Enorrste: Where We Stand
I have been asked by a friend to give a short post as to where I currently stand on the RV issue. There has been a great deal of progress recently toward an eventual RV. Maliki went to Kuwait and signed all of the documents necessary for the UN to release Iraq from the sanctions of Chapter VII.
However, the UN Security Council will not meet until June, so it is questionable whether an actual release will be effected prior to that meeting. It is my understanding that an assistant to Ban Ki Moon has been working assiduously to get everything ready for a final release.
There is a slim possibility that some sort of statement may be made at the Arab Summit. I have heard that Ban Ki Moon will be present there.
On the negative side, Saudi Arabia, Jordan, Talibani, and Allawi decided not to attend the Summit. There were possibly other standouts as well.
This means that the Summit will be more of a “shell summit” than anything else.
I do not expect any dramatic announcements from the Summit at this point and would be surprised if any were made.
This brings me back to Maliki. The Preparatory Committee of three or four high level executives in Iraq failed to get the Conference off the ground. I understand that it will now be held on the 4th or 5th of April. At least they finally set a firm date.
As you may recall, the primary goals of the conference are to resolve the issue of the two ministers who have been called to be arrested by Maliki, and a final resolution of the Erbil Agreement. The resolution of the Erbil Agreement is what is necessary for the final formation of a true shared government in Iraq.
Due to the intransigence of Maliki, this agreement has never gained momentum. At the same time, we did hear that Maliki finally accepted an Iraqiya nominee for the post of ministry of defense. This shows at least SOME movement toward the final formation of a government.
On a more positive note our super sleuth Kaperoni found an article that clearly indicates that the necessary laws are now in place to define the process of moving from the old rate to the new rate for the IQD. This set of laws was declared necessary by Shabibi before he would actually pull the trigger. The article is clear that these laws are now enacted.
In addition we have it on good evidence from Kaperoni’s effforts that Shabibi has been ready to pull the trigger since at least last June.
In addition the security situation in Iraq is as tight as it has ever been, largely due to the Arab Summit. Shabibi has expressed concern over the security situation prior to his pulling the trigger several times.
Added to that we have the statement from the head of the IMF (I forgot her name!) that she is satisfied with the progress made by Iraq in the last year on banking reforms.
While we have other articles that indicate that the process is not yet complete, it is clear that international banking can take place immediately after the RV, if only for a few hours a day. I have stated my opinion before that I believe the international banks will be chafing at the bit to open offices in Iraq immediately post-RV. In doing so, Iraq could catch up quickly in terms of Basel compliance and the ability to handle investors worldwide. The analogy I have used is that it is like going from no phones to cell phones without ever having to put in the land lines that took decades across America.
In short, progress should be made quickly and I do not feel that this is a hindrance to the RV any longer. We also have the clear statement from the CBI that the process of “removing the three zeros” is essentially completed inside Iraq.
In addition we have clear statements that the plan will be implemented in 3 phases, the first of which is now completed (removing the 3 zeros, plus education of the people). The second phase is the first RV at around $1.
This will allow an easier transition for the people in terms of conversion as well as create an atmosphere for de-dollarization of the country as the rate gradually rises over the next several months (this is also stated clearly in articles found by Kaperoni).
They are also on record that the new currency is already or will be soon printed, to be ready to be issued in September.
We also have the fact that the 2013 budget will be base on the new rate of the IQD.
Finally, phase three will be a second RV to at least $3.50, unless it has already reached that level between the first RV and September.
At that time the new currency will be introduced, the highest note of which is $100 dinars, a clear indication that the rate will start at or near a dollar.
Both the old (current) currency and the new currency will co-exist for up to 2 years and both will remain legal tender throughout the process.
Our dinars will never go back to Iraq but will, according to Saleh himself, remain in the federal reserve accounts of countries around the world for “a long time.”
Therefore, we are clearly talking of a “when” issue rather than an “if” issue. We are also no longer talking about a “rate” but only about a “date.” So where does that leave us?
It seems clear to me that the RV will not occur during the Summit. It is possible, but highly unlikely.
Kaperoni and I believe that Maliki would love to have the RV announced at the Summit. However, as stated above, Shabibi is withholding the trigger until the government unity issue is resolved. This, then, would take us up to April 5 and the National Conference.
Unfortunately I don’t see a lot of hope in the outcome of the conference either.
Maliki is a very hard man to deal with, probably for a number of reasons. He may be a power-monger; he may fear for his safety; and he certainly is not good at compromising with his opponents. These three factors do not bode well for a successful National Conference. After all, he has held the same position for 2 years now: why should we expect anything different this time?
This brings me to the issue of the IMF, the World Bank, and the US Administration. After such long delays it seems to me that none of these institutions are in a position to either improve things, move them along more quickly, or delay them in any sense. I actually believe these institutions are just as frustrated as we are at this time. Therefore we come back, finally, to Maliki and Shabibi.
Maliki continues to stand his position, which mainly means refusing to share power. As long as this continues Shabibi will not pull the trigger, in my opinion.
I have stated for some time now that I believe that Maliki is holding out for a full release from Chapter VII sanctions from the UN.
This is certainly his right and it is a good move for him politically, especially if/when he is finally successful. After that release, which most likely will occur in June at the Security Council Meeting, Iraq will be truly autonomous.
While the UN has tried to give the appearance of autonomy to Iraq by making statements to that affect, echoed by Obama as well, Maliki seems not to be convinced. He wants ALL hands off. At the same time, I believe, but cannot prove, that he will allow the RV immediately on release from Chapter VII. Having said that, however, does not mean that the RV will occur.
The reason for this is that Shabibi is the one who is truly in control, not Maliki.
Kaperoni presented an article some weeks back in which Shabibi made a clear statement that he does not need the government’s approval to pull the trigger.
Therefore, while I believe Maliki has wanted to tie release of Chapter VII sanctions to the RV, I also believe that his recent trip to Kuwait was made not just for the purpose of obtaining that release BEFORE the Arab Summit, but also so that he could announce the RV at the Summit.
Since he did not get his release, he has changed his mind and now will wait to hear from the UN. This will fly in the face of his prior APPROVAL to Shabibi to go ahead with the RV. Therefore, I believe that we are nearly back to where we were last June. At that time Shabibi was ready but wanted the government to be finalized. Maliki was ready because he was working out a deal with the Kuwaitis.
We came very close to getting our RV in June, but it was the failure of Maliki to finalize the government that held it up. Maliki made some progress (the defense position and a visit to Kuwait) but failed to come to the table with the Preparatory Committee, thereby missing his chance to have an effective Arab Summit. Now we await the National Conference. I hold little hope for much to come from it.
That means that we would then wait until June and the release from Chapter VII. But even that will not guarantee an RV unless Maliki has come to a power-sharing agreement prior to that time.
Against this negativism, however, is the fact that Shabibi is slowly plowing along and is laying out his plan with more specificity almost daily, including setting certain deadlines. The end of phase 1 is completed and the beginning of phase 2 (the first RV) is supposed to come “in the coming days” or even “in a few days.”
Of course those few days have already passed, so Shabibi’s frustration must be growing. He is having more and more difficulty in holding the reigns on the economy. His plan is in jeopardy, in short. Plus he is on record that the new currency (and clearly, then, a new higher rate) will already be in place when he issues that currency in September.
Therefore our window is something less than 5 months now (April to September) and practically speaking less than that, since the first RV must naturally occur SOONER rather than LATER in order for a gradual increase in the value of the IQD to be effective.
This leads me to two final conclusions. The first is that Shabibi may go ahead and pull the trigger even if Maliki fails to form a final government. I say this because while on the one hand he is placing pressure on Maliki by making these specific announcements with set dates (particularly September), on the other hand those specific announcements are also placing pressure on the CBI to ACT if it is to implement phase 2 and then phase 3 in September.
In other words, Shabibi is cooking his own goose as well. In sum, the ball, once again, is in Maliki’s hands right now. If he forms the government we will see the RV “poste haste”.
On the other hand, if he fails to form a government, even a release from Chapter VII will NOT give us the RV. At some point, though, I believe Shabibi will act, and almost certainly before the end of April, even if the National Conference is a bust.
He must act if he wants to stay on plan for a gradual growth in IQD value from $1 upward as September approaches. Time is against him, and he will be forced to pull the trigger EVEN IF THE GOVERNMENT IS NOT FORMED. The FORMATION OF THE GOVERNMENT is the first key.
Failing in that, the second key is TIME. Either way, I see the end of April as Shabibi’s “last stand” before pulling the trigger. Of course I could be wrong.
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