Archive for year: 2015

Erbil, Kurdistan Region of Iraq, (presidency.gov.krd) – President Masoud Barzani received a United States Department of Defense delegation headed by Secretary Ashton Carter, and including a number of US Defense officials and military advisors.

President Barzani received the delegation with a number of Kurdistan Region officials including Mr. Masrour Barzani, the Chancellor of the Kurdistan Region Security Council.

In the meeting, President Barzani and Secretary Carter discussed the latest military operations against the terrorists of the Islamic State, ISIS, in Kurdistan, Iraq and other areas in the region. The two sides also discussed yesterday’s terrorist attacks across a number of front sectors in the Kurdistan Region.

They also discussed the anticipated operations, notably the liberation of Mosul from the control of the Islamic State terrorist organisation.

Secretary Carter conveyed President Obama’s message to President Barzani that the United States will continue to support the Kurdistan Region and the partnership between the United States and the Kurdistan Region which has been further strengthened after the start of the terrorist attacks in the Summer of 2014.

Secretary Carter stated that in recent communications with other allies, he urged further support for the Peshmerga forces of the Kurdistan Region.

President Barzani on his part expressed his appreciation to the United States government for its military support against the terrorists of the Islamic State, saying that the support has been essential to defeating the terrorists.

Erbil, Kurdistan Region, Iraq (cabinet.gov.krd) – Prime Minister Nechirvan Barzani yesterday received German Foreign Minister Frank Walter Steinmeier and his delegation.

In a meeting, also attended by Deputy Prime Minister Qubad Talabani and other KRG officials, Minister Steinmeier commended the Peshmerga forces for liberating many areas from the Islamic State terrorist organisation, ISIS, particularly the town of Sinjar.

He conveyed his Government’s support to the people, the government, and the Peshmerga forces of the Kurdistan Region, saying Germany’s military assistance to the Peshmerga forces will continue.

He noted the significant number of internally displaced people, who fled ISIS terrorist threats and took refuge in Kurdistan Region. He stressed that Germany would help ease the burden on the Kurdistan Region by promoting additional assistance from the international community.

Prime Minister Barzani expressed gratitude for Germany’s military assistance to Peshmerga forces, and humanitarian assistance for the IDPs. He expressed his hope that the military assistance would continue through the change in the war against ISIS following the liberation of Sinjar.

Prime Minister Barzani noted that much more humanitarian assistance is urgently needed to better serve the IDPs whose numbers are expected to increase due to the anticipated liberation of Mosul.

Regarding the outstanding issues between Erbil and Baghdad, Prime Minister Barzani stressed that they must be resolved through dialogue and negotiations.

Prime Minister Barzani meanwhile pointed out that serious dialogue among political parties in the Kurdistan Region are in progress to resolve issues that have emerged during recent months.

The situation in Iraq and the Middle East region in general, including relations with neighbouring countries, were also discussed in the meeting.

Text of speech by Deputy Prime Minister, Qubad Talabani, at the Oil and Gas Conference in London, 30 November to 2 December 2015:

Good morning ladies and gentlemen.

Thank you for attending this important conference in these difficult times, and for your continued support to our development despite the challenges we face. As you all know, Kurdistan has a lot to offer to international investors and the international community.

At the same time, we are mindful of the fact that business does not occur in a vacuum and doing business with the KRG today is part of something bigger, especially since energy and economy are inseparable from security.

I wish I could tell you that everything is great and Kurdistan is as vibrant and growing as in the past. But your commitment to the place, your investment and our partnership and friendship prevent me from standing before you to tell you everything is alright.

Things are pretty far from being all right at the moment.

But I will tell you today that I am confident that together we can overcome the challenges. And I will outline some of the ways in which we will make things alright – and better – again.

Kurdistan is today being tested by a series of crises. Security, Humanitarian Political and of course Economic.
I must say I am proud that we are turning these crises into opportunities to look at our shortcomings and to address them.

Thanks to the heroic efforts of the Peshmerga forces and vital support of the International Coalition against Daesh, Kurdistan today is a safer place.

Our forces managed to absorb the initial shock caused by Daesh attacks on Kurdistan and today our forces are a lot more efficient, better organised and more determined to face the state of terror that calls itself Daesh.

With the continued support and resolve of the international community and the trust of our partners in this room, we can achieve important progress against the DAESH threat.

As you saw in Paris, Beirut, Sinjar and other areas, the terrorists will stop at nothing to inflict death and terrorise people anywhere.
Our shared values of life, freedom and morality put us all under the duty to eradicate them.

Kurdistan has also risen to the challenge of hosting over 1.8 million Syrian refugees and internally displaced persons (IDPs) from conflict affected regions of Iraq.

Today Kurdistan is a safe haven for all who are fleeing violence because of their identity.

Those seeking safety have been welcomed by the Kurdish people and were provided food, shelter and services by the KRG.

This all despite the insufficient assistance from the international community and almost no assistance by the Federal Government of Iraq.

This humanitarian crisis has caused a 30% increase in the population of our region, and I am proud but not surprised at the tolerance, hospitality and acceptance by the people of Kurdistan of this unprecedented influx in such a short time.

Our police and internal security records show near-zero incidents of hate or racist crimes against the IDPs and refugees.

More recently, Kurdistan has faced an internal political crisis. Disputes amongst the political parties regarding the term and powers of the President, issues surrounding the Parliamentary Speaker and the Cabinet have reached a critical stage.

But I believe that the worst is behind us. These political disputes have been, and will continue to be part of Kurdish political life. All parties have committed to addressing these disputes through dialogue and negotiations.

We must remain true to our commitments and prove to our people and our friends around the world that we can overcome such political challenges in a civilized and democratic way.

But of all of these crises, the one that poses the most significant threat to the long-term future of Kurdistan – and the one that is taking most of our time in government office – is the economic crisis.

Kurdistan’s economic crisis was set off by the ‘triple shock’ of: the inexcusable and unjustifiable cutoff in fiscal transfers by the federal government of Iraq in February 2014,

Which was then followed by the conflict with DAESH in mid-2014, and further compounded by the sustained fall in global oil prices which has continued throughout 2015.

These shocks are responsible for the sharp decline in the economic activity in Kurdistan and has caused us significant difficulty to meet fiscal obligations.

However, the deeper origin of the crisis was already visible in 2013:

At a time when oil prices were over $100/bbl and fiscal transfers, albeit incomplete, still flowed from Baghdad, the KRG ran a budget deficit of some 1.7 trillion Iraqi Dinars. Even back then, Kurdistan was living beyond its means.

Moreover, the Kurdish economy was almost entirely dependent on revenue from Iraqi oil exports, .

Because we failed during the ‘boom years’ of high world oil prices to invest in diversifying the economy through strengthening sectors like agriculture, industry and tourism to increase production and create jobs, Kurdistan was unprepared when the first wave of the triple shock hit in early 2014.

To pay salaries and pensions, and fund the war with DAESH, and service the large number of refugees and IDP’s other government expenditures were slashed.

Public investment in roads, schools and health facilities came to a halt. Despite our government’s best efforts, payments to government employees, pensioners and private contractors fell into arrears.

In 2014, as a direct result of Baghdad cutting our budget payments the KRG registered a budget deficit of nearly IQD 8 trillion ($6.5 billion).

This was funded through advances from the local banking system, bilateral loans, and forward sales of oil and refined petroleum products. As the shock wave continued in 2015, so did the fiscal imbalances.

A new budget agreement with Baghdad raised hopes at the beginning of 2015, but these were soon dashed as the Federal Government did not meet its payment obligations.

Let me be clear on this point: Baghdad may have had financial difficulties of its own, but it was for their own political and financial reasons that they made the choice that was easiest for them and that was to continue to shortchange the KRG while maintaining regular payments to non Kurdish parts of Iraq, including areas under Dash control.

I repeat today what we have stated on numerous occasions: We still prefer to reach an agreement with Baghdad and we are always ready for that.

But Baghdad has left us no other choice but to pursue the course we pursued.

We had to expand our independent oil exports. And thankfully, because of the support of many of you in this room, and of course the efforts of our indefatigable oil minister Ashti Hawrami, our production and export capabilities have increased and our oil has legally found its way to Market.

But despite this progress, global oil prices softened further and our salary arrears have increased.

A budget deficit on the order of IQD 2-3 trillion is projected for 2015, which is better than 2014, but it’s still very large.

Today, it is clear that the KRG’s fiscal situation is unsustainable and that major reforms are needed to restore fiscal balance.
We cannot just borrow our way out of the problem and a further buildup of arrears is unacceptable.

Fiscal sustainability is not only an urgent priority, it also points the way forward to a stronger, more robust economy for Kurdistan in the future.

Economic strength is the ultimate source of long-term peace, prosperity and stability for our people and region.

And so my government has identified three priorities for fiscal reform; these priorities complement action in other areas, such as mobilization of non-oil revenue and further cuts in non-salary operational expenditure.

The first priority area is restructuring expenses. In particular creating a more sustainable salary and pensions scheme .

It is widely known that in Kurdistan, nearly 70% of the region’s budget is spent on salaries of civil servants and on our pensions scheme.

This is unsustainable, therefore our government is considering a range of policy options for reforming public sector spending, in particular restructuring salaries and pensions.

In this, we are keen to ensure adequate protection for those at the bottom of the pay scale and a readjustment of benefits and allowances for those higher up the chain.

We are also analyzing the reform measures announced recently by the Federal Government and if necessary we shall adopt them too.
The second and third priority areas for reform are petroleum products and electricity sector respectively.

These two areas benefit from large subsidies paid for by the KRG. For example, the KRG provides diesel and natural gas free of charge to the independent power producers.

Total subsidies to electricity cost the KRG over $3 billion annually, electricity tariffs are low and billing and collection are weak. Despite the presence of private refineries and power producers, the government plays an overly central role in administering both petroleum products and electricity.

Reform options are under consideration and some underway for reducing subsidies for petroleum products and electricity, while continuing to offer protection to the most vulnerable consumers.

The KRG is also putting in place plans to reduce the role of government in running these sectors in order to focus more on regulation in line with international standards, while encouraging private investment.

Our people have become accustomed to generous government salaries and other payments, benefits and subsidies funded by oil revenues.

But what was feasible at $100/bbl is unsustainable at $40/bbl.

We didn’t introduce any automatic adjustors to government payments to take account of lower oil prices, nor did we save or invest enough, particularly in supporting private investment in non-hydrocarbon sectors. But now is as good a time to act as any, and we will.
Economic reform is necessary but won’t be easy. We know we cannot do it alone. We have asked the governments of the UK, the US and other European countries for technical assistance as we begin to finalize and implement our reform agenda.

Reform is essential in order to preserve our stability and ensure our success.

Despite the size of the challenges we face, I am optimistic that with the resolve we have, we will overcome our fiscal challenges; balance our budget; begin to operate a fiscal surplus and resume timely payments to our reformed public sector and to our partners in the private sector, both domestic and international.

At the same time we are increasing our non oil related revenues.

We are seeking ways to monetize assets, including our oil infrastructure assets. We are reviewing our tax regime as well as restructuring electricity tariffs for the big factories and those in industry who have high electricity demands to come more in line with industry standards.

We will continue to make our arrears payments to the IOC’s so that they continue investing in the infrastructure thus increasing our production and export capabilities.

We truly appreciate the patience of our IOC partners, and we will repay that faith with continued determination to meet our financial obligations.

We never forget those who helped through our bad times. We will improve the delivery of services to our citizens and business by reducing red tape and by making our transactions more transparent.

We have already begun to make governmental transactions e-ready in Kurdistan and in early 2016 we will announce our government services portal to the people of Kurdistan and to the business community.

Through this portal,citizens and businesses alike will know exactly the steps necessary to receive government services and by making such transactions and services clear and transparent, we will begin to weed out corruption and make processes faster and easier.

We will continue to make advances against Daesh, and preserve the safety and stability of Kurdistan, and with our partners in Iraq and the international coalition, we will eradicate this threat and make Kurdistan and Iraq a safer place for business.

They say it’s darkest before dawn. Even if everyone doesn’t see it yet, I can sincerely say that we’re starting to see those rays of sunlight appearing on the horizon.

The path forward will not be easy.

Here, I would like to remind the people of Kurdistan that the generations of our parents fathers and grandparents grandfathers faced greater challenges than those we face today, and overcame them often with no friends but the mountains.

Today, I can confidently say that we have more friends than the mountains. So we have no option but to succeed, and United we will.

Thank you for your attention.

Erbil, Kurdistan Region, Iraq – On 27 November 2015, the Kurdistan Regional Government (KRG) received a partial ruling from the tribunal in the ongoing arbitral proceedings between the KRG, Dana and others. The arbitration is subject to duties of confidentiality under applicable law and arbitration rules.  Without waiving these duties of confidentiality, the KRG is obliged to correct inaccurate public statements made by Dana, which create an impression that is materially misleading and incomplete.

Further to a hearing in London on 21 September, the arbitral tribunal has ruled on some of the Claimants’ claims.

Significantly, this is a partial award that does not finally determine all issues in the arbitration, and leaves many issues unresolved.  The arbitral tribunal has neither heard nor decided the KRG’s counterclaims, which, as the tribunal noted, have been partially and provisionally quantified by the KRG’s experts at more than US$ 3 billion.  The quantum of the KRG’s counterclaims is, therefore, almost double the amount of the payment claims that are the subject of the partial award and, if upheld, would eclipse those claims and result in the Claimants owing significant amounts to the KRG.  The tribunal specifically proceeded on the basis that, as conceded by the Claimants, the KRG has an arguable case on its counterclaims.  The KRG’s counterclaims will be heard in the next phase of the arbitration.

Dana and its affiliates and principals have caused substantial losses to the KRG as a result of their failures to meet their obligations.  The KRG will continue forcefully to pursue its claims for damages and other relief against Dana, its affiliates and principals as a result of these failures in all appropriate fora.

Moreover, the Claimants remain obliged, under the terms of the accounting procedure in their contract with the KRG, to refund to the KRG the balance of any revenues after recovering their invested petroleum costs and a contractual remuneration fee.  Even according to the Claimants’ own accounts (which are not accepted by the KRG), the amounts awarded in the partial award far exceed the amounts the Claimants would be entitled to retain under the contract.  This means that, even based on the Claimants’ own (disputed) figures, the Claimants would have to pay back to the KRG a significant portion of the amount awarded.

Dana’s press release is also materially selective and misleading in other material respects:

a. As the KRG explained in its press release of 5 July 2015, Dana has omitted that the tribunal determined in its previous partial award that the Claimants have no entitlement to payment for gas supplied to the power stations in excess of 200 MMscf/day pursuant to the parties’ service plan.  The Claimants had previously issued invoices in excess of $1.3 billion for such gas.  The tribunal has not made any award in the Claimants’ favour in relation to these invoices, which have no basis and should be withdrawn.

b. Dana still omits that the tribunal has ruled that the KRG is entitled to be supplied free of charge at the power stations at Erbil and Bazian with such gas as may be produced by the plant at Khor Mor in accordance with the parties’ service plan.  Any failure to meet this obligation will place Dana in further breach of its duties and will give the KRG additional rights and remedies.  Particularly given the importance of uninterrupted power supply in the current environment, the KRG calls upon Dana to confirm that it will provide a continuous and uninterrupted supply of this gas, as it is required to do.

c.  Dana is incorrect to suggest that the KRG ‎has prevented the proper and timely development of the fields.  The KRG is, and has always been, willing to proceed with further development in accordance with international petroleum industry practice.  In the KRG’s view, it is Dana that has prevented further development.

d. Dana continues to omit that the tribunal has rejected the Claimants’ arguments that Dana and Crescent novated their obligations to Pearl, and has specifically held that Dana and Crescent remained and remain liable to the KRG to perform the obligations created by the contract.  This finding is relevant to the KRG’s counterclaims against Dana and Crescent.  In addition, as a result of the tribunal’s finding that Dana has assigned its rights under the contract to Pearl, Dana also has no subsisting contractual entitlement to payment from the KRG.  The KRG is not party to any arrangements between Dana and Pearl.

e. Dana fails to mention that, in any case, any proceeds received by the Claimants for sales of condensates and LPGs – under the partial award or otherwise – are subject to a contractually mandated accounting procedure, and a significant portion of such proceeds will be payable to the KRG.

The KRG considers that the Claimants’ continuing attempts to escalate their disputes are unreasonable and unconstructive.  The Claimants are well aware of the enormous financial pressures facing the KRG and the people of the Kurdistan Region.  The KRG’s financial difficulties result from taking essential steps that are critically important to both the Kurdistan Region and the international community, including the KRG’s effective fight against ISIL terrorism and its efforts to care for over 1.8 million refugees and IDPs within the Kurdistan Region.

It is regrettable that, rather than cooperating in the common good and seeking a constructive way forward with the KRG as other International Oil Companies are doing, the Claimants appear set on a course of escalating legal action and improper attempts to vilify the KRG.  In circumstances where the Claimants have singularly failed to meet their own commitments to the KRG, and yet are aggressively pursuing the KRG in legal proceedings, the KRG will continue vigorously to pursue its own counterclaims and to defend its position.