Thread: Iraq/Dinar News. 09/05 to 01/14/07

Not exactly Iraq but some good info...


Spotlight: Central banker, royal ties
By Karina Robinson

Published: October 13, 2006


SINGAPORE Sheik Salem Abdul Aziz al-Sabah is an optimist. How else to explain his 20-year stint as governor of the Central Bank of Kuwait, during which his calls for privatization and the development of the country's capital markets have been ignored? Or his belief that the quest for a single currency in the Gulf region by 2010 stands a good chance? Let alone his confidence that Kuwait can be a regional financial center.

Known by other central bankers as the "big survivor" and an "intelligent and balanced man," while Kuwaiti bankers call him "the father of all the banks," Sabah has spent his entire career in the central bank - something he is eager to point out when asked whether being part of the ruling family gave him a sense of entitlement or duty.

"Both," he said during an interview during the annual meetings of the International Monetary Fund and the World Bank last month in Singapore. "I have to do a lot for my country, not just something. But being a member of the ruling family has nothing to do with my position, by the way, because I started with the central bank and took so many posts in it."

Sabah, who holds an undergraduate degree from the American University in Beirut, also sits on the board of the Kuwait Investment Authority, which is in charge of managing foreign investments for the state, and "has strong tentacles throughout the rest of Kuwait society," according a former adviser to Sabah, Keith Wood, who has worked for the Bank of England.

The vision of Kuwait as a regional financial center is a pet project of the new emir, or ruler, of Kuwait, Sheik Sabah al-Ahmed al-Jaber al-Sabah, who took power this year following the death in January of his half-brother.

But with Dubai and Bahrain already advanced as financial centers, and Qatar and Saudi Arabia well on their way, it is hard to imagine Kuwait wanting to be a regional financial center.

"Wait a couple of months and ask me again," said Sabah the banker, 55, who is not a close relative of the emir.

Kuwait's vociferous Parliament has been an impediment to the modernization of the country. For example, Project Kuwait, an attempt to increase oil output, has been sitting on the back burner for almost 10 years, while the law on privatization remains just a piece of paper. As a result, only 26 percent of gross domestic product in Kuwait came from the private sector in 2005, and that looks unlikely to change.

"I have to admit we have been slow" in encouraging the development of stock and bond markets, Sabah said. "The main source of borrowing is from banks." He would like more companies to access medium- and long-term funds from the capital markets, rather than through shorter-term bank loans, but for this Parliament must update laws.

Meanwhile, the goal of a single currency in the Gulf Cooperation Council by 2010 looks doubtful when there is not even a name for it, let alone much agreement among the component countries: Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain.

"To introduce a single currency among single nations is not an easy issue," Sabah said. "It requires many economic, institutional and administrative arrangements. I have to admit we have been slow for the past two years. But we believe we can achieve that."

Perhaps Sabah, who is known to visit Tottenham Court Road when he is in London to view the latest electronic technology, should not be judged on the issues that are beyond his control. Instead, one should look at the state of the banking sector in Kuwait. There he wins good marks.

"The banking system in Kuwait is in pretty good shape," said Rory Keelan, a senior analyst at Capital Intelligence, a ratings agency with offices in Cyprus, Lebanon and Hong Kong. "The central bank in Kuwait is a conservative institution, but it should be, due to the problems of the past."

In 1982 there was a crash in the unofficial Souk al-Manakh stock market. This year the Kuwait stock market, along with those of other Gulf countries, suffered a sharp correction. Two years ago the central bank introduced a rule under which banks could only lend against 80 percent of their deposits as a way to stem what the central bank saw as a worrying overexpansion of credit.

Sabah dismisses bankers' complaints about the new lending rule. "When we introduced such an instruction in July 2004, the credit portfolio of the banking system was about 9 billion Kuwaiti dinar," or about $31 billion. Today it is almost 13.5 billion Kuwaiti dinar. In 2005, private sector credit grew 20 percent.

He has also managed to keep inflation-it was a 4.1 percent in 2005-in check, not an easy task when oil money pours in at a rate estimated by some at more than $120 million a day.

Fighting for change and believing, after 20 years, that you will one day succeed, shows a positive attitude to life. It must have been severely tested when the Iraqis invaded in 1990. Sabah was forced to flee Kuwait overland in a convoy to the Saudi Arabian border in temperatures averaging 50 to 60 degrees Celsius, or 122 to 140 Fahrenheit. His homes were destroyed and the central bank vaults were looted.

"Well, it is an old story, in the past," he said. "Now it is a different regime."

Karina Robinson is senior editor of The Banker. This article is adapted from her monthly column.

SINGAPORE Sheik Salem Abdul Aziz al-Sabah is an optimist. How else to explain his 20-year stint as governor of the Central Bank of Kuwait, during which his calls for privatization and the development of the country's capital markets have been ignored? Or his belief that the quest for a single currency in the Gulf region by 2010 stands a good chance? Let alone his confidence that Kuwait can be a regional financial center.

Known by other central bankers as the "big survivor" and an "intelligent and balanced man," while Kuwaiti bankers call him "the father of all the banks," Sabah has spent his entire career in the central bank - something he is eager to point out when asked whether being part of the ruling family gave him a sense of entitlement or duty.

"Both," he said during an interview during the annual meetings of the International Monetary Fund and the World Bank last month in Singapore. "I have to do a lot for my country, not just something. But being a member of the ruling family has nothing to do with my position, by the way, because I started with the central bank and took so many posts in it."

Sabah, who holds an undergraduate degree from the American University in Beirut, also sits on the board of the Kuwait Investment Authority, which is in charge of managing foreign investments for the state, and "has strong tentacles throughout the rest of Kuwait society," according a former adviser to Sabah, Keith Wood, who has worked for the Bank of England.

The vision of Kuwait as a regional financial center is a pet project of the new emir, or ruler, of Kuwait, Sheik Sabah al-Ahmed al-Jaber al-Sabah, who took power this year following the death in January of his half-brother.

But with Dubai and Bahrain already advanced as financial centers, and Qatar and Saudi Arabia well on their way, it is hard to imagine Kuwait wanting to be a regional financial center.

"Wait a couple of months and ask me again," said Sabah the banker, 55, who is not a close relative of the emir.

Kuwait's vociferous Parliament has been an impediment to the modernization of the country. For example, Project Kuwait, an attempt to increase oil output, has been sitting on the back burner for almost 10 years, while the law on privatization remains just a piece of paper. As a result, only 26 percent of gross domestic product in Kuwait came from the private sector in 2005, and that looks unlikely to change.

"I have to admit we have been slow" in encouraging the development of stock and bond markets, Sabah said. "The main source of borrowing is from banks." He would like more companies to access medium- and long-term funds from the capital markets, rather than through shorter-term bank loans, but for this Parliament must update laws.

Meanwhile, the goal of a single currency in the Gulf Cooperation Council by 2010 looks doubtful when there is not even a name for it, let alone much agreement among the component countries: Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain.

"To introduce a single currency among single nations is not an easy issue," Sabah said. "It requires many economic, institutional and administrative arrangements. I have to admit we have been slow for the past two years. But we believe we can achieve that."

Perhaps Sabah, who is known to visit Tottenham Court Road when he is in London to view the latest electronic technology, should not be judged on the issues that are beyond his control. Instead, one should look at the state of the banking sector in Kuwait. There he wins good marks.

"The banking system in Kuwait is in pretty good shape," said Rory Keelan, a senior analyst at Capital Intelligence, a ratings agency with offices in Cyprus, Lebanon and Hong Kong. "The central bank in Kuwait is a conservative institution, but it should be, due to the problems of the past."

In 1982 there was a crash in the unofficial Souk al-Manakh stock market. This year the Kuwait stock market, along with those of other Gulf countries, suffered a sharp correction. Two years ago the central bank introduced a rule under which banks could only lend against 80 percent of their deposits as a way to stem what the central bank saw as a worrying overexpansion of credit.

Sabah dismisses bankers' complaints about the new lending rule. "When we introduced such an instruction in July 2004, the credit portfolio of the banking system was about 9 billion Kuwaiti dinar," or about $31 billion. Today it is almost 13.5 billion Kuwaiti dinar. In 2005, private sector credit grew 20 percent.

He has also managed to keep inflation-it was a 4.1 percent in 2005-in check, not an easy task when oil money pours in at a rate estimated by some at more than $120 million a day.

Fighting for change and believing, after 20 years, that you will one day succeed, shows a positive attitude to life. It must have been severely tested when the Iraqis invaded in 1990. Sabah was forced to flee Kuwait overland in a convoy to the Saudi Arabian border in temperatures averaging 50 to 60 degrees Celsius, or 122 to 140 Fahrenheit. His homes were destroyed and the central bank vaults were looted.

"Well, it is an old story, in the past," he said. "Now it is a different regime."

Karina Robinson is senior editor of The Banker. This article is adapted from her monthly column.

Just think when Iraq really starts punpimg

Oil prices in retreat on OPEC indecision
By Jad Mouawad The New York Times

Published: October 11, 2006


NEW YORK After a week of informal talks, the president of OPEC, Edmund Daukoru, said Wednesday that the cartel had agreed to trim oil production by one million barrels a day, although its members were still negotiating over how the cut would be allocated among them.

The confusion surrounding the position of the Organization of Petroleum Exporting Countries, and the group's inability to reach a formal agreement quickly, sent oil prices falling to their lowest level of this year. Some OPEC members want an emergency meeting next week to complete the accord.

Investors were unimpressed. The contract for November delivery of light, low-sulfur crude oil fell 93 cents, or 1.6 percent, on the New York Mercantile Exchange to close at $57.59 a barrel, the lowest level since February.

Market analysts said that a report from the International Energy Agency, forecasting slightly lower demand for oil than anticipated in 2007 because of slower growth in the United States, weighed much more heavily on the market than the OPEC announcement.

As the price of oil has fallen more than 25 percent since peaking in mid-July, OPEC members have so far been unable to agree on a common approach to reducing supply and sustaining prices. That has left oil markets unsettled.

The prospect of OPEC agreeing to act in concert to keep prices from falling further led the United States energy secretary, Samuel Bodman, to say Wednesday that would seek talks with the cartel in the next week. "We have continued to encourage OPEC, as well as all producers, to make plenty of oil available, so we can keep our market well- supplied," Bodman said during an interview with CNBC, a U.S. financial news cable network.

OPEC is not a homogenous group, but a collection of countries with divergent political and economic interests. As oil prices more than doubled over the past three years, OPEC members found it easy to agree on a common policy that brought them windfall revenue.

But with prices now falling, that consensus is fraying. Iran and Venezuela have called for a special meeting in Vienna next week to endorse production cuts. Others, like Kuwait and Algeria, have backed the proposal but disagree on how to apportion the cuts. Nigeria has resisted calls for a special meeting to avoid overshadowing OPEC's next scheduled conference, to be held in Abuja, the Nigerian capital, in December.

This is the time OPEC should have been bracing itself for the first quota cut in two years. Instead, as an analyst from Société Générale noted, "OPEC failed its return to discipline."

The group's most influential member, Saudi Arabia, has remained conspicuously silent. The Saudis are understood to support a production cut, but OPEC watchers reason that the country, which accounts for one-third of OPEC's output, wants to be discreet, with midterm U.S. elections just weeks away.

With bickering in the ranks and without clear leadership from Saudi Arabia, analysts are left weighing vague signs to discern what OPEC is up to.

Paul Horsnell of Barclays Capital said, "The Kremlinology of OPEC is back."

In the past two years, OPEC producers have been steadily increasing their output to meet rising demand for oil and to make up for unexpected shortages in global supplies. That has led the group to raise its total output above 30 million barrels a day, the highest level in more than 25 years.

Now, with supplies aplenty, inventories brimming and demand slowing, OPEC finds itself having to shift its focus to manage a declining price pattern.

Some producers have been paring their output in recent months, so OPEC now produces 27.5 million to 27.8 million barrels a day, depending on estimates. That excludes oil from Iraq, which has no production quota.

Referring to OPEC, Sadek Boussena, a former president of the group and a former oil minister from Algeria, said: "They have had no training for nearly two years. It's like a football game. Right now, they are warming up for a friendly game. But if prices fall further, it might become vital for them to act."

NEW YORK After a week of informal talks, the president of OPEC, Edmund Daukoru, said Wednesday that the cartel had agreed to trim oil production by one million barrels a day, although its members were still negotiating over how the cut would be allocated among them.

The confusion surrounding the position of the Organization of Petroleum Exporting Countries, and the group's inability to reach a formal agreement quickly, sent oil prices falling to their lowest level of this year. Some OPEC members want an emergency meeting next week to complete the accord.

Investors were unimpressed. The contract for November delivery of light, low-sulfur crude oil fell 93 cents, or 1.6 percent, on the New York Mercantile Exchange to close at $57.59 a barrel, the lowest level since February.

Market analysts said that a report from the International Energy Agency, forecasting slightly lower demand for oil than anticipated in 2007 because of slower growth in the United States, weighed much more heavily on the market than the OPEC announcement.

As the price of oil has fallen more than 25 percent since peaking in mid-July, OPEC members have so far been unable to agree on a common approach to reducing supply and sustaining prices. That has left oil markets unsettled.

The prospect of OPEC agreeing to act in concert to keep prices from falling further led the United States energy secretary, Samuel Bodman, to say Wednesday that would seek talks with the cartel in the next week. "We have continued to encourage OPEC, as well as all producers, to make plenty of oil available, so we can keep our market well- supplied," Bodman said during an interview with CNBC, a U.S. financial news cable network.

OPEC is not a homogenous group, but a collection of countries with divergent political and economic interests. As oil prices more than doubled over the past three years, OPEC members found it easy to agree on a common policy that brought them windfall revenue.

But with prices now falling, that consensus is fraying. Iran and Venezuela have called for a special meeting in Vienna next week to endorse production cuts. Others, like Kuwait and Algeria, have backed the proposal but disagree on how to apportion the cuts. Nigeria has resisted calls for a special meeting to avoid overshadowing OPEC's next scheduled conference, to be held in Abuja, the Nigerian capital, in December.

This is the time OPEC should have been bracing itself for the first quota cut in two years. Instead, as an analyst from Société Générale noted, "OPEC failed its return to discipline."

The group's most influential member, Saudi Arabia, has remained conspicuously silent. The Saudis are understood to support a production cut, but OPEC watchers reason that the country, which accounts for one-third of OPEC's output, wants to be discreet, with midterm U.S. elections just weeks away.

With bickering in the ranks and without clear leadership from Saudi Arabia, analysts are left weighing vague signs to discern what OPEC is up to.

Paul Horsnell of Barclays Capital said, "The Kremlinology of OPEC is back."

In the past two years, OPEC producers have been steadily increasing their output to meet rising demand for oil and to make up for unexpected shortages in global supplies. That has led the group to raise its total output above 30 million barrels a day, the highest level in more than 25 years.

Now, with supplies aplenty, inventories brimming and demand slowing, OPEC finds itself having to shift its focus to manage a declining price pattern.

Some producers have been paring their output in recent months, so OPEC now produces 27.5 million to 27.8 million barrels a day, depending on estimates. That excludes oil from Iraq, which has no production quota.

Referring to OPEC, Sadek Boussena, a former president of the group and a former oil minister from Algeria, said: "They have had no training for nearly two years. It's like a football game. Right now, they are warming up for a friendly game. But if prices fall further, it might become vital for them to act."

Originally Posted by bluezzguy

Adster,

Forgive the novice here. The rate from 3 years ago, I thought I have read in other posts that that too was an artificial rate set by Iraq, and that the dinar was not fully tradeable at that time as well.

Sorry if this has been rehashed before..

Randy

Hi Randy,

The naysayers often stated that the rate was not real, as it was not tested against neighboring countries, and then it was said not to be real, but this is far from the truth. The very first rate adjustment under Saddam was not pulled out of a hat as some will state, but it was calculatated with the assistance of top economic leaders at the time, so it was not set by Saddam, but he surely caused the dramatic drop, so what does this tell us?

Technically, the real rate, if traded freely outside of Iraq was stated to be half the $3.00 plus value, so what does this mean? Technically, at worse, it was worth $1.50 if it were freely traded, so the thought here would be that it is worth at least that and I suppose this is why some think the revalue will be the $1.48, as it makes sense.

Sadly, nothing makes much sense in Iraq, and if you were to assume the experts were right, and the dinar should be worth $1.50, then think about this, debt was high, sanctions were in place, Iraq attacked Kuwait, and threatened others, so talk about reasons why the dinar was not freely traded, there were many. (g)

If we want to use the past to place a current value on Iraq dinar, then it would make sense that $1.48 should be reasonable start point. Democracy in place, no sanctions, in fact, money is being committed like never before, plus FIL is done, exports will increase, agricultural investments will pay off big, and on and on the reasons go to support $1.48, but lets look at it this way, we ended at .31 and the books are still pegged to this value, so knowing the above, this would appear to be an artificially low rate with oil at more than twice what it was, and after all, this is what whole revalue is currently based on, OIL. Sure makes it interesting, but the way I hear it, .30/.40 is a great starting point. (g)

Good luck to all, Mike

As U.S. effort winds down, can Iraq fill 'reconstruction gap'?
The Associated Press

Published: October 12, 2006


NEW YORK Hard behind U.S. tanks and troops, America's big builders invaded Iraq three years ago. Now the reconstruction funds are drying up and they're pulling out, leaving both completed projects and unfulfilled plans in the hands of an Iraqi government unprepared to manage either one.

The Oct. 1 start of the U.S. government's 2007 fiscal year signaled an end to U.S. aid for new Iraq reconstruction.

"We're really focusing now on helping Iraqis do this themselves in the future," said Daniel Speckhard, reconstruction chief at the U.S. Embassy in Baghdad. Many Iraqi government ministries aren't able yet to pick up where the Americans leave off, he said. "They're very bad at sustainment in terms of programs and projects."

In 2003, Congress committed almost $22 billion (€17 billion) to a three-year program to help Iraq climb back from the devastation of war and the looting that followed, and from years of neglect under U.N. economic sanctions and Saddam Hussein's rule.

The money, the biggest such U.S. effort since the Marshall Plan in Europe after World War II, was invested in thousands of projects, large and small, from rebuilt oil pipelines and upgraded power plants to schoolbooks, new ambulances, and plant nurseries to replenish Iraq's groves of date palms.

But the U.S. and Iraqi planners, engineers and construction crews faced major obstacles in a landscape wracked by anti-U.S. insurgency and Iraqi-on-Iraqi violence, in an economy bled by corruption, and in a nation abandoned by thousands of its skilled hands and shunned by much of the world.

In this dangerous environment, almost $6 billion (€5 billion) in that U.S. reconstruction aid was diverted to training Iraqi police and troops and to other security costs, adding to what U.S. auditors now dub a "reconstruction gap."

Fewer than half the electricity and oil projects planned have thus far been completed, internal documents of the U.S. reconstruction command show. Scores of other projects were canceled, and the "gap" can be seen in the streets of Baghdad, where people spend most of their day without electricity, and spend hours in line for gasoline and other scarce fuels.

Although the Americans will complete jobs already under contract, probably into 2008, many in the U.S. program are disappointed Congress chose not to underwrite essential new projects.

"I always thought there would be value in having more money. (Other) donors haven't been coming in," noted Maj. Gen. William McCoy, senior U.S. Army engineer overseeing reconstruction. Of almost $14 billion (€11 billion) pledged in 2003 by non-U.S. donors, barely $3 billion (€2.4 billion) has been disbursed.

From one key Iraqi's perspective, much of the money that has gone to reconstruction has been misspent.

"Huge amounts of funds were wasted because of bureaucracy, corruption, incapacity and the spending of money on unimportant projects," Ali Baban, planning minister in Iraq's 5-month-old government, told the AP.

In a series of high-profile cases, big names in U.S. engineering-construction — Parsons, Bechtel, Halliburton — were criticized for poor performance. In one recent example, the Special Inspector-General for Iraq Reconstruction last month said renovation of Baghdad's police academy, overseen by Parsons Corp., was so shoddy that sewage dripped through a new dormitory's ceilings.

"My biggest disappointment has been the issues we're having to recover from with bad work by American contractors," McCoy said by telephone from Baghdad.

The auditors say, however, that most projects show good workmanship and quality control. American officials point particularly to what Speckhard called a "very significant success in helping the oil sector get back on its feet" — vital to Iraq's future, since more than 90 percent of its government revenues come from oil sales.

It was a struggle, against insurgent sabotage, equipment breakdowns and oil smugglers, but Iraqi oil production, which scraped bottom at 1.4 million barrels a day last January, is again approaching prewar levels, hitting 2.5 million a day in June. It has dropped back slightly since.

Oil exports this summer topped 1.65 million barrels a day, said to be the level necessary to generate extra funds for reconstruction.

Reconstruction officials point, too, to U.S.-financed work on Iraq's schools — rehabilitation of most of the 12,000 schools needing it, training of more than 100,000 teachers — and to progress in restoring or extending drinking water and sewer lines to more Iraqis. But a U.S. executive recently underscored how the nonstop Sunni-Shiite Muslim bloodshed can obstruct, in sometimes gruesome ways, Iraq's recovery.

"Water treatment plants have been shut down by the accumulation of dead bodies in canals," Bechtel's Cliff Mumm informed a congressional committee as he listed contractors' problems in Iraq.

The greatest problems plague the giant U.S. effort to restore Iraqi electricity.

By adding 2,710 megawatts — more than the output of America's Hoover Dam — U.S. engineers have boosted Iraq's potential generating capacity to over 7,000. But power hasn't flowed at anywhere near that capacity, and seldom topped even the paltry level of prewar Iraq, about 4,500 megawatts. Baghdad suffers especially, getting no more than four to six hours of electricity a day.

On the day McCoy was interviewed, national output was 4,200 megawatts. Said the general, ending a 16-month Iraq tour, "I wanted to have electricity working a whole lot better."

Iraqi officials are quick to blame insurgent sabotage, but engineers say it's often utility workers outside Baghdad who cut lines, keeping power in their areas. McCoy also attributed shortfalls to a surging demand for electricity, erratic fuel supplies and poor maintenance — a point the Iraqis concede.

"Most power stations are old and need constant maintenance that cannot be provided," said Aziz Sultan, Electricity Ministry spokesman.

That "sustainment" worries the Americans.

Auditors following up last year found one-quarter of completed water-treatment plants had broken down. "Concerns remain about Iraq's capacity to operate its expanded and modernized infrastructure," the special inspector-general, Stuart W. Bowen Jr., reported on July 31. Limited new U.S. spending will focus on training Iraqis in operations and maintenance.

The Americans worry, too, about the Baghdad government's ability to invest oil funds effectively.

"A second real challenge in this country is to make sure money is spent wisely and avoid corruption," Speckhard said.

Corruption and theft, petty and grand, touches every corner of Iraq. American officials say tribal chiefs sell material from downed power lines and then charge "tariffs" for access to repair them. Hundreds of Oil Ministry staff have been fired after allegedly smuggling Iraq's poorly monitored oil or fuel products out of the country or into the black market. Even medicines vanish, leaving hospitals in short supply.

As the U.S. fiscal year ended, the Army congratulated its reconstruction teams on what they've accomplished in Iraq. "Never has so much been done, so well and so quickly, by so few," it said. One measure of sacrifice: At least 575 Iraqi and other contract workers, many in reconstruction, have been killed since 2003.

But huge challenges lie ahead in a country where a third or more of the work force remains unemployed. On electricity alone, the Iraqis estimate they'll need to find $20 billion (€15.9 billion) more to finish the modernization.

Carlos Pascual, who headed the reconstruction office at the State Department until this year, said Iraq's sectarian bloodletting, unsettled politics and paralyzed decision-making make hope of a quick recovery illusory.

"There were people seriously committed to try to put in place programs to improve the lives of Iraqis," the ex-ambassador said. "The problem was it was never happening in a context that could make it sustainable."

___

EDITOR'S NOTE — Charles Hanley has reported periodically from Iraq since 2002. Associated Press correspondent Sameer N. Yacoub contributed to this report from Baghdad.

NEW YORK Hard behind U.S. tanks and troops, America's big builders invaded Iraq three years ago. Now the reconstruction funds are drying up and they're pulling out, leaving both completed projects and unfulfilled plans in the hands of an Iraqi government unprepared to manage either one.

The Oct. 1 start of the U.S. government's 2007 fiscal year signaled an end to U.S. aid for new Iraq reconstruction.

"We're really focusing now on helping Iraqis do this themselves in the future," said Daniel Speckhard, reconstruction chief at the U.S. Embassy in Baghdad. Many Iraqi government ministries aren't able yet to pick up where the Americans leave off, he said. "They're very bad at sustainment in terms of programs and projects."

In 2003, Congress committed almost $22 billion (€17 billion) to a three-year program to help Iraq climb back from the devastation of war and the looting that followed, and from years of neglect under U.N. economic sanctions and Saddam Hussein's rule.

The money, the biggest such U.S. effort since the Marshall Plan in Europe after World War II, was invested in thousands of projects, large and small, from rebuilt oil pipelines and upgraded power plants to schoolbooks, new ambulances, and plant nurseries to replenish Iraq's groves of date palms.

But the U.S. and Iraqi planners, engineers and construction crews faced major obstacles in a landscape wracked by anti-U.S. insurgency and Iraqi-on-Iraqi violence, in an economy bled by corruption, and in a nation abandoned by thousands of its skilled hands and shunned by much of the world.

In this dangerous environment, almost $6 billion (€5 billion) in that U.S. reconstruction aid was diverted to training Iraqi police and troops and to other security costs, adding to what U.S. auditors now dub a "reconstruction gap."

Fewer than half the electricity and oil projects planned have thus far been completed, internal documents of the U.S. reconstruction command show. Scores of other projects were canceled, and the "gap" can be seen in the streets of Baghdad, where people spend most of their day without electricity, and spend hours in line for gasoline and other scarce fuels.

Although the Americans will complete jobs already under contract, probably into 2008, many in the U.S. program are disappointed Congress chose not to underwrite essential new projects.

"I always thought there would be value in having more money. (Other) donors haven't been coming in," noted Maj. Gen. William McCoy, senior U.S. Army engineer overseeing reconstruction. Of almost $14 billion (€11 billion) pledged in 2003 by non-U.S. donors, barely $3 billion (€2.4 billion) has been disbursed.

From one key Iraqi's perspective, much of the money that has gone to reconstruction has been misspent.

"Huge amounts of funds were wasted because of bureaucracy, corruption, incapacity and the spending of money on unimportant projects," Ali Baban, planning minister in Iraq's 5-month-old government, told the AP.

In a series of high-profile cases, big names in U.S. engineering-construction — Parsons, Bechtel, Halliburton — were criticized for poor performance. In one recent example, the Special Inspector-General for Iraq Reconstruction last month said renovation of Baghdad's police academy, overseen by Parsons Corp., was so shoddy that sewage dripped through a new dormitory's ceilings.

"My biggest disappointment has been the issues we're having to recover from with bad work by American contractors," McCoy said by telephone from Baghdad.

The auditors say, however, that most projects show good workmanship and quality control. American officials point particularly to what Speckhard called a "very significant success in helping the oil sector get back on its feet" — vital to Iraq's future, since more than 90 percent of its government revenues come from oil sales.

It was a struggle, against insurgent sabotage, equipment breakdowns and oil smugglers, but Iraqi oil production, which scraped bottom at 1.4 million barrels a day last January, is again approaching prewar levels, hitting 2.5 million a day in June. It has dropped back slightly since.

Oil exports this summer topped 1.65 million barrels a day, said to be the level necessary to generate extra funds for reconstruction.

Reconstruction officials point, too, to U.S.-financed work on Iraq's schools — rehabilitation of most of the 12,000 schools needing it, training of more than 100,000 teachers — and to progress in restoring or extending drinking water and sewer lines to more Iraqis. But a U.S. executive recently underscored how the nonstop Sunni-Shiite Muslim bloodshed can obstruct, in sometimes gruesome ways, Iraq's recovery.

"Water treatment plants have been shut down by the accumulation of dead bodies in canals," Bechtel's Cliff Mumm informed a congressional committee as he listed contractors' problems in Iraq.

The greatest problems plague the giant U.S. effort to restore Iraqi electricity.

By adding 2,710 megawatts — more than the output of America's Hoover Dam — U.S. engineers have boosted Iraq's potential generating capacity to over 7,000. But power hasn't flowed at anywhere near that capacity, and seldom topped even the paltry level of prewar Iraq, about 4,500 megawatts. Baghdad suffers especially, getting no more than four to six hours of electricity a day.

On the day McCoy was interviewed, national output was 4,200 megawatts. Said the general, ending a 16-month Iraq tour, "I wanted to have electricity working a whole lot better."

Iraqi officials are quick to blame insurgent sabotage, but engineers say it's often utility workers outside Baghdad who cut lines, keeping power in their areas. McCoy also attributed shortfalls to a surging demand for electricity, erratic fuel supplies and poor maintenance — a point the Iraqis concede.

"Most power stations are old and need constant maintenance that cannot be provided," said Aziz Sultan, Electricity Ministry spokesman.

That "sustainment" worries the Americans.

Auditors following up last year found one-quarter of completed water-treatment plants had broken down. "Concerns remain about Iraq's capacity to operate its expanded and modernized infrastructure," the special inspector-general, Stuart W. Bowen Jr., reported on July 31. Limited new U.S. spending will focus on training Iraqis in operations and maintenance.

The Americans worry, too, about the Baghdad government's ability to invest oil funds effectively.

"A second real challenge in this country is to make sure money is spent wisely and avoid corruption," Speckhard said.

Corruption and theft, petty and grand, touches every corner of Iraq. American officials say tribal chiefs sell material from downed power lines and then charge "tariffs" for access to repair them. Hundreds of Oil Ministry staff have been fired after allegedly smuggling Iraq's poorly monitored oil or fuel products out of the country or into the black market. Even medicines vanish, leaving hospitals in short supply.

As the U.S. fiscal year ended, the Army congratulated its reconstruction teams on what they've accomplished in Iraq. "Never has so much been done, so well and so quickly, by so few," it said. One measure of sacrifice: At least 575 Iraqi and other contract workers, many in reconstruction, have been killed since 2003.

But huge challenges lie ahead in a country where a third or more of the work force remains unemployed. On electricity alone, the Iraqis estimate they'll need to find $20 billion (€15.9 billion) more to finish the modernization.

Carlos Pascual, who headed the reconstruction office at the State Department until this year, said Iraq's sectarian bloodletting, unsettled politics and paralyzed decision-making make hope of a quick recovery illusory.

"There were people seriously committed to try to put in place programs to improve the lives of Iraqis," the ex-ambassador said. "The problem was it was never happening in a context that could make it sustainable."

___

EDITOR'S NOTE — Charles Hanley has reported periodically from Iraq since 2002. Associated Press correspondent Sameer N. Yacoub contributed to this report from Baghdad.

Nice one Mike, have your Kurd friends said anything last few days???

1932
Currency unit consisting of 1,000 fils or 20 dirhams. When officially introduced at the end of the British mandate (1932), the Iraqi dinar was equal to, and was linked to, the British pound sterling, which at that time was equal to US$4.86.

1932–1949
1949–1971
Iraqi dinar (ID) equaled US$4.86 between 1932 and 1949 and after devaluation in 1949, equaled US$2.80 between 1949 and 1971.

1959–1967
Iraq officially uncoupled the Iraqi Dinar from the pound sterling as a gesture of independence in 1959, but the Iraqi dinar remained at parity with the pound until the British unit of currency was again devalued in 1967.

1971
One Iraqi dinar remained equal to US$2.80 until December 1971, when major realignments of world currencies began.

1973
Upon the devaluation of the United States dollar in 1973, the Iraqi Dinar appreciated to US$3.39.

1980
It remained at this level until the outbreak of the Iran-Iraq War in 1980.

1982
In 1982 Iraq devalued the dinar by 5 percent, to a value equal to US$3.22, and sustained this official exchange rate without additional devaluation despite mounting debt.

1988
In early 1988, the official dinar-dollar exchange rate was still Iraqi dinar (ID)1 to US$3.22; however, with estimates of the nation’s inflation rate ranging from 25 percent to 50 percent per year in 1985 and 1986, the dinar’s real transaction value, or black market exchange rate, was far lower-only about half the 1986 official rate.

1986–2003
1986–2003 between .33 cents to 1.32 to a dollar.

2001
Oil-production: 2.452 million bbl/day (2001 est.); note — production was disrupted as a result of the March-April 2003 war (2001 est.)

2002
GDP: purchasing power parity — $58 billion (2002 est.)

2002
Exports–partners:US 40.9%, Canada 8.2%, France 8.2%, Jordan 7.5%, Netherlands 6.4%, Italy 5.4%, Morocco 4.7%, Spain 4.4% (2002)

2003
In october 2003, the official Dinar-dollar exchange rate was ID1 to US$0.00027.

2004–2005
August 2004 till 2005, the official dinar-dollar exchange rate is ID1 to US$0.00068. Population: 25,374,691 (July 2004 est.)

2006
As of Jan 1st 2006, the official Iraqi dinar-US dollar exchange rate is ID1 to US$$0.00067.

Fox News talking about Iraq, problems,

Marshal Law,

Gov Coup!

Reference David from Washington Post, he reference a "blog"!

Ability of New Iraqi Leaders Doubted - washingtonpost.com

Cairo, 13 October 2006 (BBC Monitoring)

Arab League Secretary-General Amr Musa has confirmed that the league is attentively following up developments in the Iraqi arena, including the issue of the law on provinces, which was approved by the Iraqi parliament yesterday, Wednesday [11 October].

In reply to a question about the Iraq parliament's approval of the law on the mechanisms of forming provinces, Musa said that it was important that the taking of decisions related to the future of Iraq would not be a cause of argument and disunity between the Iraqi parties or the Iraqi people. Everyone should work towards preserving the unity of Iraq, its people and land, he stressed.

He pointed out what was agreed upon during the meetings by the preparatory committee of the Iraqi accord conference to the effect that the current constitution and its controversial points would be revised and would undergo a general responsible discussion in order to protect Iraqi unity.

The Arab League's secretary-general added that the league was maintaining its contacts with the various Iraqi parties and the preparatory committee of the Iraqi National Accord Conference in order to hold the next meeting by the committee next November, according to what was agreed upon during the committee's meeting, which was held at the Arab League's headquarters last July.

Source: MENA news agency website

Arab League chief says provinces law should not disunite Iraqis | Iraq Updates

Originally Posted by bluezzguy

Adster,

Forgive the novice here. The rate from 3 years ago, I thought I have read in other posts that that too was an artificial rate set by Iraq, and that the dinar was not fully tradeable at that time as well.

Sorry if this has been rehashed before..

Randy

It has been mentioned before (don't have the link handy) that the dinar traded internationally at levels between $3.00 USD and almost $5.00 USD for many years PRIOR to Saddam's regime. Their economy was quite healthy then and had a strong agricultural base as well as oil. They were once the world's largest exporter of dates.


OOOOOOOOOOPS LOL While I was typing this Adster posted the whole refernece. Thanks Adster

Originally Posted by Offshore-Wealth.com

Hi Randy,

The naysayers often stated that the rate was not real, as it was not tested against neighboring countries, and then it was said not to be real, but this is far from the truth. The very first rate adjustment under Saddam was not pulled out of a hat as some will state, but it was calculatated with the assistance of top economic leaders at the time, so it was not set by Saddam, but he surely caused the dramatic drop, so what does this tell us?

Technically, the real rate, if traded freely outside of Iraq was stated to be half the $3.00 plus value, so what does this mean? Technically, at worse, it was worth $1.50 if it were freely traded, so the thought here would be that it is worth at least that and I suppose this is why some think the revalue will be the $1.48, as it makes sense.

Sadly, nothing makes much sense in Iraq, and if you were to assume the experts were right, and the dinar should be worth $1.50, then think about this, debt was high, sanctions were in place, Iraq attacked Kuwait, and threatened others, so talk about reasons why the dinar was not freely traded, there were many. (g)

If we want to use the past to place a current value on Iraq dinar, then it would make sense that $1.48 should be reasonable start point. Democracy in place, no sanctions, in fact, money is being committed like never before, plus FIL is done, exports will increase, agricultural investments will pay off big, and on and on the reasons go to support $1.48, but lets look at it this way, we ended at .31 and the books are still pegged to this value, so knowing the above, this would appear to be an artificially low rate with oil at more than twice what it was, and after all, this is what whole revalue is currently based on, OIL. Sure makes it interesting, but the way I hear it, .30/.40 is a great starting point. (g)

Good luck to all, Mike

Mike,

Thanks for taking the time to explain and talk about history. It helps make some things clear, as I am late to this party, and even with all the reading since I started paying attention in July, sometimes get confused with all the different info out here.

Thanks to you and the many others who work tirelessly(or so it seems) on bringing credible info to the rest of us.

Yes.. what Adster said.. hearing anything from your Kurd friends?

I might just as well ask RR if he has heard anything as well..

Randy