Top Energy Stories

Iraq is looking to neighboring countries to fill an electricity shortage and diversify its sources of supply as Iranian exports of gas and electricity have diminished. Baghdad is discussing potential electricity interconnections with each of Saudi Arabia, Turkey, Jordan, and Kuwait. But failure to agree on the price that Iraq would pay for the imported power has hindered progress after long-running negotiations. “No agreement is reached yet,” an Iraqi Electricity Ministry official said of tariff negotiations with the GCC Interconnection Authority (GCCIA), the body that manages connections between the power systems of six Gulf countries. “We had long talks with them, but the problem is that the price is still high; we still haven’t reached a suitable price with them so far.” For more details on pricing and the status of negotiations, read the full story on Iraq Oil Report.

Genel Energy is taking the KRG to court. The Kurdistan Regional Government's (KRG) Ministry of Natural Resources told UK-listed Genel in August that it intended to terminate the contracts for the development of the Bina Bawi and Miran gas fields. Now, Genel says it is taking the dispute to arbitration in London. The impending legal fight is the latest red flag for oil sector investors who have also voiced concerns about the KRG's track record of failing to pay invoices on time or to stick to schedules for repaying debts. Such worries tend to discourage capital spending, and Kurdistan's overall production has declined this year by nearly 10 percent. The dispute also highlights the KRG's failure over the past decade to establish a clear and viable strategy for developing its extensive gas resources. Read the full story on Iraq Oil Report.

The KRG has run up nearly $5 billion worth of debt to power producers — a major factor complicating efforts to improve electricity service and attract investment. The single biggest debt is more than $4 billion owed to Mass Group, an Amman-based company owned by prominent Iraqi-Kurdish businessman Ahmad Ismail Saleh, which runs three power plants in Kurdistan's Dohuk, Erbil, and Sulaimaniya provinces as well as the Bismaya plant in Baghdad. The amount of the outstanding debt was confirmed by both a KRG Electricity Ministry official and an industry official. The KRG's inability to make reliable payments removes incentives for power producers to spend money on maintenance that could help improve electricity service, according to industry officials. And the unresolved debt is also likely to cause concern for prospective investors evaluating the risks associated with making large capital commitments in Kurdistan. “The debts that we have racked up are so huge that it’s not within the power of the Electricity Ministry to pay them back,” the KRG Electricity Ministry official said. Read the full story on Iraq Oil Report.

Security News

Tribesmen living near the Gharraf oil field in Dhi Qar province shot a rocket-propelled grenade (RPG) and heavy machine gun bullets at police in anger over water shortages, as environmental issues threaten to aggravate instability in southern Iraq. Armed men from the Shuweilat tribe used an RPG and a PKC machine gun to fire indirect shots at a police patrol near an irrigation canal in Rifai district on Dec. 6, according to a local police officer and an activist in the area. Across Iraq, water shortages are already forcing people to leave their farms in rural areas to find work in cities. This is placing extra pressure on already over-burdened urban infrastructure, and leading to social tensions in overcrowded neighbourhoods, according to the environment minister and a recent report by the UN’s migration agency. Tensions over water scarcity between residents of various provinces adds pressure to already fragile security and economic conditions. Read the full story on Iraq Oil Report.

The self-proclaimed Islamic State (IS) militant group has launched an increasingly fierce campaign in northern Iraq, including several recent attacks near oil fields in which both security forces and civilians have been killed. The firepower, persistence, and deadly success of the IS group's recent operations appear to signal an aggressive new chapter in its insurgency — as well as the chronic inadequacy of Iraq's fractious security response. In many rural areas in northern Iraq, civilians have taken up arms to defend themselves. "We are farmers, not fighters," said Adnan Mohammed, a resident of Lheban village, which is near the Bai Hassan and Khurmala oil fields. "We can't keep fighting if the Iraqi Army and Peshmerga won't defend the land. We were left alone to fight Daesh. Nobody helped us. They didn't give us a single bullet." Read the full story on Iraq Oil Report.

More National News

Kurdistan's prime minister owns an $18 million building in Miami. According to Zack Kopplin, reporting for the American Prospect, Masrur Barzani is the beneficial owner of the commercial space, which is being leased to a CVS drugstore. It is the fourth time the Barzani family has been exposed hiding wealth in U.S. real estate. Kopplin writes:

Collectively, the family has paid over $75 million for these four properties alone. These investments likely represent only a small fraction of the family’s secret wealth in the United States. None of these properties were discovered through a Panama Papers–style leak. Instead, all four properties, which had proxy owners and expensive law firms to protect them, were only unmasked because their agents made small slipups.

In the case of the CVS, it was a Pennsylvania-based law firm, Cozen O’Connor, that appears to have exposed their own secret client. Over two months, beginning in December 2018, the law firm opened three Florida companies and a Delaware company all named after the pharmacy’s Washington Avenue address. The paperwork for the Florida companies included the Kurdish prime minister’s name and signature, along with that of one of his other brothers, Muksi Barzani.

The records showing Barzani's signature, and subsequent efforts by lawyers to cover their tracks, are available on publicly accessible databases.

Barzani's office denied Kopplin's story, without addressing the documentary evidence showing Barzani's ownership of the real estate. Instead, the prime minister's statement, which was issued only in Kurdish, attempts to raise questions about Kopplin's motives and character by implying he had an affair with the wife of an unnamed Kurdish MP. Those allegations appear to be both false and irrelevant to the third-party evidence unearthed by Kopplin's reporting. Kopplin later appeared on the Kurdish TV station NRT to explain his investigation; shortly after, the station was reportedly hit with a debilitating cyberattack.

How corruption erodes healthcare in Iraq. Writing for the Konrad-Adenauer-Stiftung foundation, Mac Skelton and Abdulameer Mohsin Hussein report on the deadly consequences of corruption for Iraqi's public health institutions. The authors warn that Iraqi authorities have not taken sufficient steps to prevent more disasters, even after two hospital fires earlier this year, in Baghdad and Nassiriya, killed a combined 174 people.

To take meaningful steps forward in mitigating fire risks in COVID-19 wards, reactive strategies such as installing fire safety equipment are necessary but not sufficient. Fires in oxygen rich environments burn faster and hotter than normal fires and require a robust preventative approach. Ideally, the Government of Iraq would make urgent and comprehensive capital investments to update public hospitals, installing centralized oxygen supply systems and sound electrical infrastructures, while also instituting and enforcing ongoing upkeep practices and electrical testing. These policy steps have and will remain in the realm of the purely theoretical in the absence of political will. The government's limited plan to install fire safety equipment are already woefully underfunded, let alone the broader infrastructural improvements needed to prevent rather than simply react to fires. There are, of course, myriad ways in which the existing health budget could be managed and spent more strategically to allow for gradual steps towards the kinds of maintenance practices mentioned above. But the post-2003 political economy of healthcare is not organized around responding to patients’ needs and systemic risks. It is organized around maximizing revenue from the very medical supply chains that are so crucial to maintaining safe and secure hospitals.

In light of these structural realities, and for the foreseeable future, patients and their families will continue to assume and prepare for the worst in high-risk medical facilities such as COVID-19 wards.

Iraq's foreign currency reserves have increased to $64 billion. John Davison and Ahmed Rasheed recently interviewed Central Bank of Iraq Governor Mustafa Ghalib for Reuters. They report:

Ghalib said the devaluation [of the Iraqi dinar at the end of 2020] had helped bring the reserves up, and that Iraq's economy was much healthier than during the middle of the coronavirus pandemic, when oil prices plummeted and Baghdad was in preliminary talks with the International Monetary Fund for a possible loan.

"We were meeting sometimes twice a day with the IMF and the World Bank, but the Iraqi government's financial situation is much better now," Ghalib told Reuters in an interview at his office in Baghdad.

"Reserves might have decreased in the 30s of billions of dollars without the devaluation ... the rise in oil prices has also helped," he added.

Ghalib said he expected Iraq's 2022 budget to be based on an oil price of roughly $45 per barrel.

Basra's local economy needs help. The province is the country’s energy hub and home to its largest oil fields and main oil export terminals. But that has not created prosperity for many residents, who suffer from a lack of job opportunities and water and electricity shortages. One hope for Basra lies in its potential attractiveness as a destination for investment. Alaa Abdul-Hussein Salman is the director of the Basra Investment Commission, which works closely with the federal National Investment Commission. He spoke with Iraq Oil Report about his efforts to get new projects started in Basra. Read the full interview on Iraq Oil Report.

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