Worldwide Kidnap Report

LONDON Feb 17 (Reuters) - Kidnap and ransom trends are in constant flux, with Somali piracy and Mexican kidnapping on the up, while hostage-taking in Colombia and Iraq is in decline.

Below is an overview of global kidnap trends with estimates of the numbers of foreigners taken captive every month, compiled largely with information from risk consultancy AKE's quarterly kidnap and ransom report.

INDIAN OCEAN -- 95 PER MONTH

Somali pirates hijacking merchant ships in the Indian Ocean frequently take more foreigners hostage in a single month than all other kidnappers in the world combined. Experts estimate several hundred Somalis head out in small boats and increasingly on larger captured motherships, boarding vessels and sailing them to pirate havens. At any given time, the pirates are estimated to hold up to 700 hostages, mainly aboard their ships in worsening conditions. Ransoms have risen swiftly over the last year, with the record payment said to be $9 million for a Korean tanker late last year. The average settlement per ship is estimated to be $3-4 million, with ships usually held for more than 100 days. Shippers warn that despite international naval patrols, the problem is worsening to the extent ships may be forced to take a longer route around Africa, driving up costs.

MEXICO -- 20 PER MONTH

Kidnapping in Mexico is rising swiftly. Most attacks target migrant workers from elsewhere in Central and Latin America. These range from "express kidnappings", in which the victim is taken to an ATM and forced to pay their own ransom, to abductions lasting up to about 60 days. Abductions of Mexicans are on the rise, but limited reporting makes estimating the numbers difficult. So far, Western nationals have not tended to be targeted. The upper limit for a payout has reportedly been $30 million.

GULF OF GUINEA -- 5 PER MONTH

While the dangers of piracy and attacks on shipping and oil platforms in the Gulf of Guinea pale in comparison to those in the Indian Ocean, the threat is seen growing particularly ahead of Nigeria's April 2011 elections. Attacks tend to be more violent than those from Somali pirates and the danger to crew higher. The average time in captivity is less than 30 days and ransoms vary from $10,000-$2 million.

NIGERIA -- 1-2 PER MONTH

Kidnapping of foreigners and locals continues to be a problem in Nigeria, particularly in the Niger Delta with the threat from both militants and armed gangs. Ransoms for foreign nationals range from $28,000-$204,000, with ransom payments for Nigerians generally less than $100,000. Time spent in captivity is varied, with the longest period some 465 days.

SUDAN -- 1 PER MONTH

Kidnapping, particularly of aid staff in Sudan's Darfur region, is seen on the increase and is restricting relief operations. Charity workers, United Nations staff and African Union peacekeepers have all been targeted. The average time spent in captivity is 100 days. There is insufficient data to estimate average ransom payments for foreign nationals. Sudanese command ransoms of less than $100,000.

AFGHANISTAN -- 1-2 PER MONTH

The risk of kidnap of foreigners, particularly aid staff, reduces relief work in Afghanistan. A particularly high proportion of kidnaps there ended in violent deaths, either through execution or during special forces rescue missions. Foreigners kidnapped and released alive can wait up to 300 days, with ransoms ranging from $300,000-$750,000. Some 5-10 Afghans are taken hostage each week with ransoms of less than $100,000.

SAHEL -- 1 PER MONTH

Al Qaeda in the Islamic Maghreb (AQIM) appears to have stepped up efforts to kidnap foreigners in North Africa's Sahel region, while local tribes have also used this as a revenue stream. Experts estimate kidnapping could have given $65 million to AQIM since 2005, the majority of its revenue stream. French forces have taken an increasingly aggressive approach with mixed results as they launch military rescue missions.

PAKISTAN -- 1 PER MONTH

Both militant groups and criminal gangs kidnap Pakistanis and occasionally foreigners. Pakistanis are generally held for about 30 days for ransoms of about $50,000, while foreigners tend to be held for longer with the record being 500 days.

REST OF AFRICA

Democratic Republic of Congo and Somalia each see on average slightly less than one foreign national kidnapped a month. In Congo, risks are seen highest in the east, with extractive industry staff and aid workers most at risk. The number of foreigners kidnapped in Somalia is low as so few operate there, but ransoms can be as high as $3 million and victims held for prolonged periods. There are fears kidnapped foreigners might be sold to al Qaeda-linked Islamist groups who might kill them for propaganda value or try to trade them for prisoner exchange.

MIDDLE EAST

Kidnappings of both foreigners and local Iraqis soared in the aftermath of the 2003 U.S.-led invasion but have since fallen sharply. Yemen is now seen as the Middle Eastern country in which foreigners are most at risk of kidnap.

ASIA

Outside Pakistan and Afghanistan, the greatest danger of kidnap in Asia is seen in the Philippines. Islamist militants have targeted wealthy Chinese-Filipino businessmen and students.

LATIN AMERICA

Kidnapping in Colombia has fallen sharply due to disarray amongst militant groups, public anger at the tactic and better coordination by security forces. Kidnapping is seen on the increase in Honduras, Guatemala and El Salvador.

EUROPE

The former Soviet Union is seen as having the highest risk of kidnap for foreigners, while a bad harvest has seen an increasing trend of farmers being kidnapped in an attempt to gain control of their grain stores. Short duration "tiger kidnaps" are becoming increasingly common in Western Europe due to the economic crisis, particularly in Northern Ireland and the Irish Republic. (Editing by Janet Lawrence)

Iraq Weekly Roundup

Summary
Levels of violence fell in Iraq last week, although at the time of writing militants have shot dead at least 27 police officers in a well-planned attack in Haditha. Not including this total, at least 36 people were killed and 41 injured in nationwide incidents last week. In general, levels of violence crept up in Iraq towards the end of February, although in total it was a relatively quiet month. The authorities reported a total of 151 fatalities, including 91 civilians, 39 policemen and 21 soldiers killed by militants during the month.

Tactics
Last week a drop by almost half in the total of bomb attacks left 19 people dead and 35 injured countrywide. There were at least 18 such attacks, and no suicide bombings reported. There was no major change in the number of small arms attacks reported which left 11 people dead and three injured. Indirect fire attacks (rockets and mortars) left two dead and three injured. There were no abductions reported.

Distribution of Violence
Baghdad remains quieter than normal, although it still accounted for several of the week’s attacks, as did the northern city of Mosul where conditions appear to have gradually worsened once again over recent weeks. There were two shooting incidents reported in the normally secure Kurdish region last week, although they are believed to have been related to personal disputes rather than politics or ideology. At least one person was also killed in a landmine explosion to the north-east of Kirkuk, highlighting the ongoing risk posed by unexploded ordnance even in more secure parts of KRG territory.

NGO Warning
Otherwise, Iraqi nationals working for international organisations are also reminded to exercise caution and remain discreet when discussing their place of work in public after reports emerged that individuals had been threatened in Baghdad because of their affiliation with foreign groups.



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Source: AKE

Building Iraq's Military (Al-Akhbar, March 1)

The US Embassy in Baghdad announced earlier this week that the Iraqi army has received a new batch of Abrams tanks. It said that the US has already delivered 131 tanks to the army and is close to completing the full delivery of 140. The Iraqi defense ministry confirmed receiving them, adding that the Iraqi forces have completed their training in the new tanks.

But some parliament members said that they were surprised that the US Embassy is withholding the remaining tanks. These parliament members demanded an investigation be opened into why there were not delivered.

According to a US Embassy statement, however, "the nine remaining tanks are in Iraq, but in US possession...waiting for the arrival of certain components for these tanks so it can deliver a complete purchase to the Iraqi army in accordance with US government standards. As soon as the components arrive, OSC-I (Office of Security Cooperation-Iraq) will deliver the additional nine tanks to the Iraqi army. We expect this will take place within the coming weeks."

The delivery of the tanks comes as part of a major and long-term plan to allegedly arm the Iraqi military with modern US weapons. This is particularly important now that Iraq has the capacity to deploy a professional army based on voluntary, rather than obligatory, recruitment.

Although different numbers are floating around on the possible cost of the arms deal, the official estimate was declared by General Muhammad al-Askari, the defense ministry spokesman, who put it at US$13 billion.

Al-Askari said that the government has signed contracts with Washington that include the purchase of F-16 fighter jets, helicopters, tanks, warships, and light weapons.

Iraq had requested 18 F-16 fighter jets at US$2.5 billion, or US$150 million per jet, as the first installment for purchasing 100 F-16's.

But the weapons deal has been surrounded by controversy from its very inception.

Iraqi Kurdish leaders have expressed strong reservations in regards to arming the Iraqi military.Iraqi Kurdish leaders - recalling their bitter experiences with previous governments - have expressed strong reservations in regards to arming the Iraqi military with such modern weapons, fearing that the federal government might use them against the Kurds in the future.

Kurdish leaders have privately told media sources that they have asked the US administration to impose a condition on Baghdad that would ban its jets from flying over autonomous Kurdish airspace.

But the request was turned down, according to Iraqi air force commander, Lieutenant Anwar Hamad Amin, who said, "Our modern jets will carry out their flights over all Iraqi airspace, including the Kurdistan region, which is part of federal Iraq and its air space."

Iraqiya List leaders Ayad Allawi and Rafe al-Essawi have joined the front opposing the armament deal in a December 7 article in the The New York Times. But the third leader in the List, Osama al-Nujaifi, publicly distanced himself from this article, saying his name was inserted without his knowledge.

In the article, the two political leaders rejected arming Iraq's military and other security forces, saying "American assistance to Iraq's army, police, and intelligence services must be conditioned on those institutions being representative of the nation rather than one sect or party."

But these politicians' reservations have not had a direct or significant effect on the arms deal. Their positions are widely seen as motivated by political and sectarian considerations.

Externally, Kuwait was alone in opposing weapons sales to Iraq, citing its fears of a new invasion similar to Saddam Hussein's 1990 assault on the emirate.

Political sources said that the official Kuwaiti criticism came from the highest political levels. As a part of this criticism, they informed Washington of their opposition to the Iraqi purchase of F-16 fighter jets. When they failed to stop the deal, Kuwait requested written US assurances that these weapons will not be used against it in the future.

Many ordinary Iraqis have also expressed opposition to the armament campaign, dismayed by poor public services, deteriorating living conditions, and the breakdown of infrastructure.

Shortages in electricity and clean drinking water have become a major problem, which the government has repeatedly failed to address, except in the autonomous region of Kurdistan.

Analysts and politicians say that there is a public awareness of the need to build a professional army capable of defending the country and confronting security challenges that often claim the lives of civilians.

But some analysts view public opposition to arms expenditures as being directed at the government's priorities more than an explicit rejection of arming the military.

"There were purchase deals where the money was paid to some countries but the weapons never arrived."Other legitimate fears expressed by political and judicial circles surrounding these enormous arms deals stem from huge corruption cases related to previous arms deals, especially under Allawi's government. In 2005, then Defense Minister Hazem Shaalan was convicted and sentenced in absentia on charges of financial corruption involving the embezzlement of US$1.3 billion.

Military affairs experts point to examples of exposed corruption cases, including a US$25 million contract approved by Shaalan's ministry, when the real value of the deal did not exceed US$5 million. According to the online newspaper of the Iraqi National Congress, led by Ahmad Chalabi, the contract put the price of one purchased bullet at 16 cents, while its real value was 4 cents.

In a 2007 report by the late Marie Colvin in The Sunday Times, she quoted Iraqi sources and Western diplomats as saying that Shaalan was accused of embezzling US$800 million from the defense ministry's budget.

This amount was part of almost US$9 billion that went missing from the general Iraqi budget during the first years of the occupation. The Sunday Times quoted Judge Radi al-Radi, the former head of the commission that investigated the case, as saying that it was one of the biggest embezzlement operations in the world.

Other examples of corruption in the armament files, which have become a popular topic among Iraqis, include press exposures of a number of cases.

For example, the defense ministry signed a deal to purchase the latest MB5 rifles, each estimated at a cost of US$3,500, but instead imported poorly made, Egyptian-made copies valued at US$200 per rifle.

Another case involves a deal to "purchase Pakistani-made armored personnel carriers, which turned out to be so old that they can barely fend off Kalashnikov bullets, let alone the fact that their steering wheels are on the right hand side, not the left."

According to analysts and observers closely monitoring this issue, these Iraqi armament scandals do not absolve Maliki's current or previous government from responsibility.

"It seems that the opportunity has not yet arose to open these files and expose scandals of corruption, which will not be any less shocking than others under the Allawi and [Ibrahim] al-Jaafari governments," as one observer put it.

Meanwhile, the parliamentary security and defense committee has before it arms deals that date back to the days of Saddam Hussein.

"There were purchase deals where the money was paid to some countries but the weapons never arrived," MP Hakem al-Zameli said, adding, "We are examining and reviewing this matter."

Analysts say that Iraqis widely expect the next government to expose new facts and strike larger deals, but that bad services will remain unchanged and the infrastructure will only deteriorate further.

This article is an edited translation from the Arabic Edition.

Iraq Weekly Roundup

Summary
After four weeks of declining violence, the number of attacks rose once again in Iraq last week. At least 53 people were killed and 245 injured in nationwide incidents, which is moderately high, albeit not as high as the figures of over 100 recorded at the beginning of the year.

Tactics
A rise in the total number of bomb attacks left 39 people dead and 242 injured, particularly in Baghdad and the central provinces. A steady number of small arms fire attacks left 14 people dead and three injured, notably in the capital. There were no kidnappings or indirect fire attacks (rockets and mortars) recorded.

Central Violence
The central region saw the majority of attacks, especially around Ba’qubah and Baghdad. Mosul in the north has been unusually quiet for at least two weeks, raising concerns that militants in the area have been looking elsewhere to conduct attacks. The spate of bombings which took place in Iraq last week could indicate that they have turned their attention to the centre of the country, although there are also ongoing fears that some of the militants have also headed across the border into neighbouring Syria.

Crossing the Border
In Anbar province last week security force patrols and operations were stepped up in the province along the border with Syria amid fears of criminal and militant infiltration. However, while the Iraqi security forces are concerned about militants crossing from Syria into Iraq, it is more likely that greater numbers are going in the opposite direction.

There is mounting evidence that groups such as al-Qaeda are directing their efforts towards the collapsing regime on Iraq’s doorstep in the hope of being able to capitalise on the cover that the lawlessness in the country will afford them.

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Source: AKE Group

Iraq: Key facts and figures

Seven years after it led the invasion of Iraq, the US now has fewer than 50,000 soldiers in the country and is due to have withdrawn all its troops by the end of 2011.

Billions of dollars have been spent on rebuilding the country's infrastructure, but there is still a long way to go.

STANDARD OF LIVING

Overall, 23% of Iraq's population lives below the poverty line (spending $2.20 per person per day), according to figures from the Iraqi government and the World Bank.

The latest report from the World Food Programme [pdf] in November 2008, described an estimated 3.1% of Iraqi households - 930,000 people - as "food insecure", living with hunger and fearing starvation. That represented a considerable improvement on 15.4%, the figure when the survey was last carried out in 2005.

However, the WFP also found a further 6.4 million people would be vulnerable to food insecurity without the Public Distribution System, which provides monthly food rations to 90% of the population.

In January 2010, there were approximately 1.3 million landline telephone subscriptions and 19.5 million mobile phone subscriptions, according to the Brookings Institution. That compares with a pre-war level of 833,000 landline subscriptions and no cellular network.

There are also now 1.6 million internet subscribers, compared with 4,600 before the US-led invasion.

The UN reported in 2004 that car ownership had doubled since 2003, but between then and the Iraq household socio-economic survey in 2007, the figure remained relatively static, rising to just above 25%.

ELECTRICITY

According to data supplied by the ministry of electricity, Iraq is only generating 8,000 of the 13-15,000 megawatts (MW) of power required to meet Iraqi needs (50-60%). This figure does not include the Kurdistan region, where conditions are better.

The situation is worst for Iraq's internally displaced, where more than a third of households (37%) receive less than four hours of electricity per day. The lack of reliable electricity supply from the national grid has led to widespread use of backyard and neighbourhood generators.

Low electricity supplies are hampering the pumping of water to Iraqi households and severely restricting economic development.

WATER AND SANITATION

World Bank figures released in February 2010 show that potable water service is available to just under 70% of the population outside of Baghdad and can drop to as low as 48% in rural areas. In some areas, water is available only in the evening; and in many areas, village residents illegally tap into water pipelines.

In Baghdad, 25% of residents remain disconnected from the water supply network and rely on expensive alternative sources of drinking water, such as delivery by tankers.

According to Unesco, decreasing water supplies have been exacerbated by drought conditions between 2005 and 2009, which have devastated agriculture and decimated livestock.

Fewer homes are connected to wastewater sanitation systems than to potable water sources. According to the figures, less than 8% of the homes outside Baghdad are connected to sewerage systems.

An outbreak of cholera in August 2008 affected nine provinces in the country and was due to the poor standard of sanitation. According to the World Health Organization "outbreaks will recur in Iraq until access to safe water and proper sanitation is ensured for all people". Diarrhoea, a symptom of other waterborne diseases, was also reported to be on the increase.

VIOLENCE

Most coalition troops have withdrawn from Iraq. The last US combat brigade pulled out in mid-August, leaving fewer than 50,000 US Army personnel in the country. Under a US-Iraq deal, all American troops will leave the country by the end of 2011.

The number of deaths, military and civilian, is continuing to fall. Iraq Body Count (IBC) says 4,645 civilians were reported killed in violence in Iraq in 2009, which was about half the level in 2008 and the lowest annual total since the invasion in 2003.

At the end of April 2010, IBC said 1,010 civilians had been reported killed so far this year. The IBC counts reported deaths and then cross references them with official figures from Iraqi hospitals and ministries.

REFUGEES AND DISPLACED

The US government and others estimate that 1.5 million Iraqis fled their homes to other parts of Iraq or other countries to escape the sectarian conflict sparked by the 2006 Samarra mosque bombing.

It is believed that another 200,000 had already been displaced following the US-led invasion, while approximately one million people left Iraq during the rule of Saddam Hussein.

The United Nations High Commissioner for Refugees (UNHCR)estimates that 427,000 Internally Displaced Persons (IDPs) and 79,000 refugees returned to their areas of origin between January 2008 and July 2010. The number of those returning dropped by 29% in the first half of 2010, compared to the same period in 2009, UNHCR figures show.

However, there are still approximately one million Iraqi refugees abroad and 1.55 million IDPs, a third of whom are living in settlements or camp-like situations in extremely poor conditions, it says.

The UNHCR registered nearly 35,000 refugees inside Iraq at the end of 2009, mostly Palestinians, Syrians and Iranians. They are primarily located in the areas administered by the Kurdistan Regional Government (KRG) and Baghdad. In addition there are 3,800 asylum-seekers from Iran, Syria and Turkey.

A refugee camp for Palestinians in the desert near the Syrian border was recently closed and the occupants moved over the border into Syria, but a further 10,000 remain - mostly in Baghdad.

OIL PRODUCTION

Iraq relies on oil for over 40% of its gross domestic product and over 90% of government revenues. It has the fourth largest proven oil reserves in the world, with about 10% of the world's oil reserves, according to theOrganization of Arab Petroleum Exporting Countries (OAPEC).

Oil production figures dipped at the start of the invasion but have since remained relatively buoyant. As of April, 2.41 million barrels of oil a day were being produced, still well below the 1979 peak of 3.5 million barrels a day.

EMPLOYMENT

The number of Iraqis employed in the public sector has doubled since 2005, with the public sector currently providing 43% of all jobs in Iraq and almost 60% of all full-time employment. But constraints on the federal budget caused by the drop in global oil prices have curtailed new public sector recruitment.

Unemployment stands at 15% and a further 28% of the workforce is underemployed, which may increase in the coming years, particularly amongst youth, according to a UN analysis of 2008 figures from Iraq's Central Organisation for Statistics and Information Technology.

The number of unemployed people below the age of 34 amounts to more than one million people, three-quarters of them male.

Only 18% of women are employed.

Young people were increasingly vulnerable to poverty and food insecurity as 450,000 entered the labour market facing limited job prospects, the UN report said.

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Source: BBC

Iraq Weekly Roundup, 21 February 2012

Summary
There was a fall in the number of attacks recorded in Iraq last week, but the death toll was nonetheless higher than normal following a mass-casualty suicide attack targeting a police academy near Palestine Street in Baghdad.  Clusters of violence occurred in Mosul, Baghdad, Kirkuk, Ba’qubah, Ramadi and Nassiriyah, although overall militancy was down in all of these cities.

Tactics
In total, at least 45 people were killed and 74 injured in nationwide incidents, of which 19 were killed and 29 injured in the suicide attack. Otherwise a fall in the total number of non-suicide bomb attacks left six people dead and 39 injured. A slight rise in the number of small arms attacks left 19 people dead and six injured. There were no indirect fire attacks (rockets and mortars) or abductions reported.

Al-Qaeda and Syria
Meanwhile, security force patrols and operations were stepped up in the province along the border with Syria amid fears of criminal and militant infiltration. However, while the Iraqi security forces are concerned about militants crossing from Syria into Iraq, it is more likely that greater numbers are going in the opposite direction. 

There is mounting evidence that groups such as al-Qaeda are directing their efforts towards the collapsing regime on Iraq’s doorstep in the hope of being able to capitalise on the cover that the lawlessness in the country will afford them.

Worldwide Risk updates

Libya
The National Transitional Council (NTC) sent military forces to the south eastern town of al-Kufra, where clashes between rival local tribes have killed dozens of people. Militiamen from the Zwai tribe have clashed with fighters from the Tibu ethnic group led by Isa Abdel Majid, who they accuse of attacking al-Kufra backed by mercenaries from Chad.

Mexico
The arrest of Jaime Herrera Herrera, a drug maker for the Sinaloa cartel, will have little impact on the cartel’s trade in methamphetamine but will further impede its efforts to assert control over its existing territories. Any decline in revenue along with a corresponding loss of personnel will hit the cartel hard as Los Zetas seek to encroach upon their western strongholds. Increased violence in these regions should be anticipated.

North Korea
The DPRK stepped up its rhetoric by targeting the series of joint military drills planned by South Korea and the US. In return, live fire exercises by the North are anticipated although artillery attacks are not expected.

Russia
Ibrahim Khalil Daudov, Dagestani branch commander of Doka Umarov’s Caucasus Emirate insurgency, was reportedly killed by police in Dagestan on 11 February in a raid against Islamic militants near the village of Gurbuki; his body remained unidentified until 14 February.  His death comes as part of a recently launched campaign against insurgents in the Chechen-Dagestani border area.   

Senegal
Violence continued in and around Dakar ahead of presidential elections on 26 February, with six having been killed thus far. Demonstrations have occurred following police use of teargas nearby a Mosque in the capital on 17 February. Security forces are expected to respond to increased violence with a heavy handed response.

Yemen
An explosion damaged a polling station in the southern port city of Aden on 20 February, one day before presidential elections were due to begin. Former Vice-President Abd-Rabbu Mansour Hadi is the only candidate in the elections due to terms agreed in a transition deal. There is a risk of further attacks by Islamist and southern separatist militants throughout the country over the election period.

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Source: AKE

2nd Foreign Energy Company Ready To Leave Iraq Showing The Difficulties Of Working In The Country

2nd Foreign Energy Company Ready To Leave Iraq Showing The Difficulties Of Working In The Country BY: Musings On Iraq

Norway’s Statoil Hydro is contemplating departing Iraq. It is currently working with Russia’s Lukoil, and the Iraqi state-run North Oil Company in a joint venture to develop the West Qurna Phase 2 field in Basra. Since late-2011, Statoil has been considering selling its share of the company, because of the various problems it has run into in Iraq, and now appears ready to finalize that deal.

Norway's Statoil won an auction for the West Qurna Phase 2 field along with Russia's Lukoil in Iraq's second auction in Dec. 2009

Statoil first entered the Iraqi petroleum industry in December 2009. That month, the Iraqi Oil Ministry held the second auction for several petroleum fields across the country. Russia’s Lukoil and Norway’s Statoil put in the winning bid for the West Qurna Phase 2 field in Basra. It has estimated reserves of 12.876 billion barrels. At that time, West Qurna was not operating. The two foreign companies agreed to form a joint venture with the state-run North Oil Company, and eventually raise production from zero to 1.8 million barrels a day in several years. After reaching an initial output mark, Lukoil and Statoil would begin being paid $1.15 per barrel of petroleum produced. The first goal was producing 130,000 barrels a day by January 2013, then 150,000 barrels by the end of the year, and 400,000 barrels by 2014. These technical service agreements benefit the Iraqi government as it gains the foreign know how and technology of international energy companies who have to put up a large amount of start-up money, and get production going before they receive any form of compensation. Even when they do, the Iraqi government was able to negotiate very low profits for them. Corporations like Statoil were willing to accept these stiff terms at first, hoping that they could enter the Iraqi market, which had been cut off since 1990 by international sanctions, and then get better terms or more fields later on.

Statoil quickly ran into problems with West Qurna Phase 2. One of them was that local tribes were demanding that they be paid for losing their land to the companies. One sheikh told Reuters that his people had sabotaged some of the work at the field to push their case. An Iraqi oil official claimed that these protests had pushed back the timeline for starting production at West Qurna, and that the Oil Ministry was talking about setting up some kind of payment plan as a result. Next, Statoil and Lukoil found that West Qurna was littered with old ordinance like mines and unexploded artillery shells from the Iran-Iraq War. As a result, contractors had to be hired to clear the fields, which again hindered work. All these issues meant that by January 2012, West Qurna Phase 2 was still not producing any oil, more than two years after the initial auction. Frustration with these delays, and the tough terms included in the original contract, all contributed to Statoil changing its opinion about operating in Iraq.

By mid-2011, the Norwegian company had enough of the difficult conditions in Iraq. In June, it started talking about renegotiating its deal with the Oil Ministry, claiming that it could not reach the production targets included in its contract, and that government red tape was holding up work. By January 2012, the Norwegians had changed their tone once again, and this time were talking about selling their share of the joint venture all together. Some analysts believed that this might have just been a bargaining tool to get better terms from Baghdad, but reports now make it seem like the corporation is serious about departing. In February for example, Reuters noted that the Norwegians had gone to the Oil Ministry, and that it had initially agreed to the sale. Statoil officials said that they were more interested in investing in Norway and the United States, than Iraq. If the Norwegians went ahead with this, it would be the second time a foreign energy company pulled out of Iraq. Kazakhstan’s KazMunai Gas withdrew from a deal for the Akkas natural gas field in Anbar in mid-2011 after the local government there staged protests, made demands for greater control over its energy resources, and requested economic concessions. That was the first time a corporation decided to leave Iraq’s oil and gas fields. That experience, and Statoil’s show how hard it is for some to operate in Iraq’s environment.

If Statoil goes ahead with its sale it would highlight the limits of working in the country. Many locals and provincial governments want a piece of the country’s greatest assets its oil and gas, which can complicate things with protests and attacks on equipment. Fields in southern Iraq are also littered with the remnants of the Iran-Iraq War, making it impossible to do anything until they are cleared. To add to that the government’s red tape can be maddening. Prime Minister Nouri al-Maliki is the acting Interior Minister right now, which means that all visas have to be okayed by his office or him personally. That causes huge delays for companies to get their workers and personnel into Iraq. That’s especially important, because the country lacks the skilled work force to develop its oil fields. That same bureaucracy has slowed down the payment to some of the companies operating in Iraq. Those revenues are very limited as well, because of the technical service agreements the government offered. Some of the major oil companies can probably wait out these difficulties. Others like Statoil may not have the resources and patience to wait for their deals to come to fruition. If it exits Iraq, it may not have a big affect either. It is the junior partner in the joint venture, with only 18.75%. That means West Qurna Phase 2 will still be developed, and other corporations will still be interested in Iraq, but it does take some of the veneer off of the country. Many businesses were willing to accept Baghdad’s terms, because the country has such huge, untapped reserves of oil and gas. Now, companies are beginning to form a more realistic view of what Iraq is like, and could use that in their negotiations with the Oil Ministry.

SOURCES

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

Gismatullin, Eduard and Stigset, Marianne, “Statoil May Renegotiate West Qurna Contract, Questions Schedule,” Bloomberg, 6/23/11

Kramer, Andrew and Werdigier, Julia, “Exxon Spars With Iraq Over Lack of Payment,” New York Times, 12/22/11

Lando, Ben, “Joining The Global Oil Sector: Challenges And Opportunities Facing Iraq,” Middle East Institute, 4/29/11

Mohammed, Aref, “Landmines hamper Iraq oil boom, delay investment,” Reuters, 11/16/11

The National, “Iraq oil deals,” 12/12/09

Rasheed, Ahmed, “UPDATE 2-Statoil seeks Iraq’s OK to sell oilfield stake,” Reuters, 2/2/12

Reuters, “UPDATE 1-Iraq Oks $998 mln oil contract with Samsun-source,” 1/24/12

Smith, Grant, “Statoil Seeks to Sell West Qurna-2 Stake in Iraq, MEES Reports,” Bloomberg, 1/13/12

Smith, Patrick, “Analysis: Iraq’s oil projections wildly optimistic,” AK News, 5/15/11

Risk Updates

Brazil

Rio de Janeiro has been relatively calm since the beginning of a city-wide police strike on 10 February. In contrast to the strike in Salvador a week previously, authorities are intent upon cracking-down on striking police officers, insisting they are breaking their covenant with the public. Despite the current calm, however, the potential for an increase in low-level crime and looting remains. 

China

China reported slowdowns in both imports and exports for January 2012, resulting in a trade surplus of US$27.3 billion, a six-month high. Imports dropped by 15.3 per cent while exports dropped 0.5 per cent. Continuing economic crises in the US and the EU, China’s largest export markets, will be a major challenge to continued Chinese economic growth in 2012. 

DRC

President Joseph Kabila’s top presidential aide, Augustin Katumba Mwanke, died in a plane crash in Bukavu on 12 February.  ‘AKM’ was extremely influential in Congolese business politics, particularly in mining deals. His death will provoke an internal power struggle, compounded by the current delay over the formation of a new government. Mining firms should expect increased confusion over decision-making processes in the coming months.

Greece

Parliament approved further austerity measures in a vote on 12 February in a bid to secure a further tranche of financing before a bond redemption on 20 March. The vote will see minimum wage floor lowered by 22 per cent, the cutting of 15,000 public sector jobs and a further trimming of the government’s spending budget. Despite wider cuts, Greece’s ability to control its debts as the economy stalls remains under question.

Iraq

The Iraqi government banned ExxonMobil from participating in the country’s fourth oil and gas bidding round scheduled for May. The move is in return for contracts signed between the oil major and the Kurdish Regional Government in October which the government regards as illegal.

Tibet

A Tibetan nun was confirmed dead in Sichuan province, south-western China, after setting herself on fire on 11 February. One of over 20 reported self-immolations over the past year, this latest casualty comes amidst growing unrest in the region. Violence and protests may worsen leading up to the Tibetan new year on 22 February.

Turkmenistan
Incumbent candidate Gurbanguly Berdymukhammedov reportedly won a landslide victory in the 12 February presidential election, with most votes counted. Berdymukhammedov’s victory comes as no surprise in a country with little legitimate opposition to the regime and he is unlikely to face any significant challenge to his rule in the medium term.

Zimbabwe
The first draft of Zimbabwe’s new constitution was rejected by the ruling ZANU-PF party as it barred any future electoral candidate who had already held power for 10 years. As Mugabe continues to push for 2012 elections, regardless of reforms stipulated in the 2008 political agreement, Zimbabwe is set for a tumultuous year.

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Source: AKE

Iraq Weekly Roundup, 13 February 2012

SummaryLevels of violence fell in Iraq last week. At least 19 people were killed and 55 injured in nationwide incidents which is a relatively low figure.

TacticsA total of 16 bomb attacks left five people dead and 39 injured – a relatively low figure. There were no suicide bombings recorded. A fall in the number of small arms fire attacks left 10 people dead and three injured. Indirect fire attacks (rockets and mortars) left one person dead and 13 injured.

Geographic DistributionViolence was concentrated in the central provinces and Baghdad. The North of the country was unusually quiet, with no major incidents recorded in Mosul city at all. Kurdistan saw Turkish military operations around the border, involving clashes with the terrorist PKK organisation.

Incidents in the SouthA kidnapped woman was rescued by the authorities in an operation in Basrah. An Iraqi private security company employee and three local residents were killed in a small arms fire exchange in West Qurnah.

Business RisksFrom a business perspective, the government announced that oil major ExxonMobil would not be allowed to participate in an upcoming oil and gas bidding round after it controversially signed contracts with the Kurdish authorities in October 2011.
Political Instability
From a political perspective the Iraqiya bloc returned to parliament last week after it boycotted proceedings following the arrest warrant issued for vice-president Tariq al-Hashimi.

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Source: AKE