Iraq Oil Min Threatens To Resign If Fuel Hike Remains

[SaraDinar]

Iraq Oil Min Threatens To Resign If Fuel Hike Remains
12-19-05 04:54 AM EST

BAGHDAD -(Dow Jones)- Iraq's oil minister said Monday that he would resign if the government doesn't overturn Sunday's decision to hike fuel prices five to nine times.

"Dr Ibrahim Bahr al-Uloum will tender his resignation to the government, if the government doesn't change its decision on the fuel prices," the minister told reporters in Baghdad.

Bahr al-Uloum said he continued to back a gradual increase in fuel prices, but said he had made his displeasure known at the cabinet meeting that approved Sunday's hike.

Iraq has suffered from an acute shortage of oil products since the U.S.-led invasion in 2003.

Up to 2 million liters of gasoline are smuggled out of the country every day.

The current government has continued ousted President Saddam Hussein's practice of subsidizing gasoline, and other oil products, keeping the price at the pump for a gallon of gasoline at a paltry 6 U.S. cents.

The subsidies, which artificially produced some of the lowest gasoline and heating fuel prices in the world, have been singled out by financial institutions both inside and outside Iraq as a crippling burden when the country is trying to create a free-market economy.

http://news.morningstar.com/news/DJ/M12/D19/200512190454DOWJONESDJONLINE000103.html

[dreamscometrue]

Well most local's knew this was coming .Others dealing with the Iraq govmentment knew this has to happen for many reasons.

Here is something that has been talked about quitley over here that the price and electric was going up right after the elections and the Provsional goverment was going to do it .The reason for this was so the "newley elected goverment would not have to come in officer make some very hard choices that had to be made.

thus the ones that will soon be leaving will make these and a few others calls ,take the heat and leave the newly elected one to reap the beneifts ...hopefully :shhh:

Will this work out ...its Iraq who knows :D

[Dinar2005]

http://www.kurdmedia.com/news.asp?id=10921

5-fold increase the day after the elections. This hike cam after a promise of relief. There must be some pretty PO'd people. Something must be up.

[Adster]

Paving the way for a r/v........

[tattatu]

This happenned Dec 9.

http://www.irna.ir/en/news/view/menu-236/0506090032003306.htm

A billion dollars of trade occurred between Iran and Iraq this year. my guess rv achieves parity with Iran. worst case for us is oil no longer tied to usd, more likely euro/yuan/usd.

[King_NID]

http://news.yahoo.com/s/afp/20051219/wl_afp/iraq_051219130234;_ylt=AiSt2umAewgPcAS7ywNRhl.QOrg F;_ylu=X3oDMTBiMW04NW9mBHNlYwMlJVRPUCUl
R/V coming soon
Also from this article:

"[the electoral commission] said it would start giving initial election results as of Tuesday [12/20/05], while warning that final results may not be out before the end of the year."

[trusty]

Also from this article:

"[the electoral commission] said it would start giving initial election results as of Tuesday [12/20/05], while warning that final results may not be out before the end of the year."


Monday 19 December 2005, 20:00 Makka Time, 17:00 GMT
Iraq announces initial election results

Iraq's electoral commission has released partial and preliminary results from the 15 December elections

http://english.aljazeera.net/NR/exeres/3148A096-417D-4BC9-B2D6-6976E3BFB9B8.htm

Trusty

[King_NID]

Monday 19 December 2005, 20:00 Makka Time, 17:00 GMT
Iraq announces initial election results

Iraq's electoral commission has released partial and preliminary results from the 15 December elections

http://english.aljazeera.net/NR/exeres/3148A096-417D-4BC9-B2D6-6976E3BFB9B8.htm

Trusty
Good find, trusty. When the final results of the vote are released, they will show who the new parliament consists of. But once that it taken care of the newly elected parliament will still need to form the new government. Hopefully this doesn't take as long as it did the last time.

[JASONTL]

I think it is going to take just as long, if not longer. That's alot of people to get positioned, and then define their responsibilities, ex cetra. We will have the same haggling, and stand offs as we did during the constitution draft, but much more. But once they are seated, I think improvments will happen very fast. I think it is obviuos Iraqi's want a better life, and they want it now.

I thought I read somewhere that the fuel increases were retracted due to the protests. May have been a head fake to test reaction. It's kind of weird to me that the outgoing interim Gov't would institute a fuel increase on the way out the door.

[louieknucks]

I read that they were retracted in Basra but I don't know about elsewhere.

[JASONTL]

Surely this will teach the people that if they protest and cause anarchy the govnt will do whatever they say?

With the oil sector still struggling, the government is spending $6 billion a year to import oil products from other countries. It is under pressure from the World Bank to cut subsidies which keep prices down.

The government says it hopes to raise $500 million through the price increase.

Oil Minister Ibrahim Bahr Al Ulum threatened to resign unless the government cancelled the decision. "I call on the government to hold off on implementing this decision. One shouldn't punish Iraqis who risked their lives going to vote (in general elections) by increasing prices," the minister said.
http://www.gulf-daily-news.com/story.asp?Article=130432&Sn=BUSI&IssueID=28275

Oil Minister Ibrahim Bahr al-Uloum said that when the cabinet raised prices it also decided that the extra money would be used to support more than two million low-income families so they wouldn't be burdened by the increases. Some aid money was supposed to reach the families before the price increase, but that didn't happen, he said.

So, raise prices across the board, then after you made a little, give it back to the people? I don't get it. I think I would be burning tires too.

"Dr. Ibrahim will submit his resignation to the Iraqi government if the situation continues as is," he said, referring to himself. "We should take in consideration the living conditions and the economic situation of the citizens."

http://web.krg.org/articles/article_detail.asp?LangNr=12&RubricNr=&ArticleNr=8243&LNNr=28&RNNr=70

[lance]

Iraqi oil minister threatens to resign amid protests

http://news.yahoo.com/s/afp/20051219/wl_afp/iraq_051219130234;_ylt=AiSt2umAewgPcAS7ywNRhl.QOrg F;_ylu=X3oDMTBiMW04NW9mBHNlYwMlJVRPUCUl
R/V coming soon

He will give up one of the most sought after positions in Iraq, because things are not going his way. I dont believe this for a second. If he does, he wasnt the right man for the job in the first place. Hard decisions are ahead, and it will take hard men to stand their ground when the Iraqi's dont see the immediate benefits from those choices. Maybe he hasnt recieved the memo about the Marshall plan and the steps to move Iraq to a market economy, where the dinar is internationally convertible. Pretty sure he will be briefed in short order. I do believe your note about a increase in the value of the dinar soon. Good luck, Lance

[dreamscometrue]

well I might be wrong but I think he will be replaced soon anyway .When the new giverment gets in place then all minsteries I think will be re-appointed.

This may be more of a poltical move on his part who knows.What I have read and have heard several times as this increase is vital of the long term recovery and jump start that is much needed.

The transitional goverment was to the be scape goat for the hard calls that needed to be made ,this is one of them .I sure hope they stick by this ,time will tell if they cannot make this hard calls then well it will be a very long road for then and us as Investors in my humble

[CashMan]

Wasn't the end of gas subsidies part of IMF goals needed to get loans etc. Correct me if I'm wrong?

[SaraDinar]

Iraq hopes cut in oil subsidies will pay off
(AFP)
20 December 2005

BAGHDAD - The Iraqi government has taken a risky step by cutting fuel subsidies, but its leap of faith, along with programs to spur the economy, should pay huge dividends for the country, officials say.

Oil Minister Ibrahim Bahr Al Ulum said the International Monetary Fund asked Iraq to raise petrol prices because Baghdad is spending six billion dollars a year to import petrol, at least a third of which is smuggled back abroad.

“I think subsidy reforms is going to be a key issue for Iraq in the future,” said Dawn Liberi, program director in Iraq for the official US relief agency USAID.

“Implementing that is a challenge no matter where in the world you are,” she told AFP.

http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/focusoniraq/2005/December/focusoniraq_December142.xml&section=focusoniraq

[icarusII]

Iraq hopes cut in oil subsidies will pay off
(AFP)
20 December 2005

BAGHDAD - The Iraqi government has taken a risky step by cutting fuel subsidies, but its leap of faith, along with programs to spur the economy, should pay huge dividends for the country, officials say.

Oil Minister Ibrahim Bahr Al Ulum said the International Monetary Fund asked Iraq to raise petrol prices because Baghdad is spending six billion dollars a year to import petrol, at least a third of which is smuggled back abroad.

“I think subsidy reforms is going to be a key issue for Iraq in the future,” said Dawn Liberi, program director in Iraq for the official US relief agency USAID.

“Implementing that is a challenge no matter where in the world you are,” she told AFP.

http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/focusoniraq/2005/December/focusoniraq_December142.xml&section=focusoniraq
There is something that I think is significant with the developments on the fuels subsidies. When the Iraqis finalized the EPCA deal, they submitted a plan to reduce fuel subsidies gradually until 2009. Unless I have missed something along the way, they increased fuel prices to the full area market prices all in one move.
The Iraqis either have ALOT more revenue coming in for their fiscal budget, meaning they could hand out more dinar to their citizens to make up for the price increase.......or they are planning on the same amount of dinar but more value on the dinar they hand out.
After the govt gets seated and functional, something must happen with their economy and pretty quickly. This is going to be a very interesting show in 2006.

Just my take,
Icarus

[JJLL]

This may also be a security statement made by the Oil Minister...

I don't think it would be hard to find out where this guy lives and where is family lives. If he doesn't make a statement like he has, he may be killed.

So he makes a false statement to make locals think that he's "on their side".

Wild guess, but in an area where you have kidnappings and car bombing daily... it may not be too far fetched.

[BIG WAVE]

“I think subsidy reforms is going to be a key issue for Iraq in the future,” said Dawn Liberi, program director in Iraq for the official US relief agency USAID.

“Implementing that is a challenge no matter where in the world you are,” she told AFP. Liberi said that switching subsidies to growth-oriented priorities like getting fertilizer and better seeds to farmers “will make a huge difference” to Iraq, which also imports food into the fertile Tigris and Euphrates river valleys.

Areas into which USAID has been pumping part of its massive $5.1 billion budget are financing for small and medium-sized enterprises, a national financial management data system and training ministries in fiscal control.

The first supports local activities, from beekeeping to tractor repair, that employ Iraqis and build local economies, while the second will track money entering and leaving local, regional and federal government coffers.

“Once that is put in place the amount and level of transparency within the budgets will change dramatically,” Liberi said.

“This is being spearheaded by the Ministry of Finance and the central bank and they are very focused on it.”

http://www.arabnews.com/?page=6&section=0&article=75047&d=21&m=12&y=2005&pix=business.jpg&category=Business

[tattatu]

Was to be implemented Jan 06 as part of a deal to secure a $30 B loan from the Paris Club. The fact gas prices hikes were implemented 12/19 might mean Mahdi will be new PM.

Sep 2005: Iran imposed its own fixed price initiative despite warnings that demand for gasoline would only increase. Iran imports 40% of its gasoline. It has spent $17B building new refineries. It must build 5 new refineries just to meet current consumption.

Cost to import is 4500 Rials/liter; and gets sold for 800 Rials/liter.

Iraq prices went from a 1 cent per liter to about 3 cents per liter, still subsidized.

Roughly

Iran 11 liters = $1 = 9100 R

Iraq 33 liters = $1 = 1500 NID


gasoline will continue flowing out of Iraq. Iranians will pay for Iraqi gas in Dinars, so the exchange rate should improve. Ideally, parity would be 500 NID to $1 to 9100 R to 11 liters of gas. Sorry this is from 5 different links and I'm too tired to post anything else.

[tattatu]

checked out Syrian price/liter for gasoline

http://www.nationmaster.com/country/sy/Energy&b_define=1

.72 USD/ liter of gasoline in Syria

.03 USD/liter of gasoline in Iraq


1500/25 = 60 NID/$1 (w/ parity)

So a Syrian would be willing to exchange at least $1 = 57 SYP = 60 Dinar to buy the same amount of gasoline, they are currently buying in Syria.

[tattatu]

Syria has no price controls on fuel, lacks oil reserves and ends up paying similiar prices that US consumers pay for fuel (I think more). Iraq and Iran with oil reserves use fixed prices to subsidize consumers and thereby create shortages in their own countries as well as contribute to the type of inflation that inhibits growth and worse contributes to criminal activity. Potentially, one could make a career in Iraq standing in line waiting for gasoline to arrive. Ironically, fiscal conservatives in Iran and I'll say Iraq too, argue that price controls stop inflation and provide economic security for people who cant afford higher prices that the free market creates. The RV is very much connected to the removal of price controls. My prediction raising the price of fuel in Iraq to 60 cents per liter would cut demand and stop the flow of gasoline from leaving the country. Wages would increase. Creating shortages in Iran would undermine the conservative's price control program -- so trade relations would improve, since economic growth could not continue without fuel. That's a 20 fold increase using today's prices, but that's what I think it would take to change both Iraq and Iran.

[tattatu]

Demand for Dinars/USD/Euros going up due to scarcity of gasoline. Future of Iran very dependent on peaceful settlement in Iraq, since Iran has increased its refining and electrical power generation capacity (w/ assistance from Russia). The problem of course is that Iran needs more oil than it produces.

Also, heard today that Russia is raising natural gas prices in Ukraine 4-fold (another example of pressure from EU and others to remove price controls.) The pipeline through Ukraine supplies Europe with 20% of their natural gas needs. The fear is that if Ukraine refuses to pay higher prices, the pipeline connecting Russia and Europe will be cutoff.

[tattatu]

http://www.zmag.org/content/print_article.cfm?itemID=5431&sectionID=15

dtd 4/30/2004
Last 13 years, Iraqis have had their gasoline for free (well sort of) cost to taxpayers about $1 B per year to subsidize a program SH started. 28% of GDP or $6.8 B in 2004 (including the cost of replacing gasoline stolen by smugglers.)

Quote by Oil Minister Ibrahim al-Uloum: Not proper to discuss raising oil prices when his workers at the ministry "dont have clean drinking water."

Haiti (2003) 130% fuel and cooking oil increase. 1 student killed
Nigeria (1998) 71% increase. 2 dead
Malaysia ?? not mentioned but i know it happenned there

Cons:
1. smuggling to other countries
2. gas diluted with water
3. long lines at stations
4. Missing from IMF-compliant budget for 2004. Oops.