[Source: NUSACC's U.S.-Arab Trade Outlook 2013]
In February 2010, the National U.S.-Arab Chamber of Commerce helped to host H.E. Amer Ismail, Iraq’s Minister of Transportation, and a delegation of eleven officials from the Ministry of Transportation, the Iraq Civil Aviation Authority, and Iraqi Airways. This was the delegates’ first opportunity to travel to the United States to meet with U.S. Government officials and high-level American business leaders – a reflection of growing cooperation in the bilateral relationship. With trade on an upswing, Iraq became America’s fourth largest export market in the Arab world in 2010.
“Our bilateral relations require us to have a common economic future,” Minister Ismail told a NUSACC crowd of more than 100 U.S. companies. “The transportation sector is key to the success of any economy. Iraq recognizes that it needs to establish a safe, secure, and effective transportation system to promote joint operation ventures with the United States. I welcome American companies to participate in joint venture operations and explore investment opportunities in Iraq.”
The end of U.S. combat operations in Iraq and the gradual formation of an inclusive governing coalition have ramped up economic development. Iraq’s three major airports – in Baghdad, Basra and Mosul – are being rehabilitated, and provincial governments are upgrading airports in Erbil, Sulamaniyah and Najaf. Procurement has already started for investments in utility and infrastructure systems, upgraded air traffic control systems, and baggage handling and passenger ticketing equipment, all of which create opportunities for U.S. exports of capital goods, services, and manpower.
Iraq is also working to rebuild its banking sector. The Central Bank of Iraq has introduced an interbank lending market, minimum reserve requirements, a government securities market, and daily currency auction. According to Euromoney, a bank’s minimum capital requirements – aimed at strengthening balance sheets – will rise 33 percent between 2012 and 2013, to approximately $120 million. At present, the Trade Bank of Iraq, Rasheed and Rafidain Banks, all state-owned banks, account for most of Iraq’s banking system’s assets and a very high percentage of the country’s branches. However, the Central Bank of Iraq has embarked on an aggressive program to require the private banks to quadruple their capital in the next few years. Thus, the sector is poised for a significant rebound in loan portfolios since inflation declined from more than 40 percent in 2007 to less than three percent in 2010, bringing down basic interest rates to an attractive six percent.
H.E. Hussein Al-Uzri, Chairman of the Trade Bank of Iraq, addressed a NUSACC roundtable of high-level banking representatives in April 2010. “Iraq is an underbanked country,” said Chairman Al-Uzri, “having only 550 banks for a population of approximately 30 million. We have to increase the number of banks and put more Iraqis back into the banking sector. American finance banks and finance institutions can help us.”
Business stakeholders and government officials in Iraq are also working to ramp up energy development in Iraq. That nation’s ambitious goal is to match or surpass Saudi Arabia over time. Iraqi Oil Minister, H.E. Hussain al-Shahristani, recently revised estimated reserves to be 143.5 billion barrels – up from the 115 billion barrels estimated in the 1970s – making Iraq’s extractable oil reserves the third largest in the world behind Saudi Arabia and Venezuela.
Seventy-one percent of Iraqi reserves are concentrated in the South, 20 percent in the North, and only 9 percent in the center of the country. Iraq’s 66 oilfields include seven “supergiants” like the West Qurna, the second largest oilfield in the world with 43 billion barrels in reserves.
Plans are underway to boost Iraqi production from 2.4 million bpd to between 10 and 12 million bpd in five to seven years. This would require over 4,000 miles of new pipeline infrastructure. Verification of larger reserves will also give Iraq a larger OPEC output target, which Iraq will discuss after meeting a target of 3.5 – 4 million bpd in two to three years.
Iraq’s parliament is working to pass a long awaited hydrocarbons law that will regulate the sector and define responsibilities between Baghdad and the provinces in 2011. October 2010 auctions of gas production rights followed two successful 2009 oilfield production auctions. Both functioned under long-term “fixed priced” development contracts with international energy companies, rather than adhering to a “share of profits” model.
As Iraq takes over security from the United States, the Iraqi Navy inaugurated its first American-built Swift Class patrol boat at Iraq’s main port at Umm Qasr. Iraq plans to take delivery of an additional 14 fifty-foot $20 million vessels before U.S. forces depart. The vessels’ main mission will be to protect the oil terminals at al-Basra and Khor al-Amiya, which load 1.7 million bpd onto tankers for export.
The U.S. Department of Defense has also proposed selling $4.2 billion worth of defense-related equipment and systems to Iraq during the U.S. withdrawal. The proposed package includes 18 Lockheed Martin F-16 jets, Raytheon AIM-9 Sidewinder air-to-air heat-seeking missiles, laser-guided bombs, and reconnaissance equipment. Two $70 million U.S.-built offshore support vessels are also expected to be delivered in 2011.
Addressing 200 business leaders from the New England region at NUSACC’s Arab Ambassadors Forum in Boston last July, H.E. Samir Sumaida’ie, Iraq’s Ambassador to the United States, noted, “Iraq has been the new Wild West, but it is getting less wild every day.” He urged American companies not to stand on the sidelines while Europeans, Asians, and other competitors lock in Iraq’s major development projects.