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Iran, Sanctions and Iraq: The Bigger Picture

By Ahmed Tabaqchali. Originally published by Iraq in Context; re-published by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Current analysis of renewed Iran sanctions often overlooks the wider context of Iraq’s regional trading relations. 

The extent of Iraq’s compliance with US sanctions on Iran has raised concerns regarding the loss of Iranian exports to its economy. However, Iraq’s trade with Iran, when looked at in the context of the wider region, shows these concerns in a different light.

It is arguably smaller than is widely perceived, especially given the long border between the two nations and the supposedly strong influence of Iran in Iraq, something which is contested.

There are many variables, following the imposition of sanctions, that will influence Iraq’s economy and trading relationships, making it difficult to examine any change in Iraq-Iran trade in isolation. Some of these variables are China’s response to these sanctions – its continued or increased purchase of Iranian oil or to impose tariffs on US crude- in light of its escalating trade war with the US.

Add to this the effects on oil demand from a change in world growth prospects as a result of an intensifying US-China trade war. Balancing or complicating events is the success of Saudi Arabia in sustaining increased oil production, or Iraq’s ability to increase its oil production. Finally, the state of the Turkish economy and the declining value of the Turkish Lira (TL[i]), in light of recent events, will play essential roles given Turkey’s substantial trading relationship with Iraq.

Much of the recent coverage of Iran’s trading relationship with Iraq refers to the significant annual exports of USD 12bn- which while significant, should be taken in the framework of Iraq’s overall imports and the trend of these imports from 2003-2017 (chart below). Additionally, Iran’s trade like, all other neighbouring nations’ trade with Iraq, is one-sided to its benefit. Iranian exports to Iraq are made up of goods and services, with the goods element at about USD 6bn for the 12 months ending March 2018[ii], which corresponds to about 15% of Iraq’s imports for 2017.

Iraq’s imports exploded six-fold from 2003 until 2013 to satisfy the population’s demand for goods after the isolation of the years under the sanctions. All of Iraq’s neighbours: Turkey, Iran and Jordan saw massive growth of exports to Iraq during this period for all types of goods, from fresh foods to finished products, given the near destruction of Iraq’ capacity to produce during the 14 years of sanctions and the ensuing civil war.

Iraqi Imports 2003-2017

 

(Source: https://tradingeconomics.com/iraq/imports)

Iraq imports peaked in 2013, after which the twin shocks of the ISIS war and the collapse in oil prices crushed the economy and with-it Iraq’s demand for goods. The effects of the ensuing ISIS conflict on overland trade routes affected the relative performance in the following years of each country’s exports.

The transit routes and volumes for 2014 (before the full effects of conflict and economic contraction) show the relative importance for each route, not only for the trade with a particular country, but that country’s additional role as a source of re-exports (chart below). In particular, Turaybill for Jordanian exports and re-exports coming from Aqaba, Kuwait’s Safwan, and Basra as a route for world exports as well as for UAE exports and re-exports from Jebil Ali. By 2014 exports from Syria ceased with the exception of the Al Waleed crossing, until it too ended when it fell under ISIS control in May 2015[iii]. Trade with Saudi Arabia ended with the invasion of Kuwait in 1990.

Iraq: Trade transit routes & volumes 2014

 (Source: Chart taken from a World Bank Report[iv])

Iranian exports peaked in absolute terms in 2013, declining by about 6% by 2017, while Iraq’s imports declined by 36%, with the result that Iran increased its market share from 11% in 2013 to 15% in 2017. However, this has more to do with the trade routes than any special relationship that Iraq might have with Iran or Iran’s competitiveness. The ISIS occupation closed Iraq’s trade route with Jordan, Syria and degraded the value of the routes with Turkey given ISIS’s occupation of Mosul and surrounding areas.

The growth in Iran’s exports from 2004 is shown in the chart below (data are based on the Iranian calendar up to the year 1395, ending in March 2017). Latest reports indicate that the figure was almost unchanged for the year ending in March 2018. Yet, Iraq’s overall imports recovered by 13% in 2017 vs 2016, and its imports from Jordan and Turkey increased by 8% and 19% respectively. All of which put the relative value of trade with Iran in context.

Given Iran’s natural geographical advantages from the long border and its supposed hegemony over Iraq, it can be argued that it should have accounted for much more of Iraq’s imports or at least cemented its conflict enhanced position when Iraq’s imports recovered. Instead it lost market share from 2016 to 2017, implying that it would continue to lose market share without the imposition of sanctions, and as such the sanctions would only accelerate this trend.

Iranian exports to Iraq 2004 – 2016

 

(Source: http://www.iraqbase.com/trade_with_iraq/iraq_tradition.aspx#c_31)

While Turkey’s exports of around USD 12bn in 2013 were twice Iran’s levels, most of these exports were destined for the Kurdistan Region of Iraq (KRI) in which Turkish goods and companies played a significant role in the economic boom the region witnessed until 2014.  The KRI, in 2017, accounted for 67% of all Turkey’s exports to Iraq up from 50% in 2007[v].

Turkish exports to Iraq suffered significantly due to the triple shock to the KRI’s economy – the loss of federal budget transfers, the ISIS conflict and the oil price collapse – as well as from the contraction of the Iraqi economy. Turkish exports declined 36% in 2013-2016 vs a decline of 43% in Iraq’s total imports, increasing its market share from 20% to 22%. The effective gain in market share is more significant than that, as most of these exports were for Iraq overall as opposed to being concentrated in the KRI. Turkish exports’ 18% recovery in 2017 and total imports’ 13% increase vs flat Iranian exports emphasises the competitiveness of Turkey’s exports whether due to quality or currency competitiveness vs the Iranian Rial.

Finally, the value of Turkish exports actually increased by about 25% in TL terms[vi], as the TL exchange rate against the USD decreased from TL 2.15 by end of 2013 to TL 3.79 by the end of 2017. All of which underlines the importance to Turkey of its exports to Iraq, especially in light of the 40% decline in the TL vs the USD so far in 2018. The significance of these exports might very well increase Iraq’s bargaining power with Turkey over many issues, particularly the water flow of the Tigris and Euphrates. Iraq’s relative bargaining power is further enhanced by the fees -converted to TL- collected for the oil that is shipped through Turkey to its port of Cihan, especially if Iraq resumes the Kirkuk oil exports of 250,000-300,000 barrels per day (bbl/d) that were cut after it reasserted feral authority over these fields in October 2017[vii].

Turkish exports to Iraq 2004 – 2017

 

(Source: https://tradingeconomics.com/turkey/exports/iraq)

Jordan’s exports and re-exports to Iraq suffered a great deal due to the closure of the land routes as a result of the ISIS occupation and subsequent conflict. The chart below shows a decline of 64% from 2013 to 2016 in Jordan’s exports, and probably a similar decline for re-exports. The mild recovery of 8% by 2017 from 2016’s low levels should be seen in the context that the trade route only reopened in October 2017, which argues well for meaningful growth in 2018[viii]. While Jordan’s economy is too small to fully replace Iran’s exports, its fresh foods[ix] would fill some of the gap and its much larger re-exports through Aqaba will make a difference.

Jordan’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/jordan/exports/iraq)

Kuwait’s exports to Iraq recovered meaningfully in 2017 after a decline in 2013-2016, yet overall volumes are small. Most of these are re-exports through Safwan as Kuwait’s ports complement Basra.

Kuwait’s exports to Iraq 2003-2017

 

(Source: https://tradingeconomics.com/kuwait/exports/iraq)

The biggest potential beneficiaries from the sanctions would be Saudi Arabia and the UAE. Developing their relationship and influence in Iraq through trade and investments is magnified without competition from Iranian goods. Their economies would benefit from both the opportunity to replace Iranian products and from a sizeable recovering market. Even though 2016[x] was a low point for UAE’s total exports to Iraq, exports accounted for 53% of the mix making Iraq the seventh largest export market, while re-exports accounted for 47% of the mix, with Iraq as the fourth largest re-export market.  All of which highlights Iraq’s importance to both the UAE’s economy and its vital re-export business.

UAE’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/united-arab-emirates/exports/iraq)

Trading with Saudi Arabia ended with the occupation of Kuwait, and while it saw a recovery since 2003, it remained tiny compared to the sizes of the two economies. The re-opening of the Arar border crossing in late 2017, coupled with the re-setting of the relationship, will change this significantly with Saudi expectations that trading values would approach those of Iran in ten years’ time[xi].

Saudi Arabia’s exports to Iraq 2003-2016

 

(Source: https://tradingeconomics.com/saudi-arabia/exports/iraq)

However, there is more to Iraq’s trade with Iran other than its exports of goods, as the relationship includes the export of electricity and gas, as well religious tourism in the form of at least three million religious tourists a year, especially during the annual Arbaeen pilgrimage.

Iran’s recent exports of electricity have been about 1.0 gigawatts[xii] (GW) increasing available domestic supply to 18.91 GW[xiii] by end of 2016. However, the supply has been frequently interrupted since 2015 as Iraq has failed to make the required contractual payments to Iran[xiv]. The supply cut in July 2018 being the latest case – which was a combination of over-due bills of about USD 1bn[xv] and Iran’s increased domestic needs for electricity. The argument over the importance of this supply has been made moot as Iran would not be able to resume exports in the near future, due to its own domestic needs[xvi]. Short-term solutions to replace this lost supply from Kuwait and Saudi Arabia have the potential to become long-term solutions that will further cement the relationship.

For instance, Kuwait supplying fuel for some of the inactive power stations would go some way for Iraq to increase the utilization of its available but unutilized generating capacity due to lack of fuel. This relationship could be developed to one of mutual benefits with Kuwait supplying electricity in return for Iraq supplying gas[xvii], which while mutually beneficial would help the rebuilding of trust. Similarly, discussions with Saudi Arabia for the supply of electricity, possibly under much more advantageous commercial terms[xviii] than those with Iran, would further develop this relationship.

Much more troublesome and very difficult to replace would be the supply of Iranian gas to power stations in Baghdad and Basra – these were based on deals signed in 2013 to supply 9.1 Billion Cubic Meter (BCM) a year to each city. Exports to Baghdad started in June 2017 and totalled 1.2 BCM by November 2017[xix], while exports to Basra were supposed to start after May 2018[xx].  Both sides have been silent on this recently, as media reports have only covered Iraq’s implementation of the sanctions in the form of banking transactions and closing access to Iranian goods. While details could be delayed until the November implementation of the oil sanctions or Iraq would seek waivers. Either way, there are no easy or short-term solutions for the replacement of this vital supply apart from increased focus and spending on capturing flared gas. However, this gas has been only available recently, and in relatively small quantities, while its eventual replacement, i.e. gas recovered from flaring, is substantially cheaper as the Iraqi government pays the Basra Gas Company (BGC) about USD 2.50 per MMBtu vs for Iranian USD 6.6 – 7.2 per MMBtu[xxi] (data as of early 2018).

Religious tourism is an important sector, employing about 160,000 people directly, extending to 447,000 beneficiaries (2014 data[xxii]). While, Iranian pilgrims and visitors are an essential component in religious tourism, yet a significant percentage of pilgrims or visitors are Iraqis. Moreover, the importance to Iraq’s economy from the spending of Iran’s pilgrims is somewhat misunderstood or overstated. For instance, during the Arbaeen, Iraqis provide hospitality through offering accommodation in their homes and providing free food as part of their religious duties towards the pilgrims[xxiii]. As such, the extra consumer spending during the most prominent religious event comes from Iraqis. The spending by regular Iranian religious visitors, throughout the year, will not be so easily replaced- although it is mitigated by the fact that almost all those visitors use Iranian airlines and employ Iranian tour operators.

Finally, the effects, of the loss of USD access for Iran, on Iraq would take a long time to assess. In 2012, the governor of the Central Bank of Iraq[xxiv] suggested that there were increased demands of 40-50% for the USD following the imposition of sanctions on Syria and Iran, which led to an increase in the market price of the USD vs the Iraqi Dinar (IQD) as can be seen from the chart below.

Iraqi Dinar (IQD) exchange rate versus the USD Jan 2011 – August 2018

 

(Source: Central Bank of Iraq, Iraqi currency exchange houses, Asia Frontier Capital)

(Note: The sharp pikes in 2012, 2013 & 2015 were due to CBI policies that restricted the sale of USD, but abandoned after causing a rise in market rates)

The convergence of the market price of the USD and the official exchange rate vs the IQD came to an end in 2011 and diverged in 2012 due to the increased demand for the USD. Apart from the spikes due to policies to limit the official supply of the USD, the normal range was 2-4% premium of the market price over the official rate. This increased up to a 10% premium during the worst of the crisis as oil revenues were substantially below expenditures and exports were less than imports. This divergence came to an end with the recovery in oil prices and the declining cost of war until it stabilized at around 1.5% premium to the official exchange rate.

It’s difficult to make the same argument today about the increased demand, or at least a sharp increase, from the current round of sanctions given that the re-integration of Iran with the world economy following the signing of the JCPOA (The Joint Comprehensive Plan of Action) still suffered from the reluctance[xxv] of most banks to deal with Iran. In particular, Iran’s access to the USD continued to be severely limited. All of which might explain that the signing of the JCPOA had not affected the market price of the USD vs the IQD.

However, it is worth noting that after a stabilization over the last few months, the premium of the market price over the official rate increased in early August from about 1.5% to over 2%. This might be related to the sanctions effect or to the signs of recovery of the local economy from increased consumer spending and the resultant increase in demand for imports. A full recovery in consumer demand for imported products would likely take the premium to a range of 2-4%.

It can be argued, that while Iraq genuinely disapproves of the Iranian sanctions given its own bitter 14 years’ experience with them, yet it stands to benefit from their imposition as they will fast-track a number of positive trends that are already taking place.

Iraq’s new-found ability to self-fund its reconstruction, estimated at about USD 18.8bn by end of 2018[xxvi], will accelerate its economic recovery through a liquidity injection of 14.5% into the non-oil economy once reconstruction projects are underway. In the process making the country extremely attractive for its neighbours’ economies, both as a goods export destination and for re-construction businesses. The opportunity to replace Iranian goods increases the benefit for these exporters. Ultimately, this will cement the USD 30bn pledged for the reconstruction of Iraq at the Kuwait Conference[xxvii] from promises into actual spending that will benefit the economies of the providers as much as Iraq’s economy. The deeper implication is a change in their relationship from that of benefactors into partners which will ensure its sustainability- in the process speeding Iraq’s re-integration in the region and ensure a balanced relationship with its neighbours.

The re-opening of the Iraq-Saudi Arabia border crossing and the Iraq-Jordan border crossings will accelerate the rehabilitation of Anbar (arguably disenfranchised after 2003 and a seat of resentment for the post-2003 political order), and the southern governorates (neglected by both the current and the prior regimes). The resumption of trade-links with their associated economic activities would provide a huge boost to the local economies, which while contributing meaningfully to the healing process, will build upon and magnify the economic revival until it becomes self-sustaining with the boost from reconstruction.

Meanwhile, the relationship with Iran might mature if the Iranians look beyond their frustration at Iraq’s compliance with the sanctions and listen closely the anti-government sentiment within Iran following the December 2017 demonstrations. What is vital here, and something that would increase stability within Iraq, is a complete rethinking the relationship to that of a state to state basis from the current relationship involving sub-state actors. This would subsequently benefit Iran by making another Iraqi security crisis less likely, and ensuring the relationship is based on national sentiment, rather than non state actors.

Disclaimer

Ahmed Tabaqchali’s 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.

[i] The code for Turkish Lira is TYR, but TL is used widely. https://en.wikipedia.org/wiki/Turkish_lira

[ii] The 12 months ending in March 2018 correspond to the Iranian year 1396. Iranian data are provided using this calendar.

 https://financialtribune.com/articles/economy-business-and-markets/81287/iran-third-biggest-trading-partner-of-iraq-with-16-share

[iii] Al Waleed crossing was freed by Iraqi forces in June 2017. https://www.reuters.com/article/us-mideast-crisis-iraq-syria/iraqi-forces-remove-islamic-state-fighters-from-vicinity-of-u-s-base-in-syria-idUSKBN19807Y

[iv] http://documents.worldbank.org/curated/en/672671468196766598/pdf/106132-v2-main-report-P159972-PUBLIC-KRG-Economic-Reform-Roadmap-post-Decision-Review-05-30-16.pdf

[v] https://www.washingtoninstitute.org/policy-analysis/view/turkey-and-the-krg-signs-of-booming-economic-ties-infographic

[vi] Arrived at by diving the value of exports by the year end value of the TL.

[vii] Iraq’s bargaining power is further enhanced if it links this with plans to double Kirkuk’s output over the next few yeaes

 The Kurdistan Regional Government (KRG) exported an average of 550,000 bbl/d in 2017 until October 2017. After which they ranged between about 240,000-370,000 bb/d for an average of 311,000.

http://auis.edu.krd/iris/sites/default/files/Statehood in KRI through an Economic Lens_ FINAL.pdf pages 6 & 7, page 7 footnote 15.

[viii] http://www.jordantimes.com/news/local/industrial-exports-iraq-resume-after-border-reopening

[ix] Although most of Jordan’s exports are currently value-add products. In 2016, Pharmaceutical Products accounted for 16% of total exports, Electrical & Electronic Equipment for 13%; Fertilizers for 12%; plastics for 11%. While Vegetable, Fruits & Nut food preparation accounted for only 2.3%, and Edible Vegetables, certain roots and Tubers accounted for 2.2% for a total under 5%.

[x] http://iraqieconomists.net/en/2017/09/19/uae-iraq-trade-touches-7-billion-2016/

[xi] https://www.thenational.ae/world/mena/saudi-iraqi-trade-to-reach-23-billion-saudi-riyals-within-10-years-1.706487

[xii] https://en.mehrnews.com/news/122562/Iran-to-resume-electricity-exports-to-Iraq-within-weeks

[xiii] Table 3, page 79 ““A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

   Figures from the Ministry of Electricity show that available capacity, was 16.0 GW by end of July 2018, which does not include the lost Iranian supply. https://moelc.gov.iq/index.php?name=News&file=article&sid=4212

[xiv] This article explains the nature of the relationship and the history of the under-payments https://www.washingtoninstitute.org/policy-analysis/view/the-irgc-may-try-to-divert-iraqs-electricity-payments

[xv] https://theiranproject.com/blog/2018/07/08/iran-cuts-electricity-supplies-to-iraq-over-unpaid-bills/

[xvi] https://theiranproject.com/blog/2018/07/17/govt-spox-iran-not-to-resume-electricity-supplies-to-iraq-in-near-future/

[xvii] https://www.middleeastmonitor.com/20170202-kuwait-considers-export-of-electricity-to-iraq/

[xviii] https://www.bloomberg.com/news/articles/2018-07-29/iraq-says-saudis-to-sell-it-power-at-a-fraction-of-iran-s-price

[xix] Page 82 “A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

[xx] http://www.irna.ir/en/News/82906994

[xxi] Page 82 “A New Hope: Iraq Oil’s Way Forward” http://www.bayancenter.org/en/2018/02/1435/

[xxii] http://documents.worldbank.org/curated/en/255111529495871846/pdf/Jobs-in-Iraq-a-primer-on-job-creation-in-the-short-term.pdf

[xxiii] http://www.bbc.com/travel/gallery/20171220-the-iraq-city-that-opens-its-doors

[xxiv] https://www.alarabiya.net/articles/2012/04/12/207233.html

[xxv] https://www.reuters.com/article/us-iran-banks-kerry-idUSKCN0Y30OJ

[xxvi] A recent report by the author covers this in further detail.http://www.iraq-businessnews.com/2018/06/15/forget-the-donations-stupid-new-dynamics-in-funding-reconstruction/

[xxvii] https://uk.reuters.com/article/mideast-crisis-iraq-reconstruction/factbox-pledges-made-for-iraqs-reconstruction-in-kuwait-idUKL8N1Q55RY

Chevron to Develop Oil Fields in Basra

By John Lee.

The state-run Basra Oil Company (BOC) has signed a memorandum of understanding with US oil company Chevron to develop oil fields

BOC announced the start of the first phase of work and cooperation with Chevron US to develop some oil fields and the establishment of a company.

The Director-General pointed out that this project will provide employment opportunities and social services for citizens in the province.

(Source: Iraqi Oil Ministry)

Defeat-IS Forces Make Progress, Require Continued Support

Defeat-ISIS Forces Make Progress, Require Continued Coalition Support

Forces battling the Islamic State of Iraq and Syria continue to make progress. However, the environment in Iraq and Syria is complex and the defeat-ISIS forces require continued support, coalition officials said today.

Army Col. Sean Ryan, the spokesman for Operation Inherent Resolve, spoke to Pentagon reporters about progress being made against the Islamic State of Iraq and Syria. He spoke via satellite from Baghdad.

“In Iraq, operations continue to secure areas across the country, as Iraq security forces locate, identify and destroying ISIS remnants,” Ryan said. “Last week alone, … operations across Iraq have resulted in the arrest of more than 50 suspected terrorists and the removal of 500 pounds of improvised explosive devices.”

Progress in Iraq’s Anbar Province

Iraqi forces are moving in Anbar province, in the Hamrin Mountains and Samarra. Reconstruction efforts are ongoing with roads reopening in the north. Iraqi engineers “cleaned the main road between Salahuddin and Samarra of IEDs, making travel safer between the two cities,” he said.

In the Baghdad area, the ISF established central service coordination cells, a program designed to use military resources to enable local communities to restore basic infrastructure and services. “Initial efforts by the coordination cells include trash collection, road openings, maintenance of water facilities,” Ryan said.

Syrian Democratic Forces are preparing for the final assault on ISIS in the Middle Euphrates River Valley. The SDF is reinforcing checkpoints and refining blocking positions ahead of clearance operations in Hajin, Ryan said.

Military Operations, Reconstruction in Syria

In Syria, too, reconstruction efforts go hand in hand with military operations. “In Raqqa, the internal security forces have destroyed more than 30 caches containing 500 pounds of explosives discovered during the clearance operations in the past weeks,” the colonel said.

ISIS remains a concern in both countries, the colonel said. “Make no mistake: The coalition is not talking victory or taking our foot off the gas in working with our partners,” he said.

Defeating ISIS, he said, will require a long-term effort.

“We cannot emphasize enough that the threat of losing the gains we have made is real, especially if we are not able to give the people a viable alternative to the ISIS problem,” Ryan said. “We continue to call on the international community to step up and ensure that conditions that gave rise to ISIS no longer exist in both Syria and Iraq.”

(Source: US Dept of Defense)

How Iraq Should Respond to the Strait of Hormuz Crisis

By Youssef Ali.

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

President Donald Trump’s decision to pull out of the nuclear deal and sign the executive order to reimpose sanctions on Iran has had a significant impact on the global oil markets.

This move poses a severe threat to the economies of major oil exporting countries including Iraq, the second largest oil exporter in OPEC after Saudi Arabia and the third in the world after Russia and Saudi Arabia by 4.4 million barrel per day. Many analysts are reflecting on the effects that this conflict has on the economy of Iraq, which heavily relies on oil.

The sanctions mainly target the Iranian energy sector, which supplies Iran with foreign exchange and at the same time represents about 40% of revenues of its budget. The goal of the sanctions is to prevent Iranian oil exports by imposing sanctions on its customers.

Eliminating Iranian oil supplies will cause unrest in the oil markets around the world because it will lead to price surges, hence substantial economic losses on importing countries, which are already fearing a potential recession. That is why the U.S. tried to convince some of OPEC’s members to increase their supplies contrary to the recent deal amongst OPEC and non-OPEC countries to decrease production, and that in order to compensate Iranian supplies and prevent the disruption of the oil market to prevent damage to the global economy.

This move led to massive disputes between the major suppliers and pushed Iran to threat blocking oil exports from the Middle East altogether if it was to be prevented from exporting its own oil to the international market. If Iran follows through with its threat, it would mean massive losses for the Gulf countries, including Iraq whose economy is primarily depended on oil exports.

That said, completely stopping Iranian oil exports would be practically unlikely for the following reasons:

The nature of oil markets which is volatile and is based on trust. If the OPEC members in the Gulf Region, especially Saudi Arabia and UAE decided to replace the sanctioned Iranian oil supplies, the possibility alone that Iran would follow through its threat of closing the Strait of Hormuz would diminish the trust in that market. The supplies which pass through the strait would be considered as unstable, importers would start looking for alternate sources. This would destroy energy markets in the Middle East, meaning massive losses to the economies of all parties involved, including neutral states such as Iraq.

On a global basis, the mentioned encounter will damage the international economy that is fearing a potential recession, because this encounter, if it happens will cause a massive increase in global oil prices, leading to a domino effect that would create a hike in the prices of many goods and services.

This is why it is expected that while the sanctions will be implemented, all parties involved will allow for under-the-table arrangements in order to avoid such mutual destruction by allowing Iran to open an limited channel to export its oil, as it has happened in the past. Prior to signing the nuclear deal, UAE oil brokerage companies and banks played such a role before they were shut down after the recent pull out of the nuclear deal by the U.S. Allowing for such back-channels would mean that the sanctions will have their impact on the Iranian economy by disrupting the traditional oil export routs and limiting its revenue, yet allowing for a backdoor deal that will help the international community avoiding a conflict that could have grave impact on the global economy.

There is a role for Iraq to play in this crisis. The current policy of Iraq in regards to this conflict, in which it is trying to mediate between the parties involved is a wise policy. It is in the interest of nobody to escalate the situation in the Gulf region. On the other hand, Iraq could, given the circumstances,  gain enormous benefits by performing the same role that UAE brokerage companies and banks were playing, which would be a win-win for everyone involved.

In other words, Iraq can empower its private sector to establish companies and banks that facilitate the financial transactions related to the Iranian oil export, which would add important revenues to the economy of Iraq and increase the financial movement in the country; at the same time it would ensure the interests of Iran and decrease the likelihood of an encounter in the Gulf, which would serve the Gulf Arabs well.

Iraq must exploit this opportunity, especially since the Europeans countries along with Russia and China have already expressed their willingness to play this role. This opportunity could also be a significant incentive for Iraq to improve its ailing banking system to be able to implement such operation.

However, this is not possible without  negotiating with the U.S. on this issue in order to avoid being subject of the sanctions. The U.S. has in the past exempted Iraq from the sanctions for dealing with Iran, given its special circumstances. The U.S. also has expressed its readiness this time to allow some exceptions. This could be Iraq’s chance to negotiate an arrangement that serves everyone well, at least for the short-term.

On the long term however, Iraq has to find alternate routes to export its oil in order to avoid the increasingly unstable oil routes of the Arabian Gulf. Viable solutions could be the Iraq-Jordan pipeline that would start in Basra and end in Aqaba. Iraq needs to accelerate building this pipeline. Another option is the rehabilitation of the Iraq-Syria pipeline that begins from Kirkuk and ends in Banias, which, of course, would only be an option if the security in Syria improves.

Iraq is either the core, or constantly caught in the middle of many crisis that are shaking the Gulf region. These reoccurring crisis pose huge obstacles in front of rebuilding and investment. If Iraq wants to survive them, it needs to play a constructive role and aim for stability and profit for all parties involved.

Coalition Strikes Target ISIS Terrorists

Combined Joint Task Force Operation Inherent Resolve and its partners continued to strike Islamic State of Iraq and Syria targets in designated parts of Syria and Iraq between July 30 and Aug. 5, conducting 20 strikes consisting of 27 engagements, Combined Joint Task Force Operation Inherent Resolve officials reported on Monday.

Operation Roundup, which began May 1 to accelerate the defeat of ISIS in the Middle Euphrates River Valley and Iraq-Syria border region, has continued to gain ground and remove terrorists from the battlefield through offensive operations coupled with precision coalition strike support.

Strikes in Syria

Yesterday near Abu Kamal, coalition military forces conducted a strike consisting of one engagement against ISIS targets, destroying two ISIS vehicles.

There were no reported strikes conducted in Syria on Aug. 4.

On Aug. 3 near Abu Kamal, coalition military forces conducted four strikes consisting of six engagements against ISIS targets, destroying five ISIS vehicles.

On Aug. 2 near Abu Kamal, coalition military forces conducted six strikes consisting of six engagements against ISIS targets, destroying six ISIS supply routes.

On Aug. 1 near Abu Kamal, coalition military forces conducted two strikes consisting of three engagements against ISIS targets, destroying an ISIS staging area and an ISIS vehicle-borne improvised explosive device factory.

On July 31 near Abu Kamal, coalition military forces conducted a strike consisting of one engagement against ISIS targets, destroying an ISIS command-and-control center.

There were no reported strikes conducted in Syria on July 30.

Other Strikes in Syria

On July 29, coalition military forces conducted two strikes in Syria that were not reported in the previous release:

— Near Abu Kamal, coalition forces conducted two strikes consisting of two engagements against ISIS targets, destroying an ISIS supply route and an ISIS vehicle.

Strikes in Iraq

There were no reported strikes conducted in Iraq yesterday.

On Aug. 4 near Dulab, coalition military forces conducted a strike consisting of an engagement against ISIS targets, destroying two ISIS tunnels.

On Aug. 3 near Wadi Ashai, coalition military forces conducted a strike consisting of an engagement against an ISIS tactical unit.

There were no reported strikes conducted in Iraq on Aug. 2.

On Aug. 1 near Wadi Ashai, coalition military forces conducted a strike consisting of five engagements against ISIS targets, destroying two ISIS-held buildings and three ISIS supply caches.

On July 31 near Wadi Ashai and Wadi Zagatoon, coalition military forces conducted two strikes consisting of two engagements against ISIS targets, destroying an ISIS-held building.

On 30 July 30 near Wadi Ashai, coalition military forces conducted a strike consisting of an engagement against ISIS targets. The strike engaged an ISIS tactical unit.

Part of Operation Inherent Resolve

These strikes were conducted as part of Operation Inherent Resolve, the operation to destroy ISIS in Iraq and Syria. The destruction of ISIS targets in Iraq and Syria also further limits the group’s ability to project terror and conduct external operations throughout the region and the rest of the world, task force officials said.

The list above contains all strikes conducted by fighter, attack, bomber, rotary-wing or remotely piloted aircraft; rocket-propelled artillery; and ground-based tactical artillery, officials noted.

A strike, as defined by the coalition, refers to one or more kinetic engagements that occur in roughly the same geographic location to produce a single or cumulative effect.

For example, task force officials explained, a single aircraft delivering a single weapon against a lone ISIS vehicle is one strike, but so is multiple aircraft delivering dozens of weapons against a group of ISIS-held buildings and weapon systems in a compound, having the cumulative effect of making that facility harder or impossible to use. Strike assessments are based on initial reports and may be refined, officials said.

The task force does not report the number or type of aircraft employed in a strike, the number of munitions dropped in each strike, or the number of individual munition impact points against a target.

(Source: US Dept of Defense)

Baker Hughes wins Iraq Flare Gas Contract

Baker Hughes, a GE company has been awarded a contract by the South Gas Company of Iraq (SGC) for fast-track solutions to help the recovery of flare gas for Nassiriya and Al Gharraf  [Garraf] oilfields. The importance of the project was highlighted by the attendance of several high-level officials, including HE Jabbar Al-Luaib, the Minister of Oil of Iraq, at the agreement-signing ceremony.

As per the agreement, BHGE will develop solutions for flare gas recovery at Nassiriya and Al Gharraf oilfields using advanced modular gas processing (NGL) technology developed in the United States and Italy. The project will utilize the modular skid-mounted Gas Processing technology to build 200 million standard cubic feet per day (MMSCFD) NGL plant and is expected to be completed by 2021.

The project will support the development of a fully integrated natural gas liquid (NGL) plant at Nasiriya that will recover 200 MMSCFD of dry gas, liquefied petroleum gas (LPG) and condensate.

The modular solution will support power plants with dry gas for efficient power generation, thus helping meet the growing demand for electricity using clean fuel. It will also contribute to curtailing the amount of gas flared in the fields of Nassiriya and Gharraf that otherwise goes to waste.

The advanced technology used to develop the plant will help produce more than 1,000 tons of LPG per day and recover more than 900 cubic meters per day of condensates, which will help to meet the domestic demand for cooking gas.

The surplus LPG and condensate will be exported, generating high revenue to the Iraqi government.  Contributing to the social and economic development of Nassiriya, the project is aligned with the vision of the Ministry of Oil and the government.

H.E. Jabbar Ali Al-Allaibi, Iraq’s Minister of Oil said, that this project is important achievement for the Ministry and marks the entry of a new phase for the sector, highlighted by time optimal utilization of flare gas, which is a major milestone in the government’s extensive efforts to drive a better future for Iraq.

H.E. also highlighted the prominence of this project for the province of Dhi Qar specifically and for Iraq in general adding that BHGE will provide it latest and advanced technologies and solutions to optimize the use of flare gas at the Nassiriya and Al Gharaf oilfields recovering 200 MMSCFD of dry gas daily.

Rami Qasem, President, MENAT & India, BHGE, said:

“As a local trusted partner to Iraq, BHGE is bringing advanced technologies and solutions that can help meet the Ministry’s goals for the industry. This contract is a testament to our continued commitment to supporting the Ministry of Oil’s strategic goals by deploying advanced flare gas solutions to build the country’s oil and gas infrastructure. The project will create more than 500 direct and indirect jobs for Iraqis, build local capabilities and strengthen the local supply chain.”

BHGE is the first and only company in the world to provide a fullstream offering covering products, services and digital solutions for the oil and gas sector, from upstream, to midstream to downstream.

BHGE has been a committed partner to Iraq for more than 50 years, with three offices in Iraq – Baghdad, Erbil and the Basra –  and more than 350 employees in country, BHGE continues to deliver its latest technology and expertise to its local customers.

(Source: Baker Hughes)

NATO Stepping Forward on Training Mission to Iraq

NATO’s Allied Joint Force Command in Naples is stepping out smartly to establish the alliance training mission in Iraq, said Navy Adm. James Foggo, the commander of the Joint Force Command, in a recent interview.

Iraqi leaders asked the alliance to stand up the mission, and NATO heads of state approved the request during the Brussels Summit July 12.

The NATO effort will build on past NATO involvement in the country. In the past, seven personnel acted as facilitators for NATO efforts. The training mission will have about 500 personnel in the nation to push forward. A Canadian major general will be the commander in Iraq, Foggo said.

The Iraqi government does not want to make the same mistakes that led to the Islamic State of Iraq and Syria taking over much of the country in 2014. Iraqi security forces had let their training lapse and ISIS was able to capture the western part of the nation and much of the north. The crown jewel in the ISIS effort was the capture of Mosul, the second-largest city in the country.

“Thankfully, we formed a coalition that went in and did some significant training and work with Iraqi forces who pushed them back,” Foggo said.

Fighting ISIS, Rebuilding

This was an incredible effort on part of the Iraqis and coalition personnel, the admiral said. Iraqi security forces were holding off ISIS, while rebuilding for the long-term fight against the terrorist organization.

NATO was a part of that effort. At the time, NATO teams concentrated on triage and medical training for Iraqi forces heading to the field, showing them how to counter improvised explosive devices and conducting explosive ordnance disposal training. “This is significant because the amount of unexploded ordnance there, particularly in Mosul, is huge,” Foggo said.

The NATO trainers also helped train Iraqis in repair of old Russian equipment like T-72 tanks and BMPs — amphibious tracked infantry fighting vehicles. “We did all that with a very small number of about seven people in Baghdad,” Foggo said. “They served as facilitators to bring in the training teams, the medical teams [and] the mechanics operating out of a couple forward operating areas in country.”

The new NATO mission formalizes the effort and commitment of the alliance. The mission will also facilitate a bigger mission set. The Iraqis have asked for more technical training, more advanced training and “they would also like to become much more proficient in the area explosive ordnance disposal,” he said.

‘It’s a Good Mission’

Foggo said a meeting he had recently in Iraq illustrates the need. He was visiting Besimayah Range in Iraq earlier this year and met with the Iraqi team tasked with going into Mosul to disarm the unexploded ordnance in the city. “These guys went in and they got everything they could above ground, to pave the way for people to return their homes and they get back to rebuilding and reconstruction,” the admiral said.

“It’s a good mission,” he continued. “It’s one NATO embraces and we look forward to leading it here in the future.”

The troops themselves are dedicated and willing, Foggo said. At that meeting in Besimayah, he spoke with Iraqi personnel who had served in Mosul. “The first thing that struck me was that they were very professional, stand-up young men who looked me in the eye,” he said. “One of the EOD specialists had been gassed. He had been disarming some sort of device that went off. It was chlorine gas and they got exposed. They were very proud of the fact that they were taken to an American field hospital to be treated.”

“I see them as being brave, very professional and very focused on the task that they have to rebuild their country now that they have succeeded in taking it back,” the admiral added.

The needs of Iraqi forces will change over time, Foggo noted. EOD may be the big need now, but something else may be more important next year. “As we get there and we provide a level of expertise that the NATO alliance can provide with all the different warfare specialties that we have and all the skill sets that we have, the alliance is a very powerful and robust and resource rich alliance,” the admiral said.

“We have people who understand how to maintain the infantry branch, maintain the armor corps, how to teach strategy and tactics, how to disarm bombs — we’re going to find things where there may be gaps or seams where the Iraqi armed forces might need help with,” he said..

“If it is in our mandate and under the rubric of training and nonkinetic activity … then we can slide into that and adapt to that fairly easily,” Foggo said.

(Source: US Dept of Defense)

Capstone Wins 1MW Order for Microturbine in Iraq

US-based Capstone Turbine Corporation has announced today it secured an order for a remanufactured C1000R microturbine to an oil and gas production site in Northern Iraq.

The associated gas-fueled C1000R microturbine will act as the primary energy source for the remote site and will require minimal maintenance.

Jim Crouse, Executive Vice President of Sales and Marketing for Capstone, said:

This order will help to further solidify Capstone microturbines as a new state of the art solution for oil and gas producers in the Middle East.

“Furthermore, the project demonstrates the confidence oil and gas customers continue to have in the reliability and long service intervals of Capstone’s products.”

(Source: Capstone Turbine Corporation)

AstraZeneca Investigated for Alleged Corruption in Iraq

By John Lee.

UK-bassed pharmaceutical company AstraZeneca has said it is the subject of an anti-corruption investigation in the US relating to its activities in Iraq

In its latest quarterly filing with the Securities and Exchange Commission (SEC), the company said:

As previously disclosed, in the US, in October 2017, AstraZeneca and certain other pharmaceutical and/or medical device companies were named as defendants in a complaint filed in federal court in the District of Columbia by US nationals (or their estates, survivors, or heirs) who were killed or wounded in Iraq between 2005 and 2009 (the Lawsuit).

“The plaintiffs allege that the defendants violated the US Anti-Terrorism Act and various state laws by selling pharmaceuticals and medical supplies to the Iraqi Ministry of Health.

“In addition, AstraZeneca has received an inquiry from the US Department of Justice in connection with an anti-corruption investigation relating to activities in Iraq, including interactions with the Iraqi government and certain of the same matters alleged in the Lawsuit.

(Source: AstraZeneca)

Coalition Strikes Continue Against ISIS Targets

Combined Joint Task Force Operation Inherent Resolve and its partners continue to pursue the lasting defeat of the Islamic State of Iraq and Syria in designated parts of Syria and Iraq, Combined Joint Task Force Operation Inherent Resolve officials reported today.

Operation Roundup, which began May 1 to accelerate the defeat of ISIS in the Middle Euphrates River Valley and Iraq-Syria border region, has continued to gain ground and remove terrorists from the battlefield through offensive operations coupled with precision coalition strike support.

Between July 23-29, coalition military forces conducted nine strikes, consisting of 11 engagements, in Iraq and Syria

Strikes in Syria

There were no reported strikes conducted Syria yesterday.

On July 28, coalition military forces conducted a strike consisting of one engagement against ISIS targets near Abu Kamal. The strike damaged an ISIS line of communication.

On July 27 in Syria, coalition military forces conducted six strikes consisting of seven engagements against ISIS targets near Abu Kamal. The strikes destroyed an ISIS fighting position and damaged three ISIS lines of communication.

There were no reported strikes conducted in Syria between July 23-26.

Strikes in Iraq

There were no reported strikes conducted in Iraq between July 27-29.

On July 26 in Iraq, coalition military forces conducted a strike consisting of one engagement on ISIS targets near Rutbah. The strike engaged an ISIS tactical unit and destroyed an ISIS pickup truck.

There were no reported strikes conducted in Iraq on July 25.

On July 24, coalition military forces conducted a strike consisting of two engagements against ISIS targets near Makhmur. The strike engaged an ISIS tactical unit.

There were no reported strikes conducted in Iraq on July 23.

Additional Strikes

On July 22, coalition military forces conducted four strikes in Syria that were not reported in the previous release. The strikes consisted of four engagements against ISIS targets near Abu Kamal that destroyed four ISIS supply routes.

Part of Operation Inherent Resolve

These strikes were conducted as part of Operation Inherent Resolve, the operation to destroy ISIS in Iraq and Syria. The destruction of ISIS targets in Iraq and Syria also further limits the group’s ability to project terror and conduct external operations throughout the region and the rest of the world, task force officials said.

The list above contains all strikes conducted by fighter, attack, bomber, rotary-wing or remotely piloted aircraft; rocket-propelled artillery; and ground-based tactical artillery, officials noted.

A strike, as defined by the coalition, refers to one or more kinetic engagements that occur in roughly the same geographic location to produce a single or cumulative effect.

For example, task force officials explained, a single aircraft delivering a single weapon against a lone ISIS vehicle is one strike, but so is multiple aircraft delivering dozens of weapons against a group of ISIS-held buildings and weapon systems in a compound, having the cumulative effect of making that facility harder or impossible to use. Strike assessments are based on initial reports and may be refined, officials said.

The task force does not report the number or type of aircraft employed in a strike, the number of munitions dropped in each strike, or the number of individual munition impact points against a target.

(Source: US Dept of Defense)