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Japanese Loans of $750 Million to Iraq’s Energy, Infrastructure Reconstruction

Tuesday, November 22, 2011

Full Text of Japan-Iraq Joint Statement

Tokyo- (PanOrient News) Prime Minister Yoshihiko Noda said Tuesday that Japan will provide loans of about 67 billion yen, or $750 million, to Iraq to help that country accelerate its reconstruction process.

The yen loans will be used to improve two oil refineries and for two new projects in the areas of communication and health, according to a joint statement released after Noda's talks with Iraqi Prime Minister Nouri al-Maliki in Tokyo.

In an attempt to boost bilateral economic ties, Japan and Iraq also struck a basic deal on an investment accord and the two premiers confirmed to step up efforts for the pact's early entry into force.

A day earlier, Japanese Economy, Trade and Industry Minister Yukio Edano affirmed with al-Maliki the need to strengthen cooperation between the two countries in the areas of the economy and energy.

During their meeting at a Tokyo hotel, Maliki expressed hope for Japanese companies to engage in the development of infrastructure in Iraq and confidence in the improvement of the nation's security, while Edano showed Tokyo's readiness to contribute to Iraq's reconstruction with Japanese technologies and financial resources, Japanese officials said.

''We intend to solidify the win-win relationship (between the two countries) by meeting Iraq's demand linked to its reconstruction in terms of technologies and funds,'' Edano reportedly said after holding talks with Maliki.

Edano said that the Japanese government intends to offer the ''greatest'' possible support for the development of infrastructure in Iraq, adding that resource-rich Iraq is an important partner from the perspective of Japan's resource diplomacy.

Maliki said at the meeting that the door is fully open for future investment by Japanese companies in Iraq and that the nation intends to take necessary steps to support the move. The two countries' cooperation could be seen not only in the oil and gas fields but also in the development of infrastructure, such as railways, harbors and roads, he said.

Meanwhile, the Japanese government said Monday it has agreed with Iraq to expand the availability of Japanese trade insurance that covers exports to the Middle Eastern country. Trade insurance became available with payment guarantees by the Iraqi Finance Ministry and the Trade Bank of Iraq. Under the previous rules, a letter of credit from a major bank in Japan or a third country was required, Japanese media reported.

Nikkei reported that Mitsubishi Corp. will participate in the construction of liquefied natural gas production facilities in Iraq and start exporting LNG to Japan from as early as 2020. The trading house will soon form a joint venture with Iraq's government-owned South Gas Co. and Anglo-Dutch oil major Royal Dutch Shell Plc.

Mitsubishi will take a 5% stake for an estimated total investment of 70 billion yen. South Gas and Shell will hold 51% and 44%, respectively, the report said.

Gas emitted during the production of crude oil at three oil fields in southern Iraq will be collected and refined into forms such as natural gas or liquefied petroleum gas. The three-way venture will launch two gas refining plants that will go into operation in 2013, with plans to invest almost 1 trillion yen to increase the volume of natural gas recovered and cleaned and to spend 350 billion yen on facilities for LNG production, bringing total expenditures to 17.2 billion dollars, or 1.32 trillion yen, the report said.

The project is expected to export about 4 million tons of LNG a year worldwide, equivalent to about 5% of Japan's annual imports, Nikkei said. Mitsubishi's share will be supplied to Japanese power and gas utilities, which face a growing need for fossil fuel to substitute for a dearth of nuclear power following the March earthquake and tsunami.

The Japanese government will support Mitsubishi through trade insurance offered by the Nippon Export and Investment Insurance organization to cover some of the investment, the first such medium- to long-term insurance involving Iraq in 21 years.

Japan is the world's largest LNG importer. This fiscal year, it will import 80 million tons of LNG from such nations as Qatar, Indonesia and Russia, due to the post-disaster need for fossil fuel.

Below is the full text of the Japan-Iraq joint statement issued on Tuesday 22 November, 2011:

Joint Statement
by the Prime Minister of Japan and the Prime Minister of the Republic of Iraq
-Towards a New Stage of the Japan-Iraq Comprehensive Partnership-

1. Upon the invitation of H.E. Mr. Yoshihiko Noda, Prime Minister of Japan, H.E. Mr. Nouri Kamil al-Maliki, Prime Minister of the Republic of Iraq, paid an official visit to Japan from November 20 to 23, leading a high level delegation.

2. The two Prime Ministers met and discussed a wide range of issues. They reaffirmed the importance of further enhancing and expanding cooperation based on shared values and interests between the two countries and peoples under the Japan-Iraq Comprehensive Partnership issued in January 2009. They confirmed that the Partnership has entered a new stage, as Iraq achieves its greater self-reliance, bearing in mind the scheduled US troops withdrawal to be completed by the end of the year 2011. In the economic field in particular, they acknowledged that the bilateral relationship had entered a new phase of advancing concrete cooperation agenda and promoting dialogue.

3. Prime Minister al-Maliki expressed his appreciation for the warm welcome and hospitality extended to him and his delegation during their stay in Japan. Prime Minister al-Maliki extended a cordial invitation to Prime Minister Noda to visit Iraq at a mutually convenient time. Prime Minister Noda accepted the invitation with profound gratitude.

4. Prime Minister al-Maliki expressed his deep appreciation, on behalf of the Government of Iraq, for Japan’s political, economic and social support through various means, including Japan’s financial assistance package, announced at the International Donor’s Conference on the Reconstruction of Iraq held in Madrid in 2003 ($1.67 billion grant, $3.28 billion in ODA loans), $6.7 billion in debt reduction and technical assistance (Annex 1). He also expressed his wholehearted gratitude, in particular, for the considerable work carried out by the Japan Self-Defense Forces (JSDF) in Iraq from 2004 to 2008. Prime Minister Noda, on behalf of the Government of Japan, expressed his appreciation to Iraq for having facilitated the operation of the JSDF. He reiterated Japan’s intention to support Iraq’s efforts for reconstruction and to consider extending further official assistance, including ODA loans and technical assistance, for projects which both countries regard as crucial in developing the economic and social infrastructure of Iraq.

5. Prime Minister Noda welcomed the recent progress in the political and democratic process of Iraq, the successful formation of Prime Minister al-Maliki’s second administration supported by the Iraqi people, and its efforts to improve the security situation in the country. Prime Minister Noda hoped that the Iraqi Government and its people would continue their efforts to improve security and reconstruct the economy, while promoting national reconciliation. Japan expressed its unwavering support for such efforts by the Government and the people of Iraq. Prime Minister Noda also expressed his appreciation for Iraq’s commitment to continue providing safety and security for Japanese nationals in Iraq after the withdrawal of US troops.

6. Prime Minister Noda expressed his profound gratitude for Iraq’s kind assistance extended to Japan after the Great East Japan Earthquake on 11 March 2011 in the form of a donation of 10 million US dollars and the decision to give priority to crude oil exports to Japan so as to satisfy the import needs of Japanese companies. He stressed his determination to do his utmost to achieve the reconstruction after the disaster in a manner open to the world. Prime Minister al-Maliki conveyed his condolences to the victims and their bereaved families, expressing his confidence in Japan’s fast recovery and the active role Japan will continue to play in the international community.

7. Prime Minister Noda explained about Japan’s efforts to ensure the safety of its agricultural products. He reiterated Japan’s commitment in continuing to provide the necessary information in a timely manner, including that related to the current radioactivity levels in the affected areas, and urged Iraq to duly relax the current restrictions on imports from Japan. Iraq pledged to review those measures.

8. The two Prime Ministers shared their intention to further promote dialogue at all levels in a broad array of fields, including politics, the economy, investment, culture and education. They decided to strengthen dialogue by holding a periodic high-level policy dialogue, by engaging in high level visits, and through the Seminar on Knowledge Sharing, which is a program for Iraqi parliamentary members.

9. The two Prime Ministers expressed their satisfaction with the progress of cooperation in the economic field. Sharing the view that the strengthening of economic ties is the driving force of the Japan-Iraq Comprehensive Partnership, they expressed their commitment to working together to further promote trade and investment between the two countries. In this regard, Prime Minister al-Maliki welcomed the Japanese business missions to Iraq which were sent three times in 2011 to facilitate Japanese business activities in Iraq. He also welcomed the establishment of the JICA Iraq Office in Baghdad in August 2011 and expressed his commitment to make every necessary measure to ensure its smooth operations. Japan welcomed Iraq’s commitment to implementing the following domestic economic reforms:
- the creation of conditions for a competitive business environment in the Iraqi economy;
- the implementation of administrative reform and public sector restructuring in a way that matches the decentralized administration and subsequent financial decentralization;
- the restructuring of the State-owned companies and the implementation of the road map that was approved by the Council of Ministers in this regard; and
- the enhancement of harmony among the comprehensive economic policies in Iraq

10. Reaffirming the Japan-Iraq Comprehensive Partnership, the two Prime Ministers welcomed the forthcoming meeting of the Joint Economic Committee to be held next year to discuss a wide range of issues that include trade relations and, investment and industrial cooperation to promote Iraqi industries, as well as education, culture, sports, science and technology.

11. The two Prime Ministers highly valued the role of the private sector in strengthening Japan-Iraq economic relations. Prime Minister Noda welcomed the visit of Iraqi Ministers and Iraqi corporate executives to Japan, accompanying Prime Minister al-Maliki. Both Prime Ministers appreciated the holding of the Japan-Iraq Industrial Cooperation Conference, which had been proposed by Prime Minister al-Maliki in February 2011. The conference is expected to attract more investment from Japanese companies in order to meet the considerable need for infrastructure development in Iraq.

12. Prime Minister Noda announced that Japan would take necessary steps to provide yen loans of approximately 67 billion yen ($750 million) for four new projects in the areas of oil, communication and health. Prime Minister al-Maliki expressed his deep appreciation since this assistance not only completes the final round of Japan’s yen loan package of up to 3.5 billion dollars announced at the Conference held in Madrid in 2003, but also goes beyond it (details attached as Annex 2). Both sides recognized that Iraq’s reconstruction process would be accelerated through implementing the four projects with a view to assisting the social and economic stabilization and the self-sustained development of Iraq and that the Japan-Iraq bilateral economic relations, including in the field of energy, would be further strengthened.

13. The two Prime Ministers reiterated their common view that the stability of the global oil market is essential for the sound growth of the world economy, acknowledging that Iraq has a great potential to be a significant player which stabilizes the market by attracting more investment to its promising oil and gas fields. Recalling the Joint Statement “Strengthening Japan-Iraq Energy Cooperation” issued in January 2011, they renewed their determination to further strengthen bilateral cooperation in the energy sector, and for that purpose, they reiterated the importance of promoting cooperation and dialogue especially regarding upstream business including the Gharraf, East Baghdad and Nasiriyah oil fields.

14. In light of securing a stable energy supply for Japan, Prime Minister Noda appreciated Iraq’s offer to provide additional crude oil to Japan in order to meet Japan’s contingency needs, if any, in case of emergency. Sharing the view that Iraq will be a reliable LNG trading partner with Japan, both Prime Ministers welcomed the contract of the South Gas Utilization Project is to be signed, as the first step of building that partnership, and Prime Minister al-Maliki expressed his expectation that a considerable portion of LNG from this project should be shipped to Japan as soon as practicable.

15. The two Prime Ministers acknowledged the significance of development and improvement of electricity for the stable power supply in Iraq. Prime Minister Noda stressed the significance of the Legal Framework Development for Independent Power Producer (IPP) in Iraq by Japan Cooperation Center for the Middle East (JCCME), with a view to Japanese company's cooperation for future IPP project in Iraq, and Prime Minister al-Maliki appreciated this proposal. They also welcomed the progress of feasibility study on the construction of a large-scale power station in the south of Iraq.

16. The two Prime Ministers welcomed that an agreement in principle had been reached on the Investment Agreement between the two countries after intensive negotiations commenced in September 2011. They confirmed that the two sides would work further towards early entry into force of the said agreement.

17. Prime Minister Noda welcomed Iraq’s decision to accelerate the process of issuing entry visa for Japanese investors that will enhance the exchange of business people between the two countries. Prime Minister al-Maliki expressed his high expectation that Japanese companies and business people would expand their business and investment in Iraq.

18. The two Prime Ministers welcomed the following developments realized by the efforts of both Governments and relevant organizations to improve the business environment in Iraq:
- the opening of an office of the Japan Cooperation Center for the Middle East (JCCME) in Baghdad; and
- the signing of a Framework Agreement among the Ministry of Finance of Iraq, the Trade Bank of Iraq, and Nippon Export and Investment Insurance (NEXI)

19. The two Prime Ministers acknowledged that Japanese companies signed contracts or MOUs with Iraq in many important fields. Particularly, Prime Minister al-Maliki welcomed the contribution of Japanese companies to the improvement of infrastructure through providing their technologies, services, and products. In order to facilitate Japanese companies to expand their abilities to work on large-scale projects, the two Prime Ministers decided to start discussions on an innovative financial scheme which could involve Japanese export credit agencies, which requires sufficient collateral, such as crude oil, so as to reduce financial risk.

20. The two Prime Ministers shared the view that education is an essential foundation for nation building. In this regard, they decided to further promote people-to-people exchange in the education and academic fields. Iraq welcomed Japan’s willingness to accept Iraqi students under the Iraqi project to dispatch 10,000 students abroad. The two Prime Ministers affirmed steady progress in a wide range of training programs and shared the view that a continuous effort is important to further improve these programs, which include: programs for oil and gas sector engineers by the JOGMEC and JCCP, training and dialogue program for stable power supplies by JICA, and agriculture and water programs, as well as business and management programs by JICA.

21. The two Prime Ministers have decided to promote cooperation in the field of education, science and technology between the two countries and welcomed the deepening of ties in the cultural field though the implementation of the rehabilitation project for the National Museum and through seminars on cultural heritage by Japanese experts.

22. The two Prime Ministers expressed their intention to strengthen their cooperation in the international arena. They stressed the need for the early reform of the United Nations Security Council so as to reflect the reality of the current international community, and expressed their intention to work together to realize this reform.

23. The two Prime Ministers reviewed the current regional and global situations. They reiterated the great importance of promoting peace, stability and prosperity in the Middle East region by pursuing opportunities to support and encourage necessary reforms from within, while promoting peaceful transition. In this regard, Prime Minister Noda expressed his expectation that the next Arab Summit would be successfully held in Baghdad.

24. The two Prime Ministers strongly condemned atrocious acts of terrorism in all their forms and manifestations, committed by whomever, wherever and for whatever purpose, including the series of terrorist attacks that occurred in Baghdad and in other cities, which killed and injured many. They reaffirmed their unequivocal determination to fight against terrorism and their resolve to enhance cooperation in combating terrorism. (END)

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