Investors seen undeterred by U.S. withdrawal from Iraq

Sun Oct 23, 2011 9:51am EDT
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By Serena Chaudhry

BAGHDAD (Reuters) - Foreign investors eager to snap up development projects in key oil producer Iraq are unlikely to balk after the United States withdraws all its troops at the end of the year as long as security does not deteriorate.

U.S. President Barack Obama said on Friday all U.S. forces would leave Iraq at the end of 2011 as scheduled, almost nine years after the 2003 U.S.-led invasion that toppled dictator Saddam Hussein.

Iraq is trying to rebuild after decades of war and economic sanctions and needs investment in every sector. The OPEC member country has signed a series of deals with international firms to develop its oil fields, the fourth-biggest in the world.

Foreign investors like oil majors Royal Dutch Shell (RDSa.L: Quote) and BP (BP.L: Quote) and bank HSBC (HSBA.L: Quote) are already pouring billions of dollars into Iraq and a U.S. pullout will likely not thwart foreign firms for an extended period, especially those with long-standing interests in the country.

"Any impact on investment will be short-term and quite muted, assuming the security situation doesn't deteriorate drastically," said Economist Intelligence Unit's Ali al-Saffar.

"This is primarily because Iraq has only really managed to attract (beyond the oil sector), frontier investors who have some level of appetite for risk so far. These more adventurous investors know the risks associated with doing business in the country, and have become quite adept at dealing with them."

Iraqi security forces continue to battle a stubborn Sunni insurgency and Shi'ite militias, and bombings and killings still occur on a daily basis despite a sharp drop in violence from the height of sectarian fighting in 2006-07.

For investors on the ground, primary concerns center around kidnapping threats and attacks on development sites. Oil pipelines are targeted by insurgents in the north and south.   Continued...