AFC Travel Report - Iraq / Kurdistan (Part 2)

In line with our process of being on the ground in the countries we invest in, AFC Iraq Fund CIO Ahmed Tabaqchali travelled to Iraq recently for an investment conference. All photos are by Asia Frontier Capital, except where noted otherwise.

As discussed in last month’s travel report, this trip to Iraq had several purposes, namely to take part in a Banking conference, meet young Iraqi entrepreneurs, visit companies, and pay a visit to the Iraq Stock Exchange. I also planned to visit the Institute of Regional and International Studies (IRIS) and its parent, the American University of Iraq-Sulaimani (AUIS) in Iraq’s Kurdistan to follow up with future direct research projects on Iraq’s economy post ISIS, and to visit one of Kirkuk’s oil fields. Last month’s travel report was focused on Baghdad, while this month’s report is focused on Kurdistan.

Most of the recent coverage of the semi-autonomous Kurdistan Region of Iraq (KRI) has been on the independence referendum of September 2017, while before that, coverage was mostly of the region’s oil industry. This report will not look into these issues, however, the historical background for the referendum and of the Kurdistan issue in Iraq was reviewed in my recent article “Historic Grievance: A Flawed Narrative for Statehood?”

The first part of the Kurdistan trip was to the city of Sulaimani, or Al-Sulaymaniyah or simply Sulaymaniyah in the Arabic adaptation of the original Kurdish name Slemani. Similar to the way that Baghdad was built and founded, Sulaimani was founded by Prince Ibrahim Pasha Baban to be the capital of the Baban Emirate in 1784, and was named after his father, Sulaiman Pasha. The city is a mere child among Iraqi cities and in particular to Erbil, the capital of the KRI, which is much older than Sulaimani and is home to one of the world’s oldest citadels.

The similarity to Baghdad extends to its cultural appeal as a capital city, attracting philosophers, poets and writers, which it has maintained throughout the decades. It continues this tradition as an open, liberal and tolerant city- loved by expatriates who affectionately nicknamed it Suli. The city exemplifies the Kurd’s tolerance and open mindedness, especially with regards to gender equality as it is manifested in the independence and treatment of women, a promising model for the rest of Kurdistan and Iraq.

The city is the cultural capital of the KRI, and the heart of the Sorani Kurdish culture. Sorani is one of the two main varieties of Kurdish dialects, the other being Kurmanji whose centre is Erbil. Until recently, the dialects were somewhat mutually unintelligible, but this changed with the prosperity that the region attained as the advent of satellite TV has bridged the gap between dialects, much in the same way that Egyptian movies had on the Arab world from the 50’s and more recently satellite TV.

The central role that culture plays makes it an ideal educational city, as it is home to two public universities and five private universities, including the focus of my visit “The American University of Iraq, Sulaimani” (AUIS) and its research centre “The Institute of Regional and International Studies” (IRIS) of which I am a non-resident fellow. AUIS celebrated its 10-year anniversary in 2017 as a non-for-profit public institution, which coincidently was the year that I became familiar with the remarkable research that the IRIS research team was conducting, and in particular the work on the disputed territories and on “post-ISIS Iraq”.

The purpose of my visit was to get to know the AUIS & IRIS teams better and to start the process for conducting further on the ground research of Iraq’s economy post-ISIS as a follow up to my first research publication for IRIS “Iraq's Economy after ISIS: An Investor's Perspective”. My other research interests are the economic roots of extremism and the economic aspects of the KRI within a federal Iraq. The first was a report that looked at the economic viability of an independent Kurdistan “Statehood in the Kurdistan Region of Iraq through an economic Lens”, while the second is a follow-up piece on the economic benefits of the KRI within a federal Iraq, which I will start working on in March.

The one-hour flight from Baghdad to Sulaimani International airport landed late at night. The late-night tour of the city was brief, yet it provided a wonderful sense of the peace and tranquillity that Kurdistan enjoyed in the last 13 years in spite of all the violence and turmoil that Iraq went through during that period. In fact, the drive through the city felt no different than any other city that I have been through over the years, and in particular it showcases developments that took place in the region. The final destination, the university’s apartment buildings within the Pak City development, is a perfect example of this.

The view from a university flat within Pak City in Sulaimani

The university is located on a hill overlooking the city which provides for some stunning views. I was given a tour of its impressive campus, stretching over 400 acres and consisting of three academic buildings with all the features of modern universities worldwide, in addition to the residence halls which are a boon for the students that come from the rest of the country.

Sitting at the steps of the main university building

Following that, the day was filled with meetings with the IRIS and AUIS staff and culminated in a rewarding dialogue session with a group of students who came from across Iraq and typified the different ethnic, socio-political, and economic backgrounds of its students.

A dialogue with students at the main cafeteria

The short time that I had did not allow for a proper visit of the city; however, I still managed a visit to the famous bustling Mawlawi Street filled with all kinds of shops, restaurants, and cafes. The best way to appreciate the street and the life it offers is to spend a day on a weekend sampling all of its wares which is something that I am planning to do in my forthcoming 2-week trip to the city in March.

Mawlawi Street, Sulaimani

The road to Erbil is about a two and half hours’ drive and I was keen to see the weird and wonderful gas stations of the region so vividly covered in this 2017 article from Wired magazine. I was not disappointed when we filed up the car from “BO” Service station, a “BP” knock off, nor when we passed by “Shall” a similar knock off of “Shell”. The impressive wide highway soon narrows into a single lane road until arrival at Erbil at which time the wide highway returns.

“BO” Gas Station on the edges of Sulaimani

Leaving Sulaimani to Erbil

Almost halfway is the resort of Dukan on a lake by the same name created by the construction of the Dukan Dam in 1959, which is one of the many beautiful features of the region. But we did not have time for a visit, settling instead for an Istikan of tea at a pit stop by the Little Zab river that feeds the lake and a tributary of the Tigris river. Istikan, in the Iraqi dialect, is a tiny glass cup used in Iraq and the region to drink tea, where the word is derived from East-Tea-Can which were the small cups used to drink tea brought following the occupation of Iraq by Britain from its then base in India.

Istikan of Iraqi tea served in a pit-stop in Dukan on the Sulaimani-Erbil road

The Little Zab River in Dukan on the Sulaimani-Erbil Road

The purpose of the Erbil trip was to meet my old school friend from over fifty years ago and to visit the oil facilities of the KAR Group with him. We shared a love for photography as members of the amateur photography society at high school in Baghdad- Baghdad College which was founded by Jesuit fathers from Boston in 1932. Arguably the college and Egypt’s Victoria College are considered as the best schools in the region. The school’s oversized role in Iraq is often compared to that of the UK’s Eaton College as covered by this fascinating NYT story in 2005.

Erbil, just like Sulaimani, can be spelled in many different ways including Arbil or Irbil, while its Kurdish name is Hawler. The city claims that it is the one of the oldest continuously inhabited areas in the world dating back to 5,000 BC. While this is subject to debate, its antiquity is not in doubt as it was first mentioned as Urbilum over 4,000 years ago by one of the Sumerian kings of the city state of Ur, and was later known as Urbilim, Arbela and Arba-ilu in Assyrian annals.

The modern city of Erbil has been through a massive transformation in the last 14 years, taking it from a conservative provincial town to a super modern city, a transformation that is often compared to that of Dubai. The city has aspired to be a new Dubai, and a drive through its wide boulevards passing through shopping malls, high rise towers, five-star hotels, and luxury housing developments is a testament to it indeed being a mini-Dubai. However, just as the financial crisis of 2007-2008 ended the Dubai boom in 2009, Erbil’s boom ended with the triple whammy of the budget crisis due to ongoing conflict with the Federal Government of Iraq, the ISIS invasion and the collapse in oil prices in 2014.

The city, much quieter than in the peak in 2013, is still beautiful, and its new landmarks wait patiently for a similar recovery that Dubai saw following the financial support of neighbouring Abu Dhabi. In the case of Erbil, this should come after the region’s government, the Kurdistan Regional Government (KRG), negotiates its differences with the Federal Government of Iraq. However, this is a few months away as the country waits for the upcoming parliamentary elections in May and the weeks of suspension afterwards as a new federal government will have been formed.

I didn’t have much time to tour the city or take many photographs as my friend was waiting to take me on a tour of the legendary oil fields of Kirkuk.

Gulan Tower World trade Centre, Gulan Road, Erbil

View from the 22^nd floor of Diavn Hotel, Erbil overlooking Sami Abdul-Rahman Park.

View from the 22^nd floor of Diavn Hotel, overlooking Erbil’s skyline

The 40km drive to the Erbil Refinery was not enough to catch up on over 40 years since we last met, nevertheless we managed to cram quite a lot over the next hours and the evening as we toured the refinery, the oil fields, and ended with a feast at his home.

The first point of the tour, the Erbil Refinery, owned and operated by KAR group, is in Kawrkosek in the Khabat district, west of Erbil and next to the Upper Zab river, one of the tributaries that feeds the Tigris river. The tour of the facilities by the refinery crew was an experience for me to translate my theoretical knowledge of refineries into a real life feel for the process, an experience that I aim to repeat during my future trips. We went through the control rooms and the three production lines that refine crude oil to petroleum products such as Naphtha, Kerosene, Diesel, Fuel Oil, Gasoline, Jet Fuel and Liquid Gas.

My friend explaining the operations at the Erbil Refinery, Erbil.

After a couple of hours of lunch and a tour the next stage was the drive towards Khurmala oil fields, operated by the same group and the source of the crude that feeds the refinery through a 20" pipeline over the 40km that separates them.

The Khurmala oil fields are within the Khurmala dome, one of the three domes or geological formations of the Kirkuk supergiant field. The other two domes are Avanah and Baba which are operated by Iraq’s North Oil Company. The Kirkuk super giant field has a deep meaning for most Iraqis, especially those of my generation as it was the first and main source of Iraq’s oil wealth prior to the discovery of the southern super giant fields.

Iraq’s oil story started with the discovery of oil in 1927 at the Baba Gurgur field, in Kurdish “Father of Eternal Fire”, within the Baba Dome. Fires, known as “Eternal Fires”, have been burning in the middle of the field for over 4,000 years (see photo below) and are the source of many legends, fables and probably fire worship.

"Eternal Fires"at Baba Gurgur
(Source: Wikipedia)

Almost 90 years later the Kirkuk super giant field is still among Iraq’s most important fields holding an estimated 9 billion barrels of recoverable oil after pumping about 14 billion barrels since the 1920’s (IEA 2012). Its production declined from a peak of 1,000,000 bbl/d in the 1980’s to around 230,000 bbl/d by end of 2017, but there are plans to restore this production to about 700,000 bbl/d in the next few years.

With these thoughts in mind and with the history of decades of conflict, including the ISIS conflict of the last three years, I was full of excitement and anticipation as we approached the field. I was not disappointed as my friend and the field’s crew provided me with all that I wanted to know and more about the details of the field, its operation and provided valuable lessons on oil fields.

Khurmala oil fields, Khurmal Dome, Makmour
 

Control Room of the Khurmala oil fields

After a couple of hours, we headed to my friend’s home for dinner, but not before taking a good-bye photo with the new eternal fires of the Khurmala oil fields.

With my friend in front of the installations at the Khurmala oil fields

The shortness of the tour did not allow for any time to see the natural beauty of Kurdistan, formed eons ago as the Arabian Plate collided with the Central Iranian and Anatolian plates which ultimately created Kurdistan’s breath-taking mountains, gorges and valleys. However, this is something that I intend to do in my upcoming trip later on this month which will coincide with the Nowruz holidays celebrating the new year in the days running up to the Spring Equinox. I will report on this in one of the upcoming newsletters.