Sunday, July 17, 2016

Islandg1211 Iraq Updates to share, 17 JULY

Islandg1211 Iraq Updates to share:


December 2015, LOI with the IMF:

On December 22, 2015 a Letter of Intent was signed between the IMF, CBI, and the Minister of Finance representing the GOI. In that LOI, the IMF laid out objectives for the CBI and the GOI, including stopping their multiple currency practices and moving towards becoming Article VIII compliant. This LOI covered the first half of 2016.

December/Jan: Abadi's Reforms begin

Abadi wanted to reform his government to a technocrat government. He was supported by the Cleric Shistani and the people. Over the winter he moved to get rid of some bad ministers and replace them.


Ramadi was freed in December and Abadi declared that he would free Mosul by the end of the year.

In January, Barzani, the President of Kurdistan, said that it would take six months to plan for the battle to retake Mosul, and then six months at least for the actual battle. He said that he would need money from the U.S. and coalition nations along with weapons.

He said he also would need a plan of who would govern Mosul post invasion. (CNN interview Jan. 2016) sources in the Pentagon have also referred to freeing Mosul "by the end of the year."

April 2016, UST:

In April, the CBI and MOF (Minister of Finance) met in Washington D.C. with Jack Lew, the U.S. Sec. Of Treasury. After those meetings, Jack Lew proposed an umbrella plan for Iraq, that even included the possibility of the UST co-signing Iraq's loans.

April 2016: Chaos in the GOI:

Abadi's reforms were challenged, the people protested, and chaos ensued. Two lawsuits were filed. This brought the Parliament to a complete halt.

May 2016: IMF/WB Umbrella Loan Package:

The CBI met with the IMF and the WB. Progress on their December LOI was reviewed, loans and the conditions for the loans were discussed, the possible bond sales and possible improved credit ratings were discussed. The IMF finalized their loans and their requirements of Iraq.

One of the non-negotiable requirements by the IMF was that Iraq had to cut their 2016 Budget. They even assisted with suggesting where to cut. The IMF also wanted other things, such as Iraq paying their back pay, debt to oil contractors, and the Paris Club payments.

June 2016:

Iraq's COM (Abadi's Council of Ministers) did meet and did approve of the IMF's agreement. However, the appointment of some of those Ministers was legally challenged by a lawsuit filed with the courts and was pending a ruling. Abadi went against the advice of the U.S. by liberating Fallujah first in June.

The GOI was on vacation during Ramadan and they were awaiting a court ruling. The court finally ruled in July, finding that the Ministers were not properly voted for approval nor was Jobouri's sacking vote legitimate. June was still productive in that many of the IMF's loan requirements were met, such payments and agreements to delay the Paris Club debt payments.

June/July: LOI

A new LOI was signed by the IMF, CBI, and MOF. It covers the next three years. This LOI again states that Iraq will move towards becoming Article VIII compliant and cut out the multiple currencies practices.

This LOI also includes the "First Step" of either the GOI passing the Investment Law OR the CBI issuing new regulations. The LOI also states that the "weekly" (not daily) Auctions would require new CBI regulations requiring proof of why you need USD by the end of the year.

July, Kurds Military MOU:

There was never going to be a battle to free Mosul without an agreement with Barzani. Last week the U.S. and the Kurds agreed that the US would arm the Kurds, pay for their Army and then some. Barzani got what he wanted.

He's now stating that 50,000 Kurds will fight in Mosul. If that number is anywhere accurate, good bye ISIS, Hello Mosul being apart of Kurdistan. Keep in mind that Barzani refuses to abide by his term limits and leave office and that he's the biggest cheerleader for having Kurdistan be its own country.

July: US Sending in more troops:

Obama pulled out of Iraq and is now mission creeping back in. A key airbase was taken last week that the will be used for staging. ISIS leadership continues to be targeted by the U.S.

July UN:

UN Sec KB Moon reviewed Iraq on Friday and stated that he's pleased with Iraq's efforts to find Kuwait's dead bodies but not the results. The UNSC placed Iraq in Chapter Seven sanctions, then lifted that restriction back in June 2012.

However, there are still open files such as the Paris Debt payments, Finding and returning Kuwait's stolen property and their dead soldiers, and Iraq becoming Article VIII compliant. These are things that the UN still wants Iraq to get done and they keep tabs on Iraq's progress.

Where's the RV???

IMO, the most important thing to look at is the IMF and UST involvement. I kept posting all last year that there was not going to be an RV because although the IMF gave Iraq the green light back in March 2015, they gave them no support. They told Iraq to "Get your act together."

When there was a lot of rumors predicting the RV throughout 2015, I felt that all of that was confusing and misleading. I really objected to the rumor that "everyone was expecting the RV New Years Day. "

The fact was NO ONE was expecting the RV New Years Day because everyone was signing the LOI which was designed to get Iraq ready for loans by mid year.

Recently, there have been more rumors about Mosul. Everyone can read up on the fight against ISIS for themselves. It's no secret, and it's accurately being reported in real time. The objective is to free Mosul by the end of the year, with the political and military plan being worked out primarily with the Kurds.

We are seeing Mosul being surrounded and a staging area starting to get set up. There's still a dozen or so villages to be liberated. There will be a troop buildup.

The fact is, there was no plan for Iraq until last December when both the military objective to liberate Mosul by the second half of the year and work on the Monetary Reform the first half of the year.

I'm not sure why the RV hasn't happened.

Perhaps the failed reforms and the chaos and the three months lost in the GOI has caused a delayed. In any case, we have to focus on the new LOI.

The June 2016 LOI with the IMF states that the CBI should stop the MCP and work towards Article VIII compliance and that they should first pass the Investment Law.

So, when will we see the RV?


It's plain as day in Article A 14 of the June IMF LOI. In reading this thoroughly, it jumped out at me the wording of this requirement.

Like me, you, and everybody, the IMF was concerned that the Monetary Reforms could get bottle necked in the GOI should politics decide to either hold it hostage or simple just stall. So, the IMF stated in the LOI that the COM could introduce the Investment Law OR the CBI could make new regulations that cover the same points.

 Don't you love that word "OR"!!! Clever of the IMF. This will probably lead to the actual passing of the Investment within the GOI since they know they can't delay or stop it.

It was very reassuring to me to see that the IMF had figured out a way to prevent the GOI from further delaying the monetary reform. I saw exactly the same thing in this June LOI with the required Budget Cut Amendment.

This was tricky because the COM that approved the IMF's loan agreement wasn't legitimate. Also, not spending the full amount of a budget isn't legal. Even here in the US, if Congress passes a Budget then it’s the law and every dime Has to be spent. So, how do you cut spending and how do you get the GOI to vote on it?

The LOI states that's there's a loophole clause within Iraq that if the oil price is different from the budgeted price, then the Budget can be cut without another vote. So, the IMF settled that one too. The Budget was cut done to 85%.

I just gave two examples of the IMF using this LOI to get around the GOI. Well done IMF. What a difference this year is to previous years. The IMF has a plan.

So the RV will come AFTER the Investment Law but BEFORE the crackdown on proving why you need USDs. The LOI states that the CBI will only have weekly auctions and will require proof of why USD is needed "by the end of the year."

So, according to the LOI, the RV should be after the Investment Law is passed and before the end of the year.

I think it's important that everyone understand that we should watch for the Investment Law, not worry about the GOI delaying this too much longer, and that YES, this RV is still being planned for before the end of the year.

Mosul as well is a go now that the agreement is made with Barzani. Abadi now is talking about Political reform being put off for now until after Mosul and after the RV

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