“The interest in Saudi and other GCC states is in the investment flows rather than the trade flows,” he said. “Going forward I see more trade opportunities. I don’t expect sizable investments will be made. “Investments will require political longevity and stability to take hold and convince investors that it’s a good move forward. But trade will continue to do well, and if the political situation improves and stabilizes, that will steer greater interest for investors to put their money into Iraq directly.”
Iraq’s cabinet has proposed an $82.6bn budget for 2011, the latest and likely permanent revision after a lengthy haggle with lawmakers amid continuous rises in oil prices.The budget – currently awaiting parliamentary approval – is higher than Sfakianakis expected, largely off the back of those spikes in oil.
“Oil revenues are increasing – so it’s a larger than expected budget,” he said. For the time being, Iraq’s economic development is homegrown. “Investments are coming in from Iraqis, from the disapora – though there’s some coming from Turkey over the northern part of Iraq,” he said. “GCC money is of less use” and its involvement in helping Iraq grow “is not expected to be immediate.” The Opec producer’s deals with global oil companies could raise output capacity to 12 million bpd from the current 2.5 million, which could pit it against leader Saudi six years from now.
The Gulf’s involvement will depend on the political situation. “If the government continues to be stable and levels of ethnic unrest and violence dissipate, that will determine it.” The budget will “most likely get passed since it’s an expansionary budget. Everyone knows money has to get spent in Iraq.” The latest budget draft is based on a $76.50 per barrel average for crude, with 2.2 million barrels in daily exports.