The Iraqi cabinet approved on Thursday a long-anticipated agreement with the semi-autonomous Kurdistan Region that could reset their strained relationship over oil exports and public sector salaries.
According to a statement issued after an extraordinary meeting, the Kurdistan Regional Government will “immediately begin delivering all the crude oil produced from the region’s oilfields” to the state oil marketer SOMO for export.
In return, the Iraqi Ministry of Finance will be “committed” to pay the Kurdish region $16 per barrel, a price set late last year in amendments to the federal budget law and approved by the cabinet, the statement added.
At least 230,000 barrels per day will be handed over to Baghdad out of the region’s current total production of 280,000 barrels per day, it said. The remaining 50,000 barrels will be reserved for local consumption.
“Any further increase in production will be handed over to SOMO,” it said.
As a goodwill gesture and the first step in implementing the deal, the federal Ministry of Finance will release May salaries for public sector employees, pending verification that the oil volumes have been received at the Turkish port of Ceyhan.
The measure aims to bring immediate relief to tens of thousands of public servants in the Kurdish region who have faced months of uncertainty over delayed payments.
Kurdistan will also transfer an initial estimated amount of 120 billion Iraqi dinars ($91.6 million) for May as a share of non-oil income, according to the agreement. A joint team will audit revenue and determine the federal share going forward.
The deal also stipulates that a three-month plan will be launched to complete the process of paying public sector employees' salaries through bank accounts.
The control over the development of natural resources has been one of the thorniest issues since the 2003 US-led invasion that toppled Saddam Hussein and helped the Kurds gain official semi-autonomy.
The Kurds argue that the country’s constitution allows them to sign deals bypassing Baghdad, while the federal authorities maintain this is illegal. That struggle has forced Baghdad at some points to withhold Kurdistan's share in the budget, plunging the region into economic hardships.
In early 2022, the Kurdish region's oil sector suffered a major blow when the Federal Supreme Court ruled that the regional law regulating the industry was unconstitutional. The court demanded it hand over all oil sector activities to Baghdad – including exports.
A year later, an arbitration ruling forced the region's exports through Turkey to halt, cutting off a major source of revenue for Erbil, the capital of the Kurdish region, and leaving it struggling to fulfil salary payments. Throughout that period the two sides failed to reach agreement.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Results
5.30pm: Maiden (TB) Dh82,500 (Turf) 1,400m; Winner: Mcmanaman, Sam Hitchcock (jockey), Doug Watson (trainer)
6.05pm: Handicap (TB) Dh87,500 (T) 1,400m; Winner: Bawaasil, Sam Hitchcott, Doug Watson
6.40pm: Handicap (TB) Dh105,000 (Dirt) 1,400m; Winner: Bochart, Fabrice Veron, Satish Seemar
7.15pm: Handicap (TB) Dh105,000 (T) 1,200m; Winner: Mutaraffa, Antonio Fresu, Musabah Al Muhairi
7.50pm: Longines Stakes – Conditions (TB) Dh120,00 (D) 1,900m; Winner: Rare Ninja, Royston Ffrench, Salem bin Ghadayer
8.25pm: Zabeel Trophy – Rated Conditions (TB) Dh120,000 (T) 1,600m; Winner: Alfareeq, Antonio Fresu, Musabah Al Muhairi
9pm: Handicap (TB) Dh105,000 (T) 2,410m; Winner: Good Tidings, Antonio Fresu, Musabah Al Muhairi
9.35pm: Handicap (TB) Dh92,500 (T) 2,000m; Winner: Zorion, Abdul Aziz Al Balushi, Helal Al Alawi
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INVESTMENT PLEDGES
Cartlow: $13.4m
Rabbitmart: $14m
Smileneo: $5.8m
Soum: $4m
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Plug and Play: $25m
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Creator: Lauren LeFranc
Rating: 4/5
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Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
