oil with legal action, there can be little doubt that will be coming soon.
The actions of these firms also reflect pre-existing concerns that had already made an investment in the Kurdistan region of Iraq less attractive — including both a less stable security situation and serious issues with payment from the Kurdistan Regional Government.
The Kurdistan Regional Government — especially the ruling Barzani-led Kurdish Democratic Party — and their Western supporters have reacted to this court decision by maintaining to all listeners that the decision is a political one, wrapped up in government formation, longer-term anti-Kurdistan region sentiments, and Iranian influence.
Only the judges know what was in their hearts, but this charge — even if true — is irrelevant to the facts at hand. From an international standpoint, the decisions of the Supreme Court represent the final interpretation of the internationally recognized Iraqi constitution, which is why oil and gas firms are quickly falling in line.
As a matter of legality, the death knell for the legitimacy of the Kurdish oil sector seems to be final. This does not mean that gray market export cannot continue, as Turkey seems to have no desire to sever this revenue source, and there are plenty of non-Western oil servicing companies that will be happy for the business. But moving to such gray market options removes much of the upside potential and further depresses revenues.
However, legalities do not prevent either side from entering a political deal that rewrites the Iraqi oil and gas law. Now obviously, the legalities contour the art of the possible in a political deal. Let’s be clear — in the Baghdad vs. Irbil contest over the legality of Kurdish oil contracts and exports, Baghdad has won.
But that does not mean an end to the political negotiation. Keeping the Kurdistan Regional Government relatively satisfied — and, for that matter, keeping the 400-500 thousand barrels per day of Kurdish oil on world markets — is in Baghdad’s interest. A political deal can yet be reached.
The Kurds could send — and doubtless, have sent, though without fanfare — a lower level, more technocratic team to Baghdad to negotiate. But this approach is unlikely to produce any result, let alone the sort of result that offers real possibilities to the Kurdistan region. A technocratic team is simply not empowered to make binding decisions, and Baghdad knows that.
The Kurds have one great but as yet untapped asset — the person of Masoud Barzani, the former president and de facto patriarch. Only Masoud can go to Baghdad and hope to truly achieve a favorable result, as whatever Masoud legitimates will be unconditionally accepted by the Kurdistan region of Iraq’s citizenry.
It is difficult to overstate the gravitas and political capital that the eldest Barzani holds throughout all of Iraq. While Arab Iraqi leaders have had numerous confrontations with him over the years, he is still held in the highest respect.
This point was made very powerfully to me once, when an Arab Iraqi friend of mine went to Irbil to see Masoud Barzani. When I saw pictures of the meeting, I asked my friend why he had paid such a public visit, during a politically sensitive period in which their sides were not aligned. My friend replied, “The man is a historical and important friend to me, and I am more confident in his patriotism than his Kurdishness.”
This deep regard that Arab Iraq holds for Masoud Barzani is singular, at least since the death of his political counterpart, Jelal Talabani. No other living Iraqi Kurd has this kind of gravitas, or commands this much respect from his Arab counterparts.
The legal decision against the Kurdistan Regional Government has put the Kurdistan Region of Iraq in a position of existential danger. But Masoud — and only Masoud — has an opportunity to go to Baghdad and cut a political deal. No other figure will be so welcome in Baghdad, and no other figure has the standing to make the decisions required to reach a compromise. And frankly, only Masoud himself could get a deal that would be acceptable to Masoud. Sending a lesser emissary is a guarantee of failure.
In short, there is an opportunity here, once Baghdad forms a government, to cut a grand bargain. This grand bargain will inevitably involve compromise. While such a bargain may give the three Kurdish provinces an unequal share of revenues that the Arab provinces may find unfair, it will almost certainly involve a degree of entanglement with the Federal Oil Ministry that will make Irbil uncomfortable. It will also force a degree of transparency on the Kurdistan Regional Government’s oil policies that some interests may find awkward.
“Only Nixon can go to China” metaphors are overused. But this instance may be a valid comparison. Only the author of the Kurdish independence referendum can go to Baghdad to salvage the best deal that can be had for the Kurdish oil project. As court decision after court decision begin to cascade against the Kurdistan Regional Government’s oil ministry, Barzani should make it clear that he wants to personally negotiate and then codify the inter-relationship between Baghdad and Irbil in the light of these decisions.
That said, I do not believe Masoud has even been to Baghdad since the days when he sat on the Iraq Governing Council. His coming down from Irbil would be a major change in pattern — but it is from this that the gesture would draw its power. His absence from personal involvement “in the fray” for decades will highlight the seriousness of the moment in which he re-engages.
Masoud Barzani has an opportunity to cement a legacy. It may not be the legacy of Kurdish independence that he dreamt of five years ago. But a legacy of securing a privileged place for the Kurdistan region inside a unified Iraq is not nothing. Kak Masoud can still be a hero to Iraq’s Kurds by cementing their long-term financial future. It is hard to see another such opportunity on the horizon. Former President Barzani should gather all his chips, all his political capital, all his personal markers and go to Baghdad at the height of his considerable power, to cut a deal.
