Citigroup Inc. (C), the U.S. bank which earns about a $1 billion in revenue from the Middle East, hired a former U.S. diplomat to oversee its team in Iraq as the holder of the world’s fourth-biggest oil reserves rebuilds its economy.
“We are very optimistic about Iraq over the next three to five years,” Dennis Flannery, who will run the division, said in an interview from Amman, Jordan yesterday. The country will have “considerable wealth” from its oil exports and is poised to invest in the oil and gas industry, power generation and housing to boost growth, he said.
Flannery, 64, was the financial attache at the U.S. embassy in Baghdad for a year before joining Citigroup in March. He has worked at the Inter-American Development Bank, the U.S. Treasury and the World Bank, and will oversee Citigroup’s plan to provide services to banks, international and state-owned companies in Iraq, the bank said in a statement. He will be based in Amman.
Iraq, which holds the world’s biggest oil reserves after Saudi Arabia, Venezuela and Iran, said exports rose to 2.2 million barrels a day in February, the highest since the U.S.- led invasion in 2003. China, Egypt, Iraq and Nigeria are among 11 economies that have the most promising growth prospects in coming decades, according to a report in February by Citigroup economists led by London-based Willem Buiter.
“Over the last year, Iraq’s security situation has improved very steadily,” Flannery said. Over a longer period, the lender may have “branches, a consumer business, a middle- market business” as well as “full-service bank in the country,” he said.
Trade Finance
Citigroup already has some operations in Iraq, where it provides letters of credit for banks, private banking services as well as payment and cash-management services to international corporate clients, Flannery said.
The lender will seek to expand its trade finance and syndicated lending services to some of the Iraq’s 44 public and private banks, he said. Citigroup is also in talks with the government to advise on finance projects in the oil, gas and power industries, as well as housing developments, he said.
The country has awarded 15 contracts for oil and gas exploration licenses since the U.S.-led invasion in 2003 that ousted the government of former President Saddam Hussein. Iraq’s investment in oil facilities in Basra in the south will boost oil export capacity by 900,000 barrels per day by September 2011 and a further 1.8 million barrels a day by 2012, taking overall export capacity to 4.5 million barrels a day, Citigroup economist Farouk Soussa said in a report in April.
Jordan Base
Citigroup will operate from Jordan for the moment, although it has options to open a representative office in Iraq, Flannery said. The New York-based lender could apply for a branch license or buy a stake in an existing bank, he said.
HSBC Holdings Plc (HSBA), Europe’s largest bank, purchased a 75 percent stake in Baghdad-based Dar Elsalam Investment Bank in 2005. Standard Chartered Plc (STAN) and National Bank of Kuwait (NBK) SAK, the Persian Gulf country’s biggest bank, secured licenses to operate in Iraq in 2004, becoming the first group of overseas banks to enter the country since nationalization in 1964.
Citigroup has operated in the Middle East for almost 50 years and offers corporate banking services in 11 countries, including the United Arab Emirates, Egypt and Kuwait. It offers consumer banking services in the U.A.E., Egypt, Bahrain and Pakistan, and is one of four banks helping the Dubai government raise $800 million in financing backed by future toll-road receipts.