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Tishwash:  The European Union and the World Bank issue a joint statement on the economy of Iraq … and an urgent request

Statement of the co-chairs issued by the co-presidency of the European Union, Germany and the World Bank following the meeting of the directors of the Iraqi Economic Contact Group,

Following the launch of the Iraqi Economic Contact Group (IECG) on October 22, 2020 in London, the Government of Iraq met with its international partners in the Economic Contact Group at the level of directors in March 2, 2021, to conduct an assessment of recent reform steps, in order to begin identifying and aligning international support, and to map the way forward towards holding a high-level contact group meeting in late spring of 2021.

The Iraqi economy has faced multiple shocks that led to a severe recession and high poverty rates. Structural hurdles accumulated for decades limit the availability of fiscal reserves to mitigate the socio-economic impact on Iraq’s most vulnerable citizens and its business ventures.

As a result, engaging in reforms is the fastest way to reverse the situation. Indeed, the long-term success of Iraq is crucial to the stability of the entire region. But the Iraqi oil-based economic model is facing an increasing challenge from a young and growing population that needs to diversify job opportunities, and from an irreversible global trend towards decarbonization and a green economy.

The Iraqi government has taken commendable steps to address immediate and long-term financial and economic challenges by initiating a frank discussion on structural reform requirements to address fiscal imbalances, address critical infrastructure gaps and direct the Iraqi economy towards sustainable and inclusive development, including gender equality.

As partners and friends of Iraq, we have indicated our appreciation for the steps taken recently to move from analysis to implementation, as evidenced by the Cabinet’s approval of the implementation plan for the White Paper, including its governance structure to achieve this goal, and we commended the Prime Minister and his government for their advancement.

Therefore, we call for the acceleration of the adoption of a reform-oriented Iraqi national budget, given the need for it to provide the necessary means and tools to ensure that Iraq can continue on its reform path towards stability. At the same time, we have been informed of the additional work required to implement the reforms.

There is an economic and social cost to being late in taking action, so it will now be necessary to start urgent implementation based on the priorities identified. The reform agenda must be an integral part of a broad and open dialogue between the government, parliament, and citizens of Iraq, in order to ensure that the future of Iraq is shaped comprehensively.  link

RVAlready:  I agree with the World Bank. They need to do the reforms immediately. Parliament and others must stop kicking the can. Nobody can afford to waste time, given the current international environment.

Yada:  RValready,,,,your opinion, just for clarity,,,a few post from others looking at 1 to 1 in Iraq. To me the would mean the RV rate of 1 dinar to say $4.00,,

RVALready:  Yeah, I saw Franks post from yesterday, suggesting an initial 1:1 in country. I think they gotta do what they can, as soon as they can.  I think kicking the can is getting them nowhere, and certainly has hurt some of their citizens.

Yada:  That is what I was thinking. If memory serves,, 1 to 1 in Iraq would me 1 dinar to $4.00 in the US

Rock1941:  why do you people keep blaming iraq when you know who’s in control

RVAlready:  I was blaming everyone who is holding this up. But, to get this done, everyone must stop kicking the can.  I’m sure World Bank knows who is responsible for kicking the can.

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Harambe:  S&P Global: Iraq’s $2 bil oil prepayment deal with Zhenhua (China) delayed pending official approval

(3/10/21)

Dubai — Iraq’s $2 billion oil prepayment deal with China’s state-owned Zhenhua Oil Co. is on hold pending government approvals, the deputy director general of State Oil Marketing Organization told S&P Global Platts.

SOMO selected Zhenhua Oil Co. as one winner in a five-year oil supply deal that includes one-year prepayment of $2 billion. Under the deal, the oil is destination free and Zhenhua is allowed to resell cargoes.

The deal, which is for supply of 4 million barrels per month, is the first such agreement to be introduced by federal Iraq’s oil marketer. Northern Iraq’s semi-autonomous Kurdistan region often has such deals with its traders. SOMO Deputy Director General Ali al-Shatari added that OPEC’s second-largest producer would be unlikely to pursue similar schemes in the near future.

The conclusion of the deal “depends on the higher authorities’ meetings and how they are going forward with it, and of course it is always the decision of the cabinet,” Shatari said in an interview this week. “Of course, we are keeping the contact with the winner Zhenhua Oil Co. in order to understand their position regarding this delay in getting the approvals. So until now everything is on hold.”

Besides the cabinet and oil ministry approvals, the ministry of finance also needs to give Zhenhua a guarantee letter, Shatari added.

Zhenhua, owned by Norinco, couldn’t immediately be reached for comment on the matter.

 One-off deal

Cash-strapped Iraq is looking for extra revenue streams as it struggles with paying bills due to the pandemic and low oil prices. The country relies on oil revenue for around 90% of its income.

The Zhenhua prepayment deal is likely to be a one-off supply agreement and will not be repeated in the near future, Shatari said.

“It cannot be a trend, by the way, unless it is happening in different periods because our target is not to allocate more than, for the time being, around 5% of our monthly exports for that purpose, so that Iraq will be more than 100% sure it can meet its obligations under such deals,” he said.

SOMO, which markets only federal Iraqi crude, expects to export around 2.9 million b/d in February, with 2.8 million b/d going through the southern terminals that handle Basrah crudes.

The agreement didn’t specify the type of oil to be lifted and just mentioned Basrah crude. Iraq sells three grades of Basrah crude: Basrah Light, Basrah Heavy, and Basrah Medium, which was introduced in January.

The type of Basrah crude “should be specified after informing the winner about the approval and then the winner should select the type of crude or even the split of types of crude the winner wants to lift over the year period when we do the prepayment in crude oil,” Shatari said.

 Profit-sharing agreement

It is not the first time SOMO has dealt with Zhenhua, which has been lifting Iraqi crude for its refineries since early 2009, Shatari said. In 2019, SOMO signed a profit-sharing agreement with Zhenhua, under which SOMO gets a percentage of resold Iraqi crude.

“Usually our contracts with our customers are crude that should go to their refineries not to be resold,” Shatari said. “For the profit-sharing contracts or agreements, we allow the resale but we share certain percentage of the profits made by every single cargo.”

He declined to disclose the percentage of shared profit.

Zhenhua has also trained SOMO traders, with the marketing body seconding traders to China in order for them to learn about the trading business, Shatari said.

“We sent them to work side by side with Zhenhua’s traders, finance and legal people,” he said. “So we got some experience and we are using their experience that’s how we initiate the sell on spot basis as well.”

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/021821-iraqs-2-bil-oil-prepayment-deal-with-zhenhua-delayed-pending-official-approval-somo

Tishwash:  A resounding drop in oil prices after an optimistic jump

Oil prices fell, Wednesday, due to an increase in US inventories, and investors’ profit taking.

Brent crude fell for the month of May 62 cents, or 0.92 percent, to reach $ 66.90 a barrel.

US West Texas Intermediate crude for the month of April was $ 63.51 a barrel, down by 49 cents, or 0.77 percent.

Crude oil inventories in America rose by 12.8 million barrels in the week ending March 5, according to data from the American Petroleum Institute.

Analysts at the Bank of the Financial Group said that the OPEC + group – the Organization of the Petroleum Exporting Countries (OPEC) and the producers allied with it – may become a victim of its success, because higher prices resulting from the restriction of supplies may stimulate US oil production.

Last week, prices gained support from OPEC +’s decision to largely maintain production cuts in April, then jumped above $ 70 a barrel, after attacks on the Saudi oil stronghold.   link

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Tishwash:  The financial advisor talks about the possibility of paying the debts to Iran in Iraqi dinars

Mazhar Muhammad Salih, the economic advisor to the Prime Minister, said, Tuesday, that Iraq can pay the value of gas supplied to Iraqi power stations to Iran in Iraqi dinars, in exchange for humanitarian needs such as food and medicine, in light of the US sanctions imposed on Tehran

Saleh said in a press statement, followed by “People”, (March 9, 2021), that “the accumulated funds of Iranian companies are the value of Iraq’s purchases of gas supplied to Iraq’s power stations, as well as the price of supplying electricity to some governorates, rights that accumulate daily with the value of the supply “.

Saleh explained that “there is a complete ban from the United States on any dealings in dollars or foreign currencies in the form of bank transfers with Iran,” noting that “there are humanitarian exceptions represented by the possibility of paying those accumulated rights in cash in favor of Tehran for needs such as food, medicine and some expenses for tourists coming to Iraq.” It shall be paid from the accumulator for these sums and dues, and are subject to criteria acceptable to all parties.

Saleh stressed that “the balance, the volume of frozen funds in Iraq, is variable and may increase by consuming gas and electricity daily and decrease upon payment,” while the Iranian side affirms that it is estimated at $ 5 billion. link

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