Basra oil service firms threaten to halt work over currency losses

Shafaq News- Basra

Private companies working in Basra's oil sector threatened on Monday to suspend operations and lay off more workers, protesting that payments on their dollar-denominated contracts are being settled in Iraqi dinars at the official exchange rate.

During a demonstration they organized in the southern province, Aziz al-Khalidi, a representative of the companies, told Shafaq News that the firms carry out work for Iraq's licensing rounds, the contracts under which international companies develop the country's oil fields, under agreements signed in dollars. Their payments are transferred in foreign currency to the state-owned Trade Bank of Iraq and to private banks, he said, but are received in dinars at the official rate of 131,000 dinars per 100 dollars.

The companies are then forced to buy dollars on the open market to meet their obligations, where 100 dollars costs around 155,000 dinars, Al-Khalidi said. “We lose more than 20 percent. The loss is roughly equivalent to the profit margin contractors typically expect in the sector.”

Al-Khalidi said the central bank had earlier granted the companies two exemptions worth 70 million dollars each, for a total of 140 million dollars, but the arrangement ran for one or two months before it was canceled. The firms later received an allocation of 30 million dollars to cover their domestic and international transfers and obligations, he said, though disbursement stopped before the central bank's new management allowed it to continue for one month only.

Most of the companies have cut their workforces on oil-sector projects by as much as 80 percent because they cannot absorb the currency losses, al-Khalidi said. He warned that work on the licensing rounds could stop and more workers could be laid off unless a mechanism is put in place to guarantee the firms are paid in dollars.

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