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Update No: 052 - (22/08/07)

Slow recovery
The latest IMF report on the Iraqi economy paints a rather dim picture. The IMF had expected Iraq to be able to increase oil production during the past year, but it failed to do so. Oil revenue has increased by just US$1.4 billion to US$28.6 billion. As result, the oil-dependent Iraqi economy registers a GDP growth inferior to the forecast, at just 6.2%. The inflation rate more than double in 2006, to almost 65%. The Central Bank is not having some success in bringing inflation down, but it is expected that by the year's end it will still hover at around 30% (it stands at 46% now), far too much for an effective stabilisation of the economy. Apart from the lowering of inflation, the forecast for the current year is not much more optimistic. GDP growth is expected at 6.3%. To compound the picture it can be added that the country's power supply system appears on the verge of collapse as consumption peaks over the summer, with four national blackouts just during the first week of August.

All quiet on the business front
Perhaps unsurprisingly given the state of the country, not much moves on the business front. An exception is the recent sale of three mobile phone licenses to as many operators for the sum of US$3.75 billion. Kuwait's Mobile Telecommunications Co (MTC), Qatar's Asiacell and Iraq's Korek won the auction, while mobile operator Orascom, which already has 3 million subscribers in Iraq on the basis of the initial short-term contracts issued by the government, dropped out of the race as the bidding was getting too expensive. With already 8 million subscribers, the market is still considered attractive, but concerns about the future dampened the enthusiasm of investors. According to the contract, 18% of the revenues will go to the Iraqi government, while profits will be taxed at 15%. 
The oil front was similarly quiet in August. The oil minister rejected a suggestion from Moscow that given Russia's long standing experience with Iraqi oil fields, maybe it should be paid some favour in the future bidding for the oil fields. On the positive side, some more oil giants are beginning to express interest in the Iraqi oil market. Chevron and Total have reached a deal to jointly bid for the development of the large Majnoon field in the south.

Ruling coalition re-emerges from its ashes
Finally after long suffering the Iraqi ruling coalition completely collapsed in August, with the Sunni bloc, the Sadrist Shia group, the Shiite Fadhila party and the Allawi secularist bloc all having walked out. Between those who left the government and those who were boycotting its meetings, during the first half of August 17 cabinet seats were left vacant. Maliki and the Dawa party however were not ready to give up, as they need to maintain their positions in government because they have no real back up position in society or in underground organisations. They have no militias and their popular base of support is not very large. Mailki fears that the Americans are plotting to replace him and that if he surrenders control the role of the Sunnis in government might be boosted after a recent series of deal between tribal sheiks and the US forces in western Iraq. American insistence at allowing the Baathists back is also seen with suspicion by Dawa circles. 
With this in mind, in mid-August Maliki managed to form a new Shiite-Kurds coalition, which however includes no Sunni Arabs, to the irritation of Washington. Maliki threatened the Sunni Bloc to replace them with unspecified 'others', but the threat was not sufficient to bring them back into the government and many suspect Maliki might not have been too unhappy about this. 

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