Provision of Yen Loan to Iraq

April 9, 2007

The Government of Japan has announced its intention to provide yen loans up to the total amount of 102,843 million yen to the Republic of Iraq for implementing the following projects: “Khor Al-Zubair Fertilizer Plant Rehabilitation Project”, “Crude Oil Export Facility Reconstruction Project”, “Engineering Services for Basrah Refinery Upgrading Project” and “Electricity Sector Reconstruction Project”. Notes to this effect were exchanged on April 9(Mon) in Tokyo between Mr. Kenjiro Monji, Ambassador of Japan to the Republic of Iraq and Dr. Ghanim Al-Jumaily, Ambassador of the Republic of Iraq to Japan.
Projects and the maximum amount of the loans

(1) Khor Al-Zubair Fertilizer Plant Rehabilitation Project: 18,120 (million yen)
(2) Crude Oil Export Facility Reconstruction Project: 50,054 (million yen)
(3) Engineering Services for Basrah Refinery Upgrading Project: 2,079 (million yen)
(4) Electricity Sector Reconstruction Project: 32,590 (million yen)

Terms and conditions of the loan:

(1) Interest rate: 0.75%
(2) Repayment period: 40 years (including a 10-year grace period)
(3) Procurement method: general untied
Outline of the Project

(1) Khor Al-Zubair Fertilizer Plant Rehabilitation Project
Agriculture, an important industry of Iraq, accounts for about 10 percent of GDP and about 10 percent of all working population. Two factories are in operation for production of fertilizer which supports the Iraqi agriculture. However, the production of fertilizer is decreasing due to poor operation and maintenance of factories, resulting from conflicts including the Gulf War and from economic sanctions. In particular, Kohr Al-Zubair Fertilizer Plant, located in Basrah Governorate in Southern Iraq, faces the problem of decreasing production capacity due to the dilapidated facilities of the factory.
Therefore, it is crucial to supply the necessary machinery in urgent needs for the factory, in order to improve its production capacity and to recover productivity of agriculture there from.

(2) Crude Oil Export Facility Reconstruction Project
In Iraq, the oil sector, which occupies almost 70% of its GDP and almost 90% of the national income, is the largest key industry and almost the single source to gain foreign currency. However, because of the insufficient reinforcement and maintenance of oil related facilities, the reliance of export facilities decreases and the capacity of the crude oil export is unstable, resulting from conflicts including Iran-Iraq War and the Gulf War, and economic sanctions .
Therefore, it is necessary to construct an on-shore/off-shore pipeline to export oil from a storage equipment in Al-Fao, Basra in the Southern Iraq, and to install off-shore loading facilities in order to operate oil export facilities stably and to increase the capacity of them.

(3) Engineering Services for Basrah Refinery Upgrading Project
In Iraq, oil sector, which occupies almost 70% of its GDP and almost 90% of the national income, is the largest key industry. However, increase of consumers’ demand for oil product during postwar reconstruction inflicted shortage of gasoline. This shortage is also caused by poor operation and maintenance of related facilities for oil products, resulting from conflicts including the Gulf War and from economic sanctions
Therefore, it is necessary to increase yield of oil products for consumers by constructing a new plant which will contribute to increasing the productivity in refining gasoline and other oil products in the existing Basrah Refinery. This yen loan is intended for engineering services for the design and management of constructing the new plant.

(4) Electricity Sector Reconstruction Project
The electricity sector is the basis of any economic and social activities in Iraq. However, the function of power supply and distribution has been greatly deteriorated by insufficient new investment and maintenance for the power sector resulting from conflicts including Iran-Iraq War and the Gulf War, and economic sanctions.
Therefore, by supplying the machinery and materials for the transformation in the power supply and distribution section, this project aims to stabilize the power supply mainly targeting the areas with high priority from the view points of the necessity, the feasibility of operation, and the effect of the project in Iraq.

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