Allawi: Saudi Investments Are a Major Driver for Iraq’s Rebuilding

(Photo: Ahmad Fathi)
(Photo: Ahmad Fathi)
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Allawi: Saudi Investments Are a Major Driver for Iraq’s Rebuilding

(Photo: Ahmad Fathi)
(Photo: Ahmad Fathi)

Iraq’s deputy prime minister said that Saudi encouragement and investments in Iraq play a great role in the country’s rebuilding process, especially in the fields of energy, electricity, petrochemicals and agriculture.

Ali Allawi, who is also Iraq’s finance minister and acting oil minister, stressed that oil for Iraq is an irreplaceable source of income as it represents 92% of the country’s exports.

Allawi called for the need to move towards a triple electrical grid between Saudi Arabia, Kuwait and Iraq, for what this could contribute to the development process, stating that his country's budget faces current difficulties with a decline in oil prices, which left the government concerned about the salaries of workers and retirees.

Speaking to Asharq Al-Awsat from Riyadh, Allawi said he met with the Saudi Energy Minister Prince Abdul Aziz bin Salman and Minister of Foreign Affairs Prince Faisal bin Farhan. Allawi also met with Saudi Arabia’s ministers of commerce and finance.

During his meetings, Allawi presented the officials with political and economic developments in Iraq, encouraging Saudi investment in his country.

Iraqi Oil

Allwai confirmed that his country is committed to the OPEC+ deal agreed on by a Saudi-Russian initiative.

“We are among the countries most affected by the decision to reduce the rate of oil production,” Allawi said, pointing out that most countries have safety nets in the form of investment funds and financial possibilities away from oil. But Iraq, according to Allawi, is not protected against low oil prices.

If the oil crisis drags on, Iraq will seek to have neighboring countries look differently at the situation in Iraq, as 92% of the country’s resources come from oil.

According to Allawi, areas of flexibility do not exist for Iraq and that the window of options is very limited.

Investment in Iraq

One of the main goals of the new Iraqi government is to restore economic and commercial balance in the country. Allawi pointed out that Saudi economic role in Iraq is somewhat “shy” knowing that the Saudi economy is the size of about half of that of the Arab world’s.

Compared to Turkey and Iran’s $12 billion investment in Iraq, Saudi Arabian investments stand at $1 billion annually.

“We want to change the balance, and we seek to increase the share of Saudi Arabia inside Iraq in various fields, including electricity, oil, petrochemicals and agriculture,” Allawi said.

He pointed out that the flow of Saudi investments in Iraq, despite the obstacles that face Saudi investors, plays a more important and bigger role in the process of rebuilding Iraq.

Allawi acknowledged that major obstacles are inhibiting Iraq’s growth. These hurdles are present in the legal system, administrative arrangements and stifling bureaucracy. The weak banking sector has also led to security problems.



Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
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Insurance Costs for Ships in Strait of Hormuz Rise Over 60%

 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 
 The Strait of Hormuz is a key shipping chokepoint for crude oil (Reuters) 

Insurance prices for ships travelling through the Strait of Hormuz have jumped more than 60% since the start of the war between Israel and Iran as the conflict threatens shipping in a key chokepoint for crude oil, the Financial Times newspaper wrote on Wednesday.

As of this week, the cost of hull and machinery insurance for ships passing through the strait — a narrow waterway between Iran and Oman, connecting the Gulf to the Arabian Sea — as well as the wider Gulf area had risen from 0.125% of the value of the ship to about 0.2%, according to the world’s largest insurance broker Marsh McLennan.

This pushes the cost of cover for a $100 million ship from $125,000 to $200,000.

Hull and machinery insurance covers damage to the ship itself, as opposed to cargo or third-party liability.

“We’ve not yet seen a missile fired at a ship in the Arabian Gulf, so what it represents is the market saying, look, there’s definitely a heightened level of concern about the safety of shipping in the region,” Marcus Baker, global head of marine and cargo insurance at Marsh McLennan, told the Financial Times.

Prices could rise further, he added.

Ships trying to pass through the strait face a range of dangers, from electronic interference to attacks by the Iran-backed Houthi group and the threat of further escalation by Israel and Iran, said brokers and insurers.

On Monday there was a collision between two oil tankers near the Strait of Hormuz.

While the cause of the crash has not yet been publicized, one ship had transmitted atypical signals about its position, raising concerns about electronic interference.

Baker said insurers were also worried that Houthi militants could widen their attacks, damaging more ships than the US, UK and Israeli-flagged vessels they have generally been targeting.

The market is “concerned about every vessel” travelling through the area because of Houthi attacks, Baker said.

Some insurers could stop offering cover because of the risks, he added, but others might see any pullback as an opportunity.

“War itself, as an insurance product, tends to be...either you lose everything or make a fortune. And many fortunes have been made by underwriters prepared to take a risk,” he said.

Insurance rates for cargo, including oil, were also likely to rise because of the conflict, multiple brokers said, but had been slower to respond.