The Iraqi dinar is the official currency of Iraq. The nation stays largely isolated from global financial markets. The nation has no real sovereign credit, there is small need for its money which stays thinly traded. All Iraqi property, including its money are viewed as currently being a very great financial risk. The Iraqi dinar value, or the Iraqi dinar exchange rate, is effectively determined through the central bank through it's US currency auctions. The Iraq dinar was initially launched in 1932 when Iraq grew to become independent from British rule. The dinar changed the Indian rupee that had been launched by the British following winning control of Iraq from Turkey in WWI. The Iraqi dinar continues to be a managed or controlled currency throughout its existence.
Initially, when it was first placed into circulation, the Iraqi dinar was pegged towards the British pound. By 1959 Iraqi nationwide wealth had proved to be more and more coupled with oil. Oil was priced and traded globally in terms from the US currency, so the Iraqi currency peg was altered within the path of the US dollar and stays so today. After the initial US Gulf Struggle and the imposition of UN financial sanctions, financial conditions inside Iraq worsened sharply. By 1993, inflation had rocketed to an amazing yearly rate of more than 1000 percent, unemployment was at a massive fifty percent and also the Iraqi dinar exchange rate dropped considerably. Throughout 1994, it required about 2,500 dinars to buy one US dollar. To help the dinar, numerous measures had been launched in 1996 such as new regulations allowing Iraqi citizens to own overseas money financial institution accounts.
Following the 2nd Gulf War, new preparations had been created to take effect on 15 October 2003 to issue a new Iraqi dinar and to manage the Iraqi dinar exchange rate. Since those new arrangements have been launched, the Iraqi dinar value has steadily increased. The current exchange rate is 1,170 dinars for 1 US dollar. Figures published through the Central Intelligence Agency (CIA) in its World Fact Book display the number of Iraqi dinars needed to purchase 1 US dollar was at 1,475 dinars in 2005, 1,466 in 2006, 1,255 in 2007, 1,176 in 2008 and 1,170 in 2009. All indicators point to the presently prevailing exchange rate gradually increasing in the not too distant future.
Iraq just lately quantified its confirmed raw oil reserves at 143 billion barrels, in comparison with Saudi Arabia with 265 billion barrels of confirmed reserves. The nice part about these reserves are that they are effortlessly accessible and as a result the oil is cheap to produce. Roughly 95% of all Iraqi export value is derived from crude oil.
In the long run, as political balance returns to Iraq, its financial programs gains efficiencies and its citizens capture the full value of the national crude oil wealth, the Iraqi dinar value might be anticipated to strengthen considerably over its current trading valuations.
There are other sources and articles on the subject of Iraqi dinar value listed below.
Showing posts with label iraqi dinar speculation. Show all posts
Showing posts with label iraqi dinar speculation. Show all posts
Sunday, December 26, 2010
Sunday, November 22, 2009
Iraqi Dinar Value - The Dollar While Weak Is Still King, Even In Iraq
Interesting article on the supposed fall of the dollar and the possible replacement by other currencies as the world currency of choice. The Iraqi Dinar could be worth even more than expected.
Globally, the Greenback Remains King
The Wall Street Journal
October 29, 2009
The U.S. dollar, once universally accepted as the world's strongest currency, has been trounced in recent months by everything from the euro to the Brazilian real to the South Korean won. But in the back-alley markets where business is done in many of the world's developing economies, the dollar still reigns.
In jewelry stores in Vietnam, taxicabs in Venezuela and outdoor markets in Nigeria, black-market money-changers say the dollar is still the currency of choice, even though its value has fallen in some cases.
"The U.S. dollar is losing value, but not here in Vietnam," said Vu Manh Quynh, an auto trader who regularly exchanges dong for dollars in the winding streets of Hanoi's Old Quarter. "Vietnamese people still keep U.S. dollars and gold." While the U.S. dollar fetches 17,858 dong on the official rates, the black market rate is closer to 18,600. Hai Duong, a currency trader, said he had 20 or more customers buying U.S. dollars on a recent Wednesday, compared with two customers buying euros.
While their true size is unknown, black markets in currencies are key to greasing the wheels of commerce in countries that have tight currency controls. They provide residents and companies with protection against inflation or a possible devaluation of the local currency, and give companies a source of dollars with which to buy and sell goods abroad. In most countries, the markets are illegal, while in others they are tacitly condoned.
"Typically, dollars are king in the black markets of the world," says Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund.
Prof. Rogoff estimates that as much as 75% of U.S. notes in circulation, or more than $600 billion, are held outside the U.S. Most of that is likely in what he calls the underground economy, where transactions are made beyond the oversight of government -- much of which is juiced by the black market.
"This money is not in cash registers, it's not in bank vaults," Prof. Rogoff says.
In the world's official foreign-exchange markets, where turnover totals about $3 trillion each day, according to the Bank for International Settlements, the dollar's luster has diminished. The dollar, for example, has fallen about 6% against the euro this year. The dollar has dropped about 15% against a basket of currencies since early March.
The ballooning U.S. deficit and a move by investors away from the haven of the dollar as world economies recover have sparked worries that the currency may be headed for a years-long swoon. It also has opened the door for renewed questioning of the dollar's future as the world's reserve currency.
For Venezuelans, where the black market plays a crucial role in the financial system, the dollar has retained its status. Residents seeking protection against inflation or a devaluation of the bolivar turn to currency traders. Large companies that need dollars for operations abroad also visit the unregulated market.
View Full Image
Justin Mott for The Wall Street Journal
."Having dollars is like a barricade," says Arnaldo Morales, a cabby who moonlights as a currency trader, buying dollars from travelers as they enter the country, then selling them to Venezuelans.
Mr. Morales says he has been trading dollars since 2003, when President Hugo Chávez imposed a currency peg. Residents can purchase only $2,500 for travel abroad each year at the official rate of 2.15 bolivars.
The economy has become so heavily dependent on the so-called parallel exchange rate for greenbacks that the government was recently forced to intervene after the dollar traded as high as seven bolivars in August. The government is flooding the domestic market with dollars by selling bonds to locals who then trade them abroad for U.S. currency.
"The dollar will always be strong," says Andrea Martinez, a trader who dismissed as temporary the recent decline in the black-market rate. Ms. Martinez operates inside a tiny, nondescript mall where shotgun-carrying private-security guards wearing bulletproof vests watch over rows of pawn shops that serve as a front for dollar traders. On a good day, she says, she still sells as much as $5,000.
In Nigeria, sub-Sahara Africa's second-largest economy, currency traders still deal predominantly in American currency. The black-market traders even have their own trade group, the Association of Bureaux de Change Operators of Nigeria.
"The dollar still has dominance in Nigeria," said Alhaji Farouk Suleman, the president of the group. "The exchange rate might not be good, but you know what you're dealing with and that you can use the dollar anywhere you go. I don't see any real shift towards the pound or euro."
The Nigerian naira, after plummeting late last year and earlier this year, has stabilized against the dollar, thanks to renewed confidence after harsh banking reforms undertaken by a new central bank governor. The dollar was fetching 183 naira in the spring, but now buys about 153 naira.
But the dollar's descent against the world's biggest currencies hasn't gone unnoticed.
On the streets of Mumbai, illegal currency traders that swap wads of cash from bags behind their shops in the bustling back alleys of Colaba, a neighborhood popular with tourists, say business has been slow recently. The dollar's decline has sellers waiting for a rebound and buyers waiting for a better deal.
"Business is way down," says one trader, spitting a stream of red betel-nut juice in the alley behind his shop and wiping his moustache. "People still want to wait." The dollar buys 47 rupees at licensed currency-trading companies and 46.70 rupees on the black market.
And at the Super Rich currency exchange near one of Bangkok's busiest downtown thoroughfares, Thaweesak Kanchanakorn says he and his girlfriend are planning to vacation in the U.S., and that he thought it might be a good idea to invest in dollars now, because they're "cheap." In the long run, "I don't think the U.S. dollar will still be a major currency for reserves anymore," he said. China's yuan "will take its place."
For now, those seeking to exchange bolivars or dong are choosing the U.S. dollar, if only because it remains the most recognizable of the world's currencies.
In Iraq, where legal currency exchanges have become common, the U.S. presence since 2003 has kept up demand for the dollar at the expense of the euro.
Ali Mohammed of the Al Nasir currency-exchange company said that although the world market value of the euro has risen, it is difficult to exchange in Baghdad. And the dollar likely will be Iraq's unofficial second currency for some time to come. The dollar fetched about 1,190 dinars in September, according to central bank figures, little changed from 1,220 dinars at the beginning of 2008.
"It's the only thing used, besides the Iraqi dinar, for commercial business and trade," he said. "As long as it stays pretty stable, we don't mind this."
Carlos Denis, who trades in the Venezuelan mall alongside Ms. Martinez, insists that the dollar is still the only currency that matters. "Take out a dollar bill in the remotest place in world and people will recognize it," he said.
-- Eric Bellman in India, Gina Chon in Iraq and Wilawan Watcharasakwet
in Thailand contributed
to this article.
Globally, the Greenback Remains King
The Wall Street Journal
October 29, 2009
The U.S. dollar, once universally accepted as the world's strongest currency, has been trounced in recent months by everything from the euro to the Brazilian real to the South Korean won. But in the back-alley markets where business is done in many of the world's developing economies, the dollar still reigns.
In jewelry stores in Vietnam, taxicabs in Venezuela and outdoor markets in Nigeria, black-market money-changers say the dollar is still the currency of choice, even though its value has fallen in some cases.
"The U.S. dollar is losing value, but not here in Vietnam," said Vu Manh Quynh, an auto trader who regularly exchanges dong for dollars in the winding streets of Hanoi's Old Quarter. "Vietnamese people still keep U.S. dollars and gold." While the U.S. dollar fetches 17,858 dong on the official rates, the black market rate is closer to 18,600. Hai Duong, a currency trader, said he had 20 or more customers buying U.S. dollars on a recent Wednesday, compared with two customers buying euros.
While their true size is unknown, black markets in currencies are key to greasing the wheels of commerce in countries that have tight currency controls. They provide residents and companies with protection against inflation or a possible devaluation of the local currency, and give companies a source of dollars with which to buy and sell goods abroad. In most countries, the markets are illegal, while in others they are tacitly condoned.
"Typically, dollars are king in the black markets of the world," says Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund.
Prof. Rogoff estimates that as much as 75% of U.S. notes in circulation, or more than $600 billion, are held outside the U.S. Most of that is likely in what he calls the underground economy, where transactions are made beyond the oversight of government -- much of which is juiced by the black market.
"This money is not in cash registers, it's not in bank vaults," Prof. Rogoff says.
In the world's official foreign-exchange markets, where turnover totals about $3 trillion each day, according to the Bank for International Settlements, the dollar's luster has diminished. The dollar, for example, has fallen about 6% against the euro this year. The dollar has dropped about 15% against a basket of currencies since early March.
The ballooning U.S. deficit and a move by investors away from the haven of the dollar as world economies recover have sparked worries that the currency may be headed for a years-long swoon. It also has opened the door for renewed questioning of the dollar's future as the world's reserve currency.
For Venezuelans, where the black market plays a crucial role in the financial system, the dollar has retained its status. Residents seeking protection against inflation or a devaluation of the bolivar turn to currency traders. Large companies that need dollars for operations abroad also visit the unregulated market.
View Full Image
Justin Mott for The Wall Street Journal
."Having dollars is like a barricade," says Arnaldo Morales, a cabby who moonlights as a currency trader, buying dollars from travelers as they enter the country, then selling them to Venezuelans.
Mr. Morales says he has been trading dollars since 2003, when President Hugo Chávez imposed a currency peg. Residents can purchase only $2,500 for travel abroad each year at the official rate of 2.15 bolivars.
The economy has become so heavily dependent on the so-called parallel exchange rate for greenbacks that the government was recently forced to intervene after the dollar traded as high as seven bolivars in August. The government is flooding the domestic market with dollars by selling bonds to locals who then trade them abroad for U.S. currency.
"The dollar will always be strong," says Andrea Martinez, a trader who dismissed as temporary the recent decline in the black-market rate. Ms. Martinez operates inside a tiny, nondescript mall where shotgun-carrying private-security guards wearing bulletproof vests watch over rows of pawn shops that serve as a front for dollar traders. On a good day, she says, she still sells as much as $5,000.
In Nigeria, sub-Sahara Africa's second-largest economy, currency traders still deal predominantly in American currency. The black-market traders even have their own trade group, the Association of Bureaux de Change Operators of Nigeria.
"The dollar still has dominance in Nigeria," said Alhaji Farouk Suleman, the president of the group. "The exchange rate might not be good, but you know what you're dealing with and that you can use the dollar anywhere you go. I don't see any real shift towards the pound or euro."
The Nigerian naira, after plummeting late last year and earlier this year, has stabilized against the dollar, thanks to renewed confidence after harsh banking reforms undertaken by a new central bank governor. The dollar was fetching 183 naira in the spring, but now buys about 153 naira.
But the dollar's descent against the world's biggest currencies hasn't gone unnoticed.
On the streets of Mumbai, illegal currency traders that swap wads of cash from bags behind their shops in the bustling back alleys of Colaba, a neighborhood popular with tourists, say business has been slow recently. The dollar's decline has sellers waiting for a rebound and buyers waiting for a better deal.
"Business is way down," says one trader, spitting a stream of red betel-nut juice in the alley behind his shop and wiping his moustache. "People still want to wait." The dollar buys 47 rupees at licensed currency-trading companies and 46.70 rupees on the black market.
And at the Super Rich currency exchange near one of Bangkok's busiest downtown thoroughfares, Thaweesak Kanchanakorn says he and his girlfriend are planning to vacation in the U.S., and that he thought it might be a good idea to invest in dollars now, because they're "cheap." In the long run, "I don't think the U.S. dollar will still be a major currency for reserves anymore," he said. China's yuan "will take its place."
For now, those seeking to exchange bolivars or dong are choosing the U.S. dollar, if only because it remains the most recognizable of the world's currencies.
In Iraq, where legal currency exchanges have become common, the U.S. presence since 2003 has kept up demand for the dollar at the expense of the euro.
Ali Mohammed of the Al Nasir currency-exchange company said that although the world market value of the euro has risen, it is difficult to exchange in Baghdad. And the dollar likely will be Iraq's unofficial second currency for some time to come. The dollar fetched about 1,190 dinars in September, according to central bank figures, little changed from 1,220 dinars at the beginning of 2008.
"It's the only thing used, besides the Iraqi dinar, for commercial business and trade," he said. "As long as it stays pretty stable, we don't mind this."
Carlos Denis, who trades in the Venezuelan mall alongside Ms. Martinez, insists that the dollar is still the only currency that matters. "Take out a dollar bill in the remotest place in world and people will recognize it," he said.
-- Eric Bellman in India, Gina Chon in Iraq and Wilawan Watcharasakwet
in Thailand contributed
to this article.
Saturday, August 1, 2009
Iraqi Dinar Value - Supplementary Budget Shows Deficit of Iraqi Dinar 3.9 Trillion
I guess we aren't the only ones that believe in huge deficits, is it possible the greatest US export is unsound financial planning?
http://www.edinarfinancial.net/news/?quer=&nm=&ny=&nn=601
Supplementary budget shows deficit of Iraqi dinar 3.9 trillion
July 29, 2009
“The supplementary budget, submitted to our committee, has an Iraqi dinar 5.3 trillion deficit. The committee believes that there is no need to present a supplementary budget with such a huge deficit,” Alaa al-Sadoon said.
On July 19, the Iraqi cabinet approved a draft supplementary budget for the current year, prepared by the Finance Ministry. The budget was planned to be devoted to provinces suffering from lack of allocations.(Source)Aswat Iraq
http://www.edinarfinancial.net/news/?quer=&nm=&ny=&nn=601
Supplementary budget shows deficit of Iraqi dinar 3.9 trillion
July 29, 2009
“The supplementary budget, submitted to our committee, has an Iraqi dinar 5.3 trillion deficit. The committee believes that there is no need to present a supplementary budget with such a huge deficit,” Alaa al-Sadoon said.
On July 19, the Iraqi cabinet approved a draft supplementary budget for the current year, prepared by the Finance Ministry. The budget was planned to be devoted to provinces suffering from lack of allocations.(Source)Aswat Iraq
Wednesday, July 1, 2009
Iraqi Dinar Exchange Rate - Iraq: The Energy Battle Heats Up
Now that US forces are leaving Iraq, Its Time for some of that Iraqi Tea, that bubbling crude to start paying off?
Iraq: The Energy Battle Heats Up
Stratfor Today » June 26, 2009 1124 GMT
ALI YUSSEF/
Summary:
Iraq's oil minister is being forced to defend himself against various charges stemming from the country's stagnant oil production. The charges come during a period of heightening tensions over oil among Iraq's feuding Shiite, Sunni and Kurdish factions. Ultimately, it will probably be up to an outside power to manage this political maelstrom - and of these powers, Turkey is the one to watch.
Analysis:
Iraq's OilIraqi Oil Minister Hussein Shahristani returned to the Iraqi parliament on June 25 to defend himself against a multitude of complaints from parliamentarians involving such issues as Iraq's declining oil output, its languishing hydrocarbons law and the corruption and mismanagement of the Iraqi oil industry's profits.
Due to a steep drop in once record-high crude prices over the past year, and aggravated by budget constraints and political infighting, Iraq's current oil output has stagnated at around 2.4 million barrels per day (bpd) - well below the country's enormous oil production potential. Since oil revenues account for 95 percent of the state's income, Shahristani has become the natural scapegoat for Iraq's current political and economic woes.
And with a major oil auction on the horizon, the country's first since the fall of Saddam Hussein, the Iraqi oil brawl is bound to escalate in the coming weeks. Given what he is up against, there is no guarantee that Shahristani will make it out of these June parliamentary grill sessions in one piece, but he has given no indication that he is prepared to bow out of this fight.Shahristani's plan to breathe some life back into Iraq's oil industry involves circumventing parliamentary approval to allow 32 of the world's major energy companies on June 29-30 to bid on 20-year-long service contracts to develop Iraq's six largest oil producing fields and two untapped natural gas fields. These energy companies, which include ExxonMobil, Chevron, Royal Dutch/Shell, ConocoPhillips, Turkish Petroleum Corp., BP, France's Total, Italy's Eni, Russia's Gazprom Neft and LUKoil, India's Oil and Natural Gas Corp. and China National Petroleum Corp., are taking a risk in investing in a country that has yet to pass an oil law, and whose politics pose a severe threat to business deals. Despite the risks, all these firms have a deep interest in securing these potentially lucrative contracts. But first, the oil minister must answer to the Federation of Oil Unions in the Shiite southern oil hub of Basra.
The southern labor unions produce the bulk of Iraqi crude and are extremely hesitant to allow foreign companies a piece of their contracts. The union federation has strongly criticized the oil minister for offering long-term service contracts, asserting that Iraqi companies and their employees are fully capable of developing the fields themselves. Shahrahstani's opponents in parliament argue that oil exploration - not production of existing fields - is needed to increase production. Shahristani, on the other hand, claims that exploration will take too much time, and there is a stronger need to focus on boosting current production. He argues that the foreign companies are the ones that the have the training, technological expertise and tools to more rapidly and efficiently boost Iraq's oil output by an additional 1.5 million bpd within four to five years.
This debate is not only about southern oil unions worried about being edged out by foreign oil majors. As Shahristani himself has claimed, there is a much wider political agenda involving multiple Iraqi factions currently in play.The Islamic Supreme Council of Iraq (ISCI), currently the largest Shiite party in parliament and the political bloc most closely aligned to Iran, carries a great deal of clout in the Shiite south that could strengthen the anti-Shahristani movement. After having fared poorly against Shiite Iraqi Prime Minister Nouri al-Maliki and his allies in January provincial polls, the ISCI is doing whatever it can to weaken the prime minister's power base so that it can be on a stronger political footing for legislative elections slated for Jan. 30, 2010.The ISCI's strategy involves using its clout in parliament to chip away at al-Maliki's Cabinet appointees.
Already, Iraqi Trade Minister Falah al-Sudani and former Parliament Speaker Mahmoud al-Mashhadani have been forced to resign. Shahristani, who maintains his political independence - and yet is in agreement with al-Maliki's vision of a strong, centralized government - is next on the target list.In addition to natural political competition, the ISCI and al-Maliki are on two different wavelengths in trying to shape the future of Iraq. The ISCI, and the Iranians by extension, envision a federalist model of Iraq that essentially carves out a Shiite autonomous zone in the south (similar to the Kurdish autonomous zone in the north). This would augment Iran's influence in Iraq via their Iraqi Shiite allies.
This vision, however, is directly at odds with that of Iraqi Prime Minister Nouri al-Maliki, smaller regional Shiite parties and the mainstream Sunni parties, who all agree on the need for a strong, centralized government in Iraq that can build up its immunity to foreign penetration. Al-Maliki and Shahristani have been able to draw support from Sunni and Shiite factions for their strong stance against federalism and their iron-fist approach with the Kurds, but they are also up against a number of sore losers from the provincial elections who want to see the prime minister weakened.The ISCI has no shortage of allies to use against al-Maliki. The oil unions in the south do not always get along politically with the ISCI, but they do share a common interest in fighting Shahristani's oil investment program. The ISCI also has a parliamentary alliance with the Sunni Iraqi Islamic Party, which recently succeeded in getting its own man in the parliamentary speaker position to use as a platform to challenge al-Maliki directly.
Finally, the ISCI has found an ally among the Kurds, who have the most to lose in this oil battle against al-Maliki and Shahristani.Iraq's Kurdistan Regional Government (KRG) is locked into conflict with Baghdad over how to manage the country's massive oil wealth. Blessed by its energy resources and cursed by its geography, the Kurdish region is up against not only Iraq's Shiite and Sunni Arab communities, but also by its far more powerful neighbors - Turkey, Iran and Syria, who all share a common interest in extinguishing any notion of Kurdish independence or even expanded autonomy.
The Kurds' best defense against their rivals is to gain as much control as possible over energy resources in the north and to use their region's energy appeal to lure in foreign investors. The more foreigners buy into the Kurdish region, the more protection the Kurds receive against outside penetration. Consequently, from the moment Saddam Hussein fell from power and the Kurds organized politically, the KRG has been extremely active in inviting foreign firms to explore and develop Iraq's northern fields.To sweeten the pot, the Kurds have offered these firms extremely attractive Production-Sharing Agreements (PSAs) that offer firms ownership stakes in the fields. This policy directly opposes Shahristani's push only to allow foreign firms to charge fees, as opposed to offering them ownership rights that would undermine Baghdad's central authority, for raising output.
The Kurds know they have a narrow window of opportunity to secure these energy rights, and will thus fight tooth and nail in parliament to shoot down Shahristani and al-Maliki's policies that aim to assert central authority in Iraq and undermine Kurdish autonomy.But the Kurds can only go so far in their dealings with foreign energy firms, dealings Baghdad terms "illegal" and "unconstitutional." Energy companies have been exploring and developing fields in the north, but any plan to export for real profit must have both Turkey's (as the export link) and Baghdad's approval.
The Kurds, however, are feeling more emboldened after the central government - under heavy pressure to raise Iraq's oil output - reluctantly allowed oil to flow from KRG fields in the north to the Turkish port at Ceyhan for export beginning June 1. The budget pressure on Baghdad allowed the KRG to take another step forward in furthering Kurdish autonomy, but the Kurds also know this export opportunity can just as easily be snatched away by their rivals. For now, the Kurds are trying to exploit the wider criticism against Shahristani, a move that will allow them to continue with business as usual on the energy front while Baghdad remains at odds with itself.From intra-Shiite rivalries to panicky oil unions to Kurdish-Arab political battles, there are a number of reasons for the world's oil supermajors to be nervous about the June 29-30 auction. These political fissures run deep, and will continue to hold the country back from checking off critical items on the parliamentary agenda, such as signing a viable oil law.
With the central government on the defensive, it will most likely be up to an outside power to manage this political maelstrom.Of these powers, the United States is too distracted to enter into Iraqi internal politics to resolve these conflicts, and Iranian influence is largely limited to their Shiite allies. Turkey, however, is the country to watch in Iraq's energy evolution. The Turks are already on an ascendant path in the region, and have been busily shoring up ties with key members of each of Iraq's warring factions, including the Kurds. If Turkey intends to fulfill its long-term objective to control a substantial portion of Iraq's energy industry, it is only a matter of time before Ankara dives deeper into Iraqi politics.
Iraq: The Energy Battle Heats Up
Stratfor Today » June 26, 2009 1124 GMT
ALI YUSSEF/
Summary:
Iraq's oil minister is being forced to defend himself against various charges stemming from the country's stagnant oil production. The charges come during a period of heightening tensions over oil among Iraq's feuding Shiite, Sunni and Kurdish factions. Ultimately, it will probably be up to an outside power to manage this political maelstrom - and of these powers, Turkey is the one to watch.
Analysis:
Iraq's OilIraqi Oil Minister Hussein Shahristani returned to the Iraqi parliament on June 25 to defend himself against a multitude of complaints from parliamentarians involving such issues as Iraq's declining oil output, its languishing hydrocarbons law and the corruption and mismanagement of the Iraqi oil industry's profits.
Due to a steep drop in once record-high crude prices over the past year, and aggravated by budget constraints and political infighting, Iraq's current oil output has stagnated at around 2.4 million barrels per day (bpd) - well below the country's enormous oil production potential. Since oil revenues account for 95 percent of the state's income, Shahristani has become the natural scapegoat for Iraq's current political and economic woes.
And with a major oil auction on the horizon, the country's first since the fall of Saddam Hussein, the Iraqi oil brawl is bound to escalate in the coming weeks. Given what he is up against, there is no guarantee that Shahristani will make it out of these June parliamentary grill sessions in one piece, but he has given no indication that he is prepared to bow out of this fight.Shahristani's plan to breathe some life back into Iraq's oil industry involves circumventing parliamentary approval to allow 32 of the world's major energy companies on June 29-30 to bid on 20-year-long service contracts to develop Iraq's six largest oil producing fields and two untapped natural gas fields. These energy companies, which include ExxonMobil, Chevron, Royal Dutch/Shell, ConocoPhillips, Turkish Petroleum Corp., BP, France's Total, Italy's Eni, Russia's Gazprom Neft and LUKoil, India's Oil and Natural Gas Corp. and China National Petroleum Corp., are taking a risk in investing in a country that has yet to pass an oil law, and whose politics pose a severe threat to business deals. Despite the risks, all these firms have a deep interest in securing these potentially lucrative contracts. But first, the oil minister must answer to the Federation of Oil Unions in the Shiite southern oil hub of Basra.
The southern labor unions produce the bulk of Iraqi crude and are extremely hesitant to allow foreign companies a piece of their contracts. The union federation has strongly criticized the oil minister for offering long-term service contracts, asserting that Iraqi companies and their employees are fully capable of developing the fields themselves. Shahrahstani's opponents in parliament argue that oil exploration - not production of existing fields - is needed to increase production. Shahristani, on the other hand, claims that exploration will take too much time, and there is a stronger need to focus on boosting current production. He argues that the foreign companies are the ones that the have the training, technological expertise and tools to more rapidly and efficiently boost Iraq's oil output by an additional 1.5 million bpd within four to five years.
This debate is not only about southern oil unions worried about being edged out by foreign oil majors. As Shahristani himself has claimed, there is a much wider political agenda involving multiple Iraqi factions currently in play.The Islamic Supreme Council of Iraq (ISCI), currently the largest Shiite party in parliament and the political bloc most closely aligned to Iran, carries a great deal of clout in the Shiite south that could strengthen the anti-Shahristani movement. After having fared poorly against Shiite Iraqi Prime Minister Nouri al-Maliki and his allies in January provincial polls, the ISCI is doing whatever it can to weaken the prime minister's power base so that it can be on a stronger political footing for legislative elections slated for Jan. 30, 2010.The ISCI's strategy involves using its clout in parliament to chip away at al-Maliki's Cabinet appointees.
Already, Iraqi Trade Minister Falah al-Sudani and former Parliament Speaker Mahmoud al-Mashhadani have been forced to resign. Shahristani, who maintains his political independence - and yet is in agreement with al-Maliki's vision of a strong, centralized government - is next on the target list.In addition to natural political competition, the ISCI and al-Maliki are on two different wavelengths in trying to shape the future of Iraq. The ISCI, and the Iranians by extension, envision a federalist model of Iraq that essentially carves out a Shiite autonomous zone in the south (similar to the Kurdish autonomous zone in the north). This would augment Iran's influence in Iraq via their Iraqi Shiite allies.
This vision, however, is directly at odds with that of Iraqi Prime Minister Nouri al-Maliki, smaller regional Shiite parties and the mainstream Sunni parties, who all agree on the need for a strong, centralized government in Iraq that can build up its immunity to foreign penetration. Al-Maliki and Shahristani have been able to draw support from Sunni and Shiite factions for their strong stance against federalism and their iron-fist approach with the Kurds, but they are also up against a number of sore losers from the provincial elections who want to see the prime minister weakened.The ISCI has no shortage of allies to use against al-Maliki. The oil unions in the south do not always get along politically with the ISCI, but they do share a common interest in fighting Shahristani's oil investment program. The ISCI also has a parliamentary alliance with the Sunni Iraqi Islamic Party, which recently succeeded in getting its own man in the parliamentary speaker position to use as a platform to challenge al-Maliki directly.
Finally, the ISCI has found an ally among the Kurds, who have the most to lose in this oil battle against al-Maliki and Shahristani.Iraq's Kurdistan Regional Government (KRG) is locked into conflict with Baghdad over how to manage the country's massive oil wealth. Blessed by its energy resources and cursed by its geography, the Kurdish region is up against not only Iraq's Shiite and Sunni Arab communities, but also by its far more powerful neighbors - Turkey, Iran and Syria, who all share a common interest in extinguishing any notion of Kurdish independence or even expanded autonomy.
The Kurds' best defense against their rivals is to gain as much control as possible over energy resources in the north and to use their region's energy appeal to lure in foreign investors. The more foreigners buy into the Kurdish region, the more protection the Kurds receive against outside penetration. Consequently, from the moment Saddam Hussein fell from power and the Kurds organized politically, the KRG has been extremely active in inviting foreign firms to explore and develop Iraq's northern fields.To sweeten the pot, the Kurds have offered these firms extremely attractive Production-Sharing Agreements (PSAs) that offer firms ownership stakes in the fields. This policy directly opposes Shahristani's push only to allow foreign firms to charge fees, as opposed to offering them ownership rights that would undermine Baghdad's central authority, for raising output.
The Kurds know they have a narrow window of opportunity to secure these energy rights, and will thus fight tooth and nail in parliament to shoot down Shahristani and al-Maliki's policies that aim to assert central authority in Iraq and undermine Kurdish autonomy.But the Kurds can only go so far in their dealings with foreign energy firms, dealings Baghdad terms "illegal" and "unconstitutional." Energy companies have been exploring and developing fields in the north, but any plan to export for real profit must have both Turkey's (as the export link) and Baghdad's approval.
The Kurds, however, are feeling more emboldened after the central government - under heavy pressure to raise Iraq's oil output - reluctantly allowed oil to flow from KRG fields in the north to the Turkish port at Ceyhan for export beginning June 1. The budget pressure on Baghdad allowed the KRG to take another step forward in furthering Kurdish autonomy, but the Kurds also know this export opportunity can just as easily be snatched away by their rivals. For now, the Kurds are trying to exploit the wider criticism against Shahristani, a move that will allow them to continue with business as usual on the energy front while Baghdad remains at odds with itself.From intra-Shiite rivalries to panicky oil unions to Kurdish-Arab political battles, there are a number of reasons for the world's oil supermajors to be nervous about the June 29-30 auction. These political fissures run deep, and will continue to hold the country back from checking off critical items on the parliamentary agenda, such as signing a viable oil law.
With the central government on the defensive, it will most likely be up to an outside power to manage this political maelstrom.Of these powers, the United States is too distracted to enter into Iraqi internal politics to resolve these conflicts, and Iranian influence is largely limited to their Shiite allies. Turkey, however, is the country to watch in Iraq's energy evolution. The Turks are already on an ascendant path in the region, and have been busily shoring up ties with key members of each of Iraq's warring factions, including the Kurds. If Turkey intends to fulfill its long-term objective to control a substantial portion of Iraq's energy industry, it is only a matter of time before Ankara dives deeper into Iraqi politics.
Thursday, March 5, 2009
Buying Iraqi Dinar, Daredevil or Dumba$$
They are cutting back in tough economic times, when it is on sale, isn't that a great time to buy?
Are you currently buying Iraqi Dinar, and if not, why not?
Iraq finance minister resists budget cuts
Wed Mar 4, 2009 8:28pm IST
By Ahmed Rasheed
BAGHDAD, March 4 (Reuters) - Iraq's finance minister on Wednesday rejected a bid by parliament to cut the 2009 budget because of slumping oil revenues, but lawmakers said they remained determined to slash spending by up to 10 percent.
Minister Bayan Jabor told a heated, four-hour meeting of parliament's finance committee that the $62 billion budget for this year should be passed as it is, despite being based on optimistically high oil prices.
The finance minister argued that parliament could cut back spending plans in June in a supplementary "negative budget" if oil prices, from which war-battered Iraq gets more than 95 percent of its revenues, remained depressed.
"We want to keep the budget as it is," Jabor told Reuters. "We insist on keeping the budget as it is because we have investment projects that should continue ... and the government has already cut the budget by around $7 billion."
Lawmakers, however, said they were not convinced and would push for a vote on Thursday on two similar proposals, either to cut 10 percent -- 7.4 trillion dinars ($6.2 billion) -- or to cut 6.8 trillion dinars ($5.8 billion) in spending.
The Iraqi government is in a bind. It is being starved of revenues just when it desperately needs money to rebuild after the years of bloodshed unleashed by the 2003 U.S. invasion.
If the government fails to restore services, equip its armed forces and improve the lives of Iraq's 28 million people, there could be a resurgence in violence, some analysts warn.
Lawmakers say a lot of money is being squandered by government entities and the budget cuts can be implemented without affecting investment spending.
Are you currently buying Iraqi Dinar, and if not, why not?
Iraq finance minister resists budget cuts
Wed Mar 4, 2009 8:28pm IST
By Ahmed Rasheed
BAGHDAD, March 4 (Reuters) - Iraq's finance minister on Wednesday rejected a bid by parliament to cut the 2009 budget because of slumping oil revenues, but lawmakers said they remained determined to slash spending by up to 10 percent.
Minister Bayan Jabor told a heated, four-hour meeting of parliament's finance committee that the $62 billion budget for this year should be passed as it is, despite being based on optimistically high oil prices.
The finance minister argued that parliament could cut back spending plans in June in a supplementary "negative budget" if oil prices, from which war-battered Iraq gets more than 95 percent of its revenues, remained depressed.
"We want to keep the budget as it is," Jabor told Reuters. "We insist on keeping the budget as it is because we have investment projects that should continue ... and the government has already cut the budget by around $7 billion."
Lawmakers, however, said they were not convinced and would push for a vote on Thursday on two similar proposals, either to cut 10 percent -- 7.4 trillion dinars ($6.2 billion) -- or to cut 6.8 trillion dinars ($5.8 billion) in spending.
The Iraqi government is in a bind. It is being starved of revenues just when it desperately needs money to rebuild after the years of bloodshed unleashed by the 2003 U.S. invasion.
If the government fails to restore services, equip its armed forces and improve the lives of Iraq's 28 million people, there could be a resurgence in violence, some analysts warn.
Lawmakers say a lot of money is being squandered by government entities and the budget cuts can be implemented without affecting investment spending.
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