Thursday, April 17, 2014

Security In Iraq 2 Weeks Before National Elections

Iraq is set to have parliamentary elections on April 30. Besides the bitter political disputes the country is facing other challenges including securing the vote, and getting people to participate. The insurgents have ramped up their attacks and are actively campaigning against people casting their ballots. During previous elections there was always some violence, but this year may be different. The Americans are not present to help, and the Iraqi Security Forces (ISF) is stretched thin because of its commitments in Anbar. That might mean wide spread attacks during the voting, and more importantly, there may be low turnout in provinces like Anbar, Salahaddin, and parts of Ninewa, Diyala, and Babil.

There has been an increase in the number of attacks since the beginning of April. In the first week of the month there were 238 reported attacks, followed by 223 the next. That was a return to the levels seen in February and the first week of March when there were 204 from February 1-7, 226 the next week, followed by 264 the 3rd week, 251 the fourth, 253 from March 1-7, before dipping to 206 the 2nd week of the month, 216 the next, 211 the third week, and 108 from March 28-31. Still, the average number of attacks for each month has been consistent since the beginning of the year. There were 32.6 per day in January, 33.7 in February, 32.0 in March, and 32.9 from April 1-14. The number of casualties was creeping upwards until April. There were a total of 1,379 in January, for an average of 44.4 per day, 1,275 in February, 45.5 per day, 1,607 in March, 51.8 per day, and 621 in the first two weeks of April, 44.3. The number of wounded followed the same pattern. There were 2,634 injured in January, 84.9 per day, 2,526 in February, 90.2 per day, 2,901 in March, 93.5, and 1,196 in the beginning of April, 85.4.

Violence In Iraq 2014

Jan 1-7
Jan 8-14
Jan 15-21
Jan 22-28
Jan 29-31
Feb 1-7
Feb 8-14
Feb 15-21
Feb 22-28
Mar 1-7
Mar 8-14
Mar 15-21
Mar 22-27
Mar 28-31
Apr 1-7
Apr 8-14

ISIS has recently carried out three large parades in Anbar and Baghdad provinces like this one in Fallujah (Institute for the Study of War)

Almost all of the violence is concentrated in central Iraq. The fighting in Anbar means that most of its major cities and towns will be off limits to the Election Commission. On April 13 it announced that it was only able to distribute 312,000 voting cards out of an estimated 900,000 registered voters. Baghdad has seen the majority of bombings. For example, there were 12 car bombs and 2 suicide bombers from April 8-14, 1 car bomb April 1-7, 2 from March 28-31, 6 from March 22-27, 9 from March 15-21, 5 from March 8-14, and 10 from March 1-7. These are the deadliest form of attack. April 9 there were eight in Kadhimiya, Jadriya, Shaab, Karrada, Mamil, Meshahda, and two in Sadr City costing 16 lives and 69 wounded. ISIS is also moving towards the capital city as seen by its recent parade in Abu Ghraib to the west. In Mosul, Ninewa and the surrounding areas the insurgency acts as a mafia extorting money from businesses, and can be said to have more influence than the local government. The situation is so bad there that the Ninewa Operations Command had to set up special flights for security personnel to travel from their homes in Baghdad to their jobs in Mosul due to constant attacks. There are also concerns that voter roles have not been updated because of intimidation of local officials. In Salahaddin militants are operating throughout all districts of the province. In April there were attacks in seven of the governorate’s eight districts. Starting in the north there were 9 in Shirqat, 12 in Baiji, 32 in Tikrit, 14 in Samarra, 4 in Balad, 2 in Tuz Khormato, 3 in Taji from April 1-14. ISIS was also bold enough to hold a parade there on the road from Baiji to Haditha, Anbar on April 13. Salahaddin is one of the deadliest places in the country, sometimes having more casualties than Baghdad. Babil, Diyala and Kirkuk are on the low end of the spectrum with around one incident per day in each, but the numbers only tell half the story. Northern Babil has become a base for ISIS. It has reportedly been moving in forces from Anbar into that province around Jurf al-Sakhr and Musayib. Earlier in the year the ISF tried and failed to clear the area, and since then the Islamists have been carrying out retaliatory attacks and some car bombings as well. This has led to protests against the lack of security and displacement of families. ISIS has also threatened regions of Kirkuk such as Qara Tapa leading some people to flee the area in March. That same month, ISIS took over the town of Buhriz in Diyala. After it left there were reports of a massacre of civilians by militias. ISIS has also launched a campaign in Kirkuk, Diyala, Ninewa, and Baghdad to convince people not to vote. They have passed out flyers and tweeted pictures of their activities. ISIS has always rejected democracy as un-Islamic, and many other insurgent groups are opposed to balloting as well. The government has launched repeated security operations in all of these provinces, but to little affect. Despite the number of insurgents killed and captured and the material that is discovered, the ISF tends to conduct raids and then leaves, which allows militants to move right back in. Its tactics of mass arrests and holding families of those wanted hostage are counterproductive, and turn the populace away from the government. Its forces are also stretched thin across the country with many units having been transferred to fight in Anbar. This has strong parallels to the 2004-2005 period when the U.S. lacked a plan to beat the insurgency, and the first elections since the invasion were held. The Americans played a large role in helping the Iraqi forces secure the country for the balloting, but they are not there anymore to provide that type of support.

Insurgents are active throughout all of Salahaddin’s districts (Wikipedia)

These events raise two questions. One will the police and army be able to protect voters on election day? Last year provincial balloting was held with only minor incidents, but that was a different environment than today where a full fledged insurgency has broken out. With militants operating throughout central Iraq, and able to reach into the south with bombings it is an open question whether the curfews, bans on vehicle traffic, and other added security measures, which are the norm on the day of voting will be enough. More importantly, Sunnis have generally lost faith in the political process, which is a major reason why the insurgency has been able to make come back. Some give militants either open or passive support and have little reason to help the security forces due to its abusive tactics and group punishments. In January 2005 there was a general Sunni boycott of elections. Many later thought that was a mistake and came out in larger numbers in the following rounds of balloting in 2005, 2009, and 2010. Now there is little motivation to do so, and turnout in some areas might be very low as a result. That means this year’s balloting may not only be a deadly one, but lead to a government that is seen as illegitimate by some voters.


Abbas, Mushreq, “ISIS expands in areas around Baghdad,” Al Monitor, 4/4/14

Abdul-Zahra, Qassim, "Car Bombs in Baghdad, Iraqi Town Kill 34 People," Associated Press, 4/9/14

AIN, "Casualties of northern Baghdad bombing reach 11 deaths, injuries," 4/9/14
- “Commission announces the distribution of 312 thousand cards in the safe areas of Anbar,” 4/13/14
- "Kadhimiya bombing results in killing, injuring 15 civilians," 4/9/14
- “ISIL elements launched huge parade in Salah-il-Din,” 4/13/14

Al Forat, "6 Persons killed, wounded northern Baghdad," 4/9/14
- “Dozens of citizens demonstrate in Babel due to deterioration of security situation,” 3/29/14
- "Shamma'iya's bombing Death toll hits 27 deaths, injuries," 4/9/14

Hussein, Taha, “Hundreds flee their homes after ISIS threatens Kurdish town,” Bas News, 3/29/14

Jubouri, Adam, “Bahrez occupation reveals the strained relationship between the parent and the local government and the size of the sensitivity of sectarianism,” 3/25/14
- "Killing and injuring 18 people in two bombings in Baghdad," 4/9/14
- "Killing and wounding six people in detonation of the seventh car bomb in central Baghdad," 4/9/14
- “Paralysis in Nineveh and university circles after militant assassinations of staff,” 12/5/13

Al Rafidayn, “Maliki’s office agrees to conduct flights to transport security personnel in Mosul,” 3/25/14

Al Rayy, “A security source: Daash controlled area in Jurf al-Sakhr and 25 families abandon area,” 4/5/14

MILITARY COUNCIL OF ANBAR REVOLUTIONARIES VIDEO: Operation Targeting Army Intelligence Officer Brigade 55 In Radwaniya


ISIS VIDEO: Islamic State of Iraq Attacks

Wednesday, April 16, 2014

Companies Start Recovering Costs From Iraq’s Majnoon Oil Field With Exports In April 2014

The Majnoon field, which stretches across Iraq’s Basra and Maysan provinces, had its first exports to Shell's trading company in April 2014. Majnoon is one of the giant fields in the south, which the Oil Ministry is hoping will eventually be the basis for a huge increase in petroleum production. Royal Dutch Shell is developing the field with Malaysia’s Petronas and the Iraqi government holding minority stakes. Like its brethren Majnoon has run into a series of problems that have delayed it reaching its marks, all signs that Iraq will likely not meet its lofty goals.
(Energy-Pedia News)

In April 2014 the first shipment of Majnoon oil was exported to Shell trading. The field was producing 210,000 barrels a day, up from 175,000, and begins the process of the foreign companies that operate the field to begin recovering their costs. Royal Dutch Shell and Petronas won the contract for the field in December 2009, and agreed to raise production from what it was producing then 46,000 barrels to 1.8 million in 2017. (1) Shell and Petronas have since entered negotiations with Baghdad to reduce that mark to 1 million and extend its contract to 2029. The initial plans were to drill 15 wells, build two new crude processing plants with a capacity of 50,000 barrels each, and upgrade the infrastructure. In late 2010 the companies started demining the field of old munitions leftover from the Iran-Iraq War. They went on to sign a deal with England’s Petrofac Ltd. to design and supply the processing plants, another with Halliburton to build an operations camp and drill wells, and one with the Iraq Drilling Company to renovate the existing 27 wells. In January 2011 it got the okay to build its own dock at Shatt al-Arab in Basra to handle the delivery of equipment for the field. That was opened in February 2012. That year it started building a pipeline to expand the export capacity, and finished two rigs and a third was under construction. Majnoon is one of the major fields in the south that the Oil Ministry is hoping will propel Iraq into being the largest petroleum producer in the world. Like the other fields in the region however it has run into a series of problems that have held up its development.

175,000 barrels a day was the initial production mark that Shell and Petronas needed to reach. That was supposed to be achieved by 2012. In April 2010 a senior economic expert questioned whether that was attainable because of the technical issues that would be encountered. Shell and Petronas themselves were shocked at the state of the field when they got there. Despite that there was some initial success. In October 2010 Shell announced that it had raised production to 70,000 barrels a day. The 175,000 goal however, turned out to be much harder. In January 2011 the date to meet that goal was set at the end of 2012. 13 months later Majnoon was only pumping 76,000 barrels. Output later dropped to 65,000 in the spring of 2012, then 54,000, and 18,600 later that year. That was one reason why Shell asked for a waiver from the Oil Ministry to push back when it would hit 175,000. In September 2012 the company said it would get there by March or April 2013, then the third quarter of that year, then the end of 2013. That led the Oil Ministry to complain about Shell’s work in August, claiming that its lack of production had cost the country $4.6 billion in lost export revenue. This is very similar to other fields in the south, such as West Qurna 2. The foreign companies that entered Iraq had high hopes for the untapped potential of Iraq’s oil wealth that had been undeveloped for decades due to wars and sanctions. They ran into a never ending series of foreseeable and unforeseeable roadblocks that slowed down their work tremendously.
Work at Majnoon has run into a series of delays (Enka)

Shell and Petronas encountered six main problems that delayed production at Majnoon. The first was red tape. Iraq’s bureaucracy is notorious for being slow and laborious. Shell complained that visa and customs offices were holding up the entry of their workers and equipment for months. Second, southern Iraq along the Iranian border is littered with mines and old munitions from the Iran-Iraq War. Those had to be removed, which took far longer than the companies expected. Third, disagreements between Shell and Petronas and the Oil Ministry held up the construction of the new pipeline that would carry the field’s increased production. In May 2011 the foreign companies wanted to sign with a Dubai firm to do the work, but Baghdad said it was too expensive. Instead it gave the deal to a state-run company that ended up contracting out to the China Petroleum Pipeline Company. Fourth, local Iraqis in Basra and Maysan demanded that they share in the oil wealth in the form of jobs. The Iraqi government created a committee to deal with these demands, but that didn’t stop protests from happening in early 2012. Shell was surprised by these demonstrations and fretted that there might be violence if concessions were not made. Most importantly, in June 2012 production at the field was shut down for repair and renovation work that was supposed to be completed by May 2013, but was dragged out to September. Afterward the field started exporting. Other companies doing business in Iraq’s oil industry have encountered these same issues. They have presented one delay after another, and held up production at other fields as well.

Iraq’s potential was a huge draw for international energy companies, but the realities have proven far more difficult than they expected. The production goals set in the 2009 auction were always far higher than could realistically be achieved especially in the short-time frame in the contracts. The companies and Baghdad have been working together to re-work these deals. Still, it took two years for Shell and Petronas to reach their initial production mark so that they could start exporting. Similar delays were experienced in other southern fields holding up the Oil Ministry’s grand plans. Iraq is already the second largest producer in OPEC, and there’s little doubt that its output will increase. It will just take a lot longer than expected, and the final amount will likely be lower than what Baghdad originally predicted.


1. Hoyos, Carola, “Shell and Petronas with Iraq oilfield contract,” Financial Times, 12/11/09


Adel, Shaymaa, “New oil fields to come on stream by end of 2013,” Azzaman, 8/29/13

Agence France Presse, “Shell blamed for Iraq’s $4bn oil losses,” 8/26/13

Ajrash, Kadhim and Razzouk, Nayla, “Iraq Revises Its Oil Reserves to 150 Billion Barrels,” Bloomberg, 4/10/13
- “Shell to Build Dock to Develop Majnoon, Iraq Ports Chief Says,” Bloomberg, 1/3/11

AK News, “Economist: neglected oil fields surprise investment companies,” 4/3/10
- “Majnoun reaches 76,000 barrels a day,” 11/19/11

Aswat al-Iraq, “Shell not to complete Majnoun oil field if threats exist, media center,” 2/16/12

Business Excellence, “Shell Iraq: Majnoon,” 3/21/12

Chmaytelli, Maher & Razzouk, Nayla, “Shell to Start Iraq Oil Output Amid Plans for Saudi Investments,” Bloomberg, 5/16/13

Cummins, Chip, “Iraq’s Oil Patch Opens the Spigot,” Wall Street Journal, 11/11/10

Dow Jones, “Iraq’s Majoon Oil Field To Hit 175,000 Barrels A Day In August –Official,” 2/7/12

Dunia Frontier Consultants, “Foreign Commercial Activity in Iraq 2010 Year in Review,” 2/5/11

El Gamal, Rania, “Iraqi tribal disputes pose new challenge to oil firms,” Reuters, 5/29/11

Hafidh, Hassan, “Iraq Aims to Boost Daily Oil Output by 360,000 Barrels,” Wall Street Journal, 8/7/13
- “UPDATE: Shell To Start Drilling At Iraq Majnoon Oil Field In July-MD,” Dow Jones, 3/31/11

Hoyos, Carola, “Shell and Petronas with Iraq oilfield contract,” Financial Times, 12/11/09

Al-Jaderi, Saadoun, “Iraq’s Majnoun oilfield output reaches international markets as output surges,” Azzaman, 4/10/14

Mackey, Peg, “Shell’s Majnoon deal highlights Iraq oil target verdict,” Reuters, 5/18/12

Mohammed, Arif, “Shell to invest $1 billion at big Iraq oilfield – official,” Reuters, 3/16/13
- “UPDATE 1-Iraq, Eni in talks to cut Zubair output to 1 mln bpd,” Reuters, 1/29/13

Oil and Gas Journal, “Shell starts crude oil exports from Iraq’s Majnoon field,” 4/7/14

Rasheed, Ahmed, “Exclusive: Iraq pipeline delays threaten Shell’s Majnoon,” Reuters, 8/26/12
- “Exclusive: Shell in talks to cut Iraq’s Majnoon output target,” Reuters, 5/8/12
- “UPDATE 1-Shell sees Iraq Majnoon 2013 output at over 200,000 bpd,” Reuters, 11/12/12
- “UPDATE 2-Iraq oil exports stagnate, deep cuts ahead due to port work,” Reuters, 8/7/13

Razzouk, Nayla, “Shell Ready to Start $12.5 Billion Project to Conserve Iraq’s Natural Gas,” Bloomberg, 6/19/11

Razzouk, Nayla and Tuttle, Robert, “Eni, Mitsubishi to Bid for Iraqi Gas Field Rights, Oil Production Climbs,” Bloomberg, 9/27/10

Reuters, “Iraq oil plan includes drilling 15 oil wells,” 4/22/10
- “Iraq supergiants to hit 2.1m bpd by year-end,” 5/23/10
- “Iraq’s Majnoon oilfield to begin producing 175,000 bpd next month,” 9/9/13
- “Iraq’s Majnoon oilfield to hit 175,000 boed in 2012,” 3/29/10
- “Shell Restarts Iraq’s Majnoon Oilfield, Petronas Has Minor Share,” 9/21/13

Said, Summer, “Shell Opens Iraqi Oil Field,” Wall Street Journal, 10/6/13

Al-Saleh, Ammar, “Majnoon field production begins end of 2012,” AK News, 5/2/12

Shell, "Shell lifts first crude oil from Majnoon oilfield," 4/7/14

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/11
- “Quarterly Report to the United States Congress,” 4/30/11

Yackley, Ayla Jean, “Shell sees Majnoon resuming oil output in Q1,” Reuters, 9/18/12

VIDEO: ISIS In Iraq Capture Hundreds Of Iraqi Soldiers

VIDEO: ISIS Fighters Enter City In Iraq And The Civilians Celebrate

Tuesday, April 15, 2014

Iraqi Government Admits To Losing Control Of Parts Of Ramadi

The Anbar council recently admitted that it had lost control of parts of the provincial capital of Ramadi. For months local officials had claimed that the city was secure and Fallujah was the only real problem in the governorate. Now there is talk about launching a military offensive to cleanse parts of the capital of insurgents. In truth, several neighborhoods have been under dispute since fighting began in December 2013, the council just didn’t want to admit that where it worked was not secure.
Security forces clearing a house in Ramadi Feb 2014 (Reuters)

Since the beginning of April 2014 Anbar officials have talked about Ramadi becoming a new focus of security operations. On April 7 a curfew was imposed due to car bomb threats. April 10 the provincial council said that families were leaving the city due to government shelling and gunfights. Three days later the security forces claimed that it had cleared 20th Street of militants, and this was the beginning of a larger effort to secure the entire city. That same day Deputy Governor Falah Issawi admitted that some neighborhoods had to be retaken, and that a large offensive to do so was in the works. This was a decided change in rhetoric from the Anbar government. In February for example, the council claimed that the city was safe enough for refugees to return to their homes. March 9 Issawi told the press that military operations in the city had ceased and that life was returning to normal there. At the same time he stated that there were still insurgents in the southern part of Ramadi. Now a month later their opinion has changed, but that’s only because security must have gotten so bad they couldn’t keep up with their story.

Evidence that Ramadi was not secure was abundant in the Iraqi press. For the last several weeks Ramadi has seen the majority of attacks and violence in Anbar. From April 8-14 there were 41 incidents in the province according to the newspapers with 6 in Ramadi, the second most for the week. Most of those were gunfights with insurgents. April 1-7 there were 41 incidents again with Ramadi accounting for the highest amount at 12. April 5 for example there were shootouts on 20th Street, Stadium Street, the Hamidiya and Sufiya neighborhoods along with a car bomb and an improvised explosive device. March 28-31 of the 31 incidents Ramadi accounted for 6 again making it number one for violence. March 28 witnessed clashes with militants in the Bakr, Malab, 60th Street, and 20th Street areas. March 30 also saw a suicide car bomb destroy a bridge outside the city. Many of these neighborhoods such as Malab and 20th and 60th Streets have been fought over for months making the official line that the city was peaceful all the more unbelievable.

Many cities and towns in Anbar province are outside of government control, but Ramadi was not officially one of them until now. The local council has not been telling the truth about the security situation hence their repeated claims that Ramadi was safe and secure. Now it has finally admitted that the city needs to be cleared. A military operation is pending, but it is not clear whether this will happen before or after the April 30 elections as the government is also talking about retaking a dam at Naimiya that the Islamic State of Iraq (ISIS) has taken over and is using to flood parts of the province as well as Fallujah. The real question is not when it will happen, but whether the security forces will be competent enough to take and hold Ramadi as it has failed to do so over the last four months.


AIN, "2 car bombs explode in southern Ramadi," 4/5/14
- “Curfew imposed in Ramadi,” 4/7/14
- "Policemen, gunmen killed in clashes in eastern Ramadi," 4/5/14
- "Voting Center detonated in central Ramadi," 4/5/14

Buratha News, “Security forces to impose its control over the area 20th Street central Ramadi,” 4/13/14

Al Jazeera, "Deaths in attack on Iraq police patrol," 3/30/14

NINA, "Clashes between army and armed groups erupt in central and eastern Ramadi," 4/5/14
- "Clashes between army and armed groups in areas of central and eastern Ramadi," 3/28/14
- “Dozens of families displace from Ramadi due to random shelling,” 4/10/14

Xinhua, "41 killed in violent attacks across Iraq," 4/6/14


VIDEO: ISIS Parade In Iraq Anbar's Garma, April 2014

Monday, April 14, 2014

Promise and Peril of Investing In Iraq, Interview with MENA Capitals’ Ali Albazzaz

Ali Albazzaz is a finance specialist focused on doing business in Iraq. He is a consultant working with MENA Capital, an investment company that focuses on the Middle East and North Africa, including Iraq.  That country has huge potential with its vast energy wealth along with huge needs after decades of wars and sanctions. This has attracted a wide variety of companies interested in developing its oil and gas sector along with rebuilding the nation in general. Unfortunately the rebirth of the insurgency might scare off foreign money. To discuss the promise and peril of Iraq is Ali Albazzaz.

1. Most of the talk about Iraq focuses upon the oil sector, but the country needs so much in terms of services and infrastructure that there are plenty of other opportunities. Outside of petroleum and gas what other sectors of the economy have attracted investment?

Housing and construction have received some foreign private investment, especially in the Kurdish region which has seen a plethora of housing developments, high-rise 5-star hotels, shopping malls and now Emaar's Downtown Erbil project. Unfortunately the picture in the rest of the country is not as rosy. There has been investment in hotels, some high profile housing projects have been signed or broken ground, and you can see visible signs of construction activity in Baghdad, where a few malls have now opened, but foreign investment is still limited in spite of Iraq's estimated 3 million housing unit shortfall.

The electricity sector has and will continue to receive a lot of investment. Whilst most of that has been from the Iraqi government, for engineering, procurement and construction contracts ($4.7bn for electricity projects in the 2014 budget), independent power producer projects (IPP) have been executed in the Kurdish region, and these are starting to be used in other parts of Iraq. The IEA estimated in 2012 that Iraq will need to build an additional 70 GW of generation capacity by 2035, so once IPP projects become entrenched outside the Kurdish region these will be a catalyst for further foreign investment of more substantial scale.

The shrine cities of Karbala and Najaf, which see millions of pilgrims per year, have seen a lot of investment in tourism related infrastructure, such as hotels, markets, shopping malls etc.

There has been some limited investment in industry (for example in building materials, steel), some investment in the telecoms sector (such as the three mobile operators that are largely owned by foreign telecommunications), and some investment in ports and logistics infrastructure.

2. Plenty of companies from the region such as Turkey and the Gulf states have gone into Iraq. Have there been as many companies from Europe, the U.S., and Asia doing business there?

There is a very significant presence of Asian companies. The Chinese, South Koreans, and to a lesser extent the Japanese, are active in the Oil and Gas, Construction, and Electricity sectors, among others. Iranian businesses are involved across a range of sectors, and like Turkey and the Gulf, are big exporters to Iraq. European and American firms are present, but nowhere near to the same extent as the countries above.

3. What issues do foreign companies face with Iraq’s banking sector and insurance?

Iraq's banking sector is still rudimentary but slowly improving. Foreign companies are able to use the better private banks to manage payments and payroll and for local foreign exchange operations. They do also provide Letters of Credit and Letters of Guarantee etc. The service levels of the state banks are so poor as to be effectively unusable, Trade Bank of Iraq being an exception. The biggest issue is the state of development of the banking sector. The balance sheets of most private banks are too small and they don’t have the skill set or appetite to participate in a meaningful way in anything beyond small projects. The entry of Standard Chartered Bank and Citibank is therefore much anticipated.

On the Insurance front foreign companies are able to get coverage but purchase it from outside of Iraq as the local market is not developed enough and does not have the depth even if it were [developed enough].

4. Iraq’s bureaucracy and corruption are rather infamous. What kinds of advice do you give to firms in dealing with those two issues?

With regard to bureaucracy, I recommend that firms work with the best local professional advisors, ideally those that operate in partnership with an international firm, and to choose an experienced, effective, and respected local partner. I also counsel them to set their expectations accordingly from the start of the process, and to be patient.

Corruption is rampant but firms do find ways of managing it in countries with similar levels of corruption and firms are able to conduct business in Iraq without resorting to it.

Some ministries and some local governments are better than others, so it’s important for firms and investors to be judicious about which counterparties they enter into agreements with. Firms can minimize the likelihood of rent-seeking behavior by enlisting the support of their national governments and engaging with Iraqi stakeholders (tribes, religious, civic groups) that may be of help.

With regard to internal graft and other illegal practices, firms need to put a lot of care in the recruitment and training of local management and staff, and be very clear about acceptable behavior. The major international audit firms are now operating in Iraq and are able to provide internal audit and assurance.

5. From 2003-2007 there was very little direct investment in Iraq. Then things took off in 2008 when the civil war ended. Now that the insurgency has been reborn and violence is taking off again in Iraq have you seen any change in foreign interest in the country?

The violence has dampened investor interest for projects in central, western, and northern Iraq - however some firms and investors are pushing ahead regardless, whilst many others have slowed down or suspended their plans (as opposed to cancelling them altogether).

It is not only the spike in violence that is of concern but also the governance issues and nature of Iraqi politics. The elections at the end of this month are unlikely to provide a quick resolution to these issues and there will probably be another protracted government formation period with increased violence in the interim, hence many firms are also waiting to see how the elections play out and what the repercussions are.

6. Kurdistan and southern Iraq are largely untouched by the current surge in violence. Do you think those areas will continue to see foreign businesses going there or will the fighting scare off companies in general from Iraq?

The Kurdish Region is not only unaffected but may be benefiting from further reinforcement of its stability and security compared to the rest of Iraq. I think businesses and investment will definitely keep going to that region, and will do so at an increasing rate.

Southern Iraq is being affected by the recent violence, but to a far lesser degree than the rest of the country. Foreign businesses will continue to be attracted, particularly because of the scale of ongoing investment in the oil and gas sector, the increase in provincial revenues and local incomes, its relative safety, and proximity to the Gulf.

Karbala and Najaf are also relatively more secure and have their own economic momentum which has not been greatly impacted.

Saturday, April 12, 2014

Musings On Iraq In The News

Iraq’s Sotaliraq republished my article "Opinions On The 2014 Elections By Iraq Observers". I was also interviewed for this article in Egypt's Ahram "Violence in Iraq grows as polls near."