Kurds hemorrhage investor patience
AEIdeas
There’s an unfortunate tendency among some emerging markets to treat foreign direct investment like a personal or collective slush fund. Investors recognize it’s a risk, and pull out when leaders work in concert with corrupt judges and officials in order to fleece businessmen or change the law to disadvantage them.
What these governments often fail to realize, however, is first that investor confidence isn’t limitless and, second, that no market is indispensable even as new markets consider themselves in the driver’s seat. Russia and Argentina both played skittles with investor money and property and will be paying the price for decades to come. Recently, major corporations have begun to cut their losses and flee Turkey as confidence in President Recep Tayyip Erdoğan’s stewardship declines.
Now, Iraqi Kurdistan is learning the hard way that spin cannot trump substance, and that corruption and poor management matter to investors. Over at Commentary, I discussed the Kurdistan Regional Government (KRG)’s latest attempt at a bond offering. The KRG sought to tap international debt markets for a five year, $1 billion bond. The market responded with a 12% offer. In comparison, Ivory Coast debt with a much longer maturity — December 2032 — yields 6.43%, and Iraqi government debt with a 2028 maturity trades at 8.2%. The 12% rate for Kurdistan shows a complete and utter lack of confidence in the KRG’s management.
But that was only the start of last week. Now, word has come down that the KRG has lost a major arbitration against Dana Gas. From Platts:
A London court has ruled in favor of a group of international oil and gas companies operating in Iraqi Kurdistan on several key issues in their arbitration case against the Kurdistan Regional Government in a development sure to test the KRG’s reputation for honoring its own contracts.
Dana Gas said Sunday that the London Court of International Arbitration had last week handed down a partial final award ruling confirming production rights claimed by Dana, Crescent Petroleum and the Pearl Petroleum consortium in Kurdistan. Specifically, it confirmed Pearl’s exclusive right to develop and produce gas and liquids from the Khor Mor and untapped Chemchemal gas and condensate fields.
The July 2 ruling also found that the KRG had a contractual obligation to pay the consortium, consisting of Dana, Crescent, MOL and OMV, for produced condensate and LPG at international prices, Dana said in a stock exchange disclosure document.
The total the KRG now must pay will likely exceed $1 billion. Dana Oil is just one example, however. The KRG owes producers about $17 billion, raising questions about where that money has gone. One thing is certain. Investor momentum may be slow to shift but once the tipping point is reached, there is often no going back. The Kurds say they want their independence but after years of financial mismanagement that makes Baghdad look like a Swiss Bank by comparison, they may find themselves following the path of Timor Leste, South Sudan, and Eritrea into state failure should they now pull the trigger without first getting their own house in order.
Dear M Rubin
KRG or Barzani family are not getting any debt and it is just a fake one and trying to laundry their stolen money from Kurdish people.
What happening is that Nichier Barzani is having some sort of agreement with few corrupted banks managements in Turkey and Europe by pretending that KRG is borrowing money from those bank and those bank are making KRG officials to sign an agreement that those bank lent money to KRG with high percentage..in reality the money comes from Barzani family which hidden in Kurdistan and aboard and those banks know that they are not giving any money to KRG but using Barzani family money( estimated billions of dollars stolen from oil revenue) with high percentage interest and then the bank after collecting the money every month from KRG, they put it in Barzani family accounts in those banks and then the banks take some percentage for themselves..
In the eyes of the Kurdish people and the world, KRG borrows money from the bank but in reality those banks are using Barzani family money( which they steal them from Kurdistan)and lent it to KRG..it is a deception and fraud Barzani family is using it in order to laundry those unbelievable amount of money they accumulate in Kurdistan and aboard ..
Please check this video as well which talks about Masror Barzani House in USA..
https://www.youtube.com/watch?v=Xh2U-PtgDrY
This family is worse than mafia family and they are the cancer of Kurdistan..we have to get rid of them.. I am hoping USA stop helping this corrupted family and please do not create another Saudi tribe family in Kurdistan for us..
http://www.kurdistanpost.com
Dear Michael
The situation in south Kurdistan is unbelievable, the corruption in it is high level in all areas of KRG’S administration. The responsibilities of the situation is not just facing Bargain or his family, the whole bunch of political leaders in multiple party KRG government are responsible.
Political leaders in Multiple KRG government are, occupied the strategic position used it as residential for their family, such as high Mounties and hills in both city of Erbil and Suleiman. They have shares in petrol, money, irresponsible towards the Kurdish issue and request of freedom.
Taliban’s wife, son, sister in low, nephews, nieces and relatives are in high government positions in Baghdad and Kurdistan, controlling the natural recourses especially oil in Kirkuk city and Taq-Taq, occupying all the industrial, commotional , trading areas.
America and it Alice are supporting these kind of political party and leaders. Unfortunately this kind of support puts corrupted leaders and parties in better position and strong enough that making it difficult and enabling public to face them. Therefore America and it Alice needs to reconsider their decision in regards to this matter.
Dear Michael
The issue with the KRG at present time reflects a greater a problem with the governments in the geopolitical region. The issue is something very fundamental and can be seen as a reflection of systemic misunderstanding and philosophical incompetence. The major issue lies within the fundamental mechanism of how the entire government operates in the region and the greater social issues it is causing. It is also a reflection of the inadequate nature of the constitution of iraq to define the ownership of its national resources.
There is a problematic issue relating to the vague definitions surrounding the Iraqi constitution with respect to ownership of the oil. The in-definitive nature of the constitution would have clearly left the reader to anticipate the problematic disputes which were to be in sued after its creation. The constitution must be clear in that it does not require legal analysis or create disputes through its interpretation. This only highlights the incompetence, inexperience and philosophical insight of the author/s.
Nepotism is the most fundamental factor detailing the KRGs institutional failures, were individuals who do not possess the appropriate qualities for important position are elected to execute objectives in which they don’t have the capacity to regulate. This underlying issue has caused a deficit in all the institutions which are regulated by the KRG. It wouldn’t seem rationale for any individual to attempt to compete with individuals for the important roles in the institutions if their insights are rejected on the basis of their last name and the ignorance of merit.
This is a cultural problem within the middle east which makes it impossible to make rationale deductions especially when you’re surrounded in an atmosphere of human stupidity and will to power. With any system that fails to meets contractual agreements with foreign cooperation’s is a sign that the individuals in power lack a general understanding of integrity. This will of course have the effect of perpetually causing negative conceptions and deter investors from the region when it is obvious they cannot meet the most fundamental requirements.
One can only suppose that the intentions of the KRG government do not lie with interests of the public, and it appears that their efforts are an attempt to utilize as much profits from the resources of the region and effectively escape in the near future. There is a undeniable disrespect for the regulators in the region, and of course the public cannot understand the importance of adhering to policies if their government has shown this inexcusable lack of integrity and leadership. This can be highlighted from all institutions in the region; for instance one cannot begin to fathom the inability of the KRG to prepare for the impending disintegration of Syria and Iraq by proportionally diversifying profits for military in fracture. Security is the most important requirement for investor confidence and of course if there is a doubt towards this ability to insure it one could only see the economic impact.
This is also a cultural issue were the belief that individuals from prominent families are believed to be more qualified than general public because of the historical significance of their ancestors . An accurate representation of their qualities are a difficult thought for these people to psychologically overcome. Social arrogance of the upper-class coupled with a dysfunctional belief system has only perpetuated social ignorance and highlights their inexcusable behavior.
It would not make any rationale sense for a government to claim sovereignty if it is obvious that they have proven that they don’t understand the importance of institutional integrity. Kleptocratic governments will always have a social, economical, and political destructive impact, and if this cyclical phenomena were to continue one could imagine the problems can only snowball till complete institutional disintegration.
This problem is a reflection of philosophical misunderstanding of politics and the impact the mechanical features would have on its pragmatic execution. The only solution for this problem is a constitutional revolution especially when the leaders and managers in the region have a misrepresentation of their inherent being. It is a reflection of the same problem which plagues this political region and if there isn’t a radical constitutional effort to attempt to create and eradicate systems to avoid these catastrophes, the KRG will be dealing with their own Kurdish spring.
“KRG owes producers about $17 billion”
Nobody has ever asserted such a high figure. i really Wonder where you got that