BAGHDAD, 23 July 2003 — The US-led authority governing Iraq said yesterday it had created a trade bank to help revive the chaotic country’s economy, and asked international banks to submit proposals to help establish it.

The Coalition Provisional Authority said the Trade Bank of Iraq would help “facilitate the transition from state-owned enterprises to greater privatization”, and would be independent of the central bank. It would have an authorized capital of $100 million and help facilitate imports and exports.

“Existing Iraqi banks are presently ill-equipped to support import-export trading activities. They lack sufficient expertise and international links,” it said in a statement.

“Existing financial institutions within Iraq are fully engaged in re-establishing basic banking services and have limited capacity for specialized trade services.”

The Wall Street Journal reported that US administrators will choose a mix of international banks by August to manage the bank, and that the lure of new business had banks worldwide rushing to build alliances that will compete to run the bank.

It said those banks include J.P. Morgan Chase & Co., which has joined forces with Britain’s Standard Chartered PLC, the National Bank of Kuwait, the Australia and New Zealand Banking Group Ltd., and Poland’s Millennium Bank.

Standard Chartered told Reuters it was looking for opportunities in Iraq, although it did not have a license to work there. “We are well-placed to support the reconstruction of Iraq. We’ve got more than 50 years experience operating in the region and we are currently providing assistance on donor and aid funding to the country,” a spokesman said.

Financial services giant Citigroup Inc. may be another contender, along with Deutsche Bank AG, which was likely to be tied up with a large US bank, the Journal said.

J.P. Morgan and Citigroup were not immediately available for comment.

The Journal said US officials expect to receive around half a dozen bids for the business, which will issue letters of credit that guarantee payment by Iraqi agencies and firms that want to buy big-ticket goods abroad.

There is no front-runner at this point for the deal, it said, citing Peter McPherson, the top Treasury Department adviser in Baghdad. McPherson said the winning group will consist of banks from at least two countries.

Meanwhile, Iraq yesterday announced it was in negotiations for its first post-war term crude export contracts, but Iraqi officials said supply rates would remain severely restricted.

State Oil Marketing Organization SOMO said it would replace spot tenders with term contract sales of Basra crude to refiners from its southern fields.

The contracts will run from Aug. 1 to the end of the year.

Iraqi exports since the war have been restricted to two spot tenders, the second of which will be completed at the end of July.

SOMO made no mention of how much Basra it expects to export in August. But an Iraqi official told Reuters he expected three initial contracts of two million barrels each, a flow of less than 200,000 barrels a day for the month, or just a tenth of pre-war capacity.

Traders at companies in talks with SOMO said final August sales could get nearer 10 million barrels, or about 320,000 bpd compared with the 260,000 bpd being moved in July in a tender.