Iraqi Kurdistan ordered to pay $490m to Kuwaiti firm

Agility

• KRG must pay $490m to Agility
• Korek adds to Kurdistan woes
• Kurdistan in debt to oil buyers

Iraq’s Kurdistan Regional Government (KRG) must pay Kuwaiti logistics company Agility $490 million after a Kuwaiti court rejected its appeal against an earlier award for the same amount, in the latest setback for the financially stricken administration.

The KRG had guaranteed a $250 million loan that an Agility subsidiary, Alcazar Capital Partners, provided to Erbil-based Korek Telecom in 2007. Korek used the money to pay the second instalment on a $1.25 billion Iraqi national mobile telecoms licence granted in the same year.

A court initially found in the KRG’s favour, but following a lengthy appeals process, Agility in April 2022 was awarded $490 million plus 7 percent interest until it received full payment.

• Korek Telecom fights $1.65 billion award to partners
• Norwegian oil major scraps Kurdistan output guidance  
• Iraq’s biggest telecoms firms tap into resurgent market

Now, the Kuwaiti court of cassation has rejected the KRG’s own appeal, and the award is enforceable, according to an Agility statement.

The decision adds to Kurdistan’s woes. The KRG’s oil pipeline to Turkey halted transporting crude last March following an arbitration ruling that only the Baghdad administration had the right to do so.

In November, KRG prime minister Masrour Barzani, a relative of Korek’s chairman Sirwan Saber Barzani, said his government was ready to resume oil exports and that he hoped Baghdad would “take the necessary steps to expedite this process”, according to a statement.

Yet, as of March 31, 2023, the KRG owed oil buyers $3.3 billion, a report by auditors Deloitte shows. The KRG did not respond immediately to a request for comment from AGBI.

Oil association debt

In November, Norwegian oil and gas company DNO, part of the six-member Association of the Petroleum Industry of Kurdistan, said the body would not restart oil production for pipeline exports until “until it is clear how they will be paid for their contractual entitlements of oil already sold and delivered for export and for future sales of such oil for export”.

The association’s members are owed nearly $1 billion, according to DNO.

A KRG ministers’ meeting in December also warned that Baghdad’s budget proposals do not meet its financial needs, which it estimates at IQD 11 trillion ($8.4 billion) annually. Kurdistan public workers frequently go unpaid due to the regional government’s financial problems.

The KRG’s entanglement with Korek, once Iraq’s top mobile operator by subscribers but now a distant third to rivals Asiacell and Zain Iraq, has added to its difficulties.

Last March, an international arbitration court ordered Korek and its chairman to pay Agility and France’s Orange $1.65 billion.

The two companies had bought an indirect 44 percent stake in Korek. Arbitrators found Korek and its chairman had “participated in a corrupt scheme” to defraud Orange and Agility, according to a statement from White & Case, a law firm representing the claimants.

Dubai’s DIFC Courts will hear an appeal from Korek against the arbitration award in the week starting February 19.

Iraq’s telecom regulator revoked the partnership between Korek and Orange and Agility in July 2014, subsequently ordering the foreign duo to return their shares to Korek’s co-founders, including its chairman Barzani.

“Korek refused to reimburse any part of the investment made by Agility,” a January 31 statement by Meysan law firm explains. “Accordingly, Agility filed its claim under the KRG sovereign guarantee.”