US set to extend sanctions waiver for Iraq to import Iranian gas

An Iraqi man checks an electric generator supplying homes with electricity in a Baghdad neighbourhood in the Iraqi capital on July 26, 2018. (AFP)
Updated 21 December 2018

US set to extend sanctions waiver for Iraq to import Iranian gas

  • Iraq’s power sector is in disrepair and does not generate enough electricity to meet domestic demand
  • US sanctions that went into effect in November have threatened to cut the country off from its chief supplier, Iran

BAGHDAD/IRBIL: The United States has reached an agreement in principle with Iraq to extend for 90 days an exemption to sanctions against Iran, allowing Baghdad to keep importing Iranian gas that is critical for Iraqi power production.
The extension was reached on Thursday, when a previous 45-day waiver was due to expire, during a visit to Washington by an Iraqi delegation, according to two Iraqi officials with direct knowledge of the negotiations.
A senior Iraqi government official and a central bank official told Reuters that talks were continuing on Friday to finalize details, including how to pay Iran for energy imports, two sources said.
The administration of US President Donald Trump has said Iraq should not pay Iran in US dollars or euros. A team from Iraq’s central bank joined the delegation to find a solution.
Washington initially granted Iraq a 45-day waiver for Iranian gas when it reimposed sanctions on Nov. 5, after months of negotiations.
Iraq relies heavily on Iranian gas to feed its power stations, importing roughly 1.5 billion standard cubic feet per day via pipelines in the south and east.
Iraqi officials have said they need about two years to find an alternative source.
Washington has said it wants to roll back Iranian influence in the Middle East, including in Iraq, where Iran holds broad sway over politics and trade.
Iraqi Prime Minister Adel Abdul-Mahdi said on Dec 11 that the United States was working with Iraq on the issue of Iranian gas because it was “linked to a very sensitive issue which is electricity.”
Persistent power shortages fueled protests this summer in the south of Iraq, which is still reeling from a three-year war against Daesh.
The prime minister, who took office in October, met US Energy Secretary Rick Perry in Baghdad this month. Perry, who came with a delegation of more than 50 business people, also met Iraq’s oil and electricity ministers.
Iraq has reached a deal with US energy giant General Electric and German rival Siemens to install liquefied natural gas-operated mobile power units at some small southern oil fields, Iraq’s state newspaper reported last month.
The Financial Times reported in October that the US government had intervened in favor of GE for a contract sought by both companies to supply 11 gigawatts of power generation equipment, reportedly worth around $15 billion.


No more spending excuses for Merkel as investment bottlenecks ease

German Chancellor Angela Merkel gestures at her arrival for the government’s ‘Open Door Day’ in Berlin on Sunday Sam sit fuga. Et laut ute odi cum as elit. (Reuters)
Updated 34 min 53 sec ago

No more spending excuses for Merkel as investment bottlenecks ease

  • German leader urged to boost public investment by taking on new debt Sunducim velessunt alis plabore sernatur

BERLIN: German Chancellor Angela Merkel has fended off growing calls for more fiscal stimulus by citing the slow outflow of existing federal funds — but data suggests the money is indeed being used up as local authority bottlenecks gradually clear. With Europe’s largest economy on the brink of recession and borrowing costs at record lows, Merkel has faced pressure at home and from abroad to ditch her pledge to target balanced budgets and instead boost public investment by taking on new debt.
Merkel and her conservatives say Berlin has already earmarked billions of euros in investment for schools, nurseries and hospitals but that local authorities have spent only a fraction of this windfall.
But this excuse seems no longer valid: Figures from the Finance Ministry show that towns and municipalities are now tapping the federal government’s funds more actively, suggesting that planning and labor bottlenecks are easing.
Of €3.5 billion ($3.9 billion) earmarked in a municipal infrastructure fund for investment in schools, nurseries and hospitals (KInvFG I), local authorities have applied for nearly €3.4 billion, the data showed — roughly 96 percent of the overall amount on offer.
The fund was created in 2015 and initially meant to last until 2018. Due to the slow initial take-up, it was then extended to 2020.
Of another €3.5 billion put aside by the government in 2017 for school renovations (KInvFG II), authorities so far have tapped €2.4 billion, or 69 percent.

HIGHLIGHTS

• German towns tap into federal funds more actively.

• Improved outflow raises pressure to provide more money.

• Coalition parties at odds over debt-financed stimulus.

“As you can see, the program is running very well,” a Finance Ministry spokeswoman said, adding that the take-up had jumped by nearly €2 billion over the past 12 months.
“The figures show that there is planning progress in most federal states and that financially weak municipalities welcome the financial aid from the federal government,” she added.
The improved flow of funds is important for Germany, where heavily indebted towns and municipalities historically manage a large chunk of public spending and many citizens are annoyed by run-down local infrastructure and closed public facilities.

Austerity
Years of austerity linked to the national debt brake — a constitutional amendment introduced in the wake of the global financial crisis of 2008/09 to rein in public debt — have led to pent-up public investment needs in towns and municipalities worth a combined €138 billion, data from KfW Research shows.
“Towns and municipalities have been structurally underfunded for more than 20 years. They were forced to cut staff,” Gerd Landsberg, managing director of the German Association of Towns and Municipalities, told Reuters.
“That partly explains the initial problems with the slow take-up of federal funds — it takes time to hire new staff and get the ball rolling,” Landsberg explained.
The latest figures show, however, that authorities are overcoming those staff-related planning bottlenecks, meaning most of the money should be used up soon, he said.
Landsberg called on the government to provide more funding lines and improve the design of its programs.
“Short-term investment funds alone do not provide sufficient planning and personnel security. We must secure the financial strength of towns and municipalities in the long term.”
Like Merkel and her conservatives, Finance Minister Olaf Scholz of the jointly governing, center-left Social Democrats (SPD) has shown little appetite so far to ditch the balanced budget goal and boost investments through new debt.
Eckhardt Rehberg, the chief budget lawmaker in Merkel’s conservatives, is also sticking to the line that billions of euros still sit unused in various special-purpose funds.
“The debate about debt-financed investment programs misses the point. The problem is not a lack of money, but the sluggish outflow of funds,” Rehberg said.
Authorities must hire more staff, cut red tape and speed up planning and approval procedures, he said. “In addition, the construction sector has already reached its capacity limit, which means it can hardly cope with more demand,” Rehberg added.
Nevertheless, members of both the SPD’s own left wing and of the Greens, an increasingly strong opposition party, are pushing for a fiscal U-turn. Even the influential BDI industry lobby group, traditionally close to Merkel’s conservatives, last week called for a debt-financed fiscal stimulus package.
Cansel Kiziltepe, a lower house SPD lawmaker specializing in finance, said Merkel and the conservatives should stop blaming local authorities and rethink their insistence on incurring no new debt in their budgets, a policy goal commonly known as the “black zero.”
“Especially in times of economic weakness and in light of improved outflow of funds, it’s high time to say goodbye to the fetish of the black zero,” Kiziltepe told Reuters.