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Iraqi Dinar Value Is Still Dependent On Political Stability And Growing Oil Output
The Iraqi dinar is the certified currency of Iraq. The nation stays largely isolated from international monetary markets. The country has no real sovereign credit, there’s little demand for its currency which stays thinly traded. All Iraqi assets, including its money are viewed as currently being a high financial risk. The Iraqi dinar value, or the Iraqi dinar exchange rate, is successfully decided by the central bank via it’s US currency sales. The Iraq currency began circulation once Iraq gained its independence in 1932 after being ruled by the Ottoman (Turkish) Empire and then Britain. Prior to the dinar, the Iraqi currency was the Indian rupee, introduced with small creativity by the British right after they defeated Turkey in WWI and took over management of Iraq.
Originally, when it was first placed into circulation, the Iraqi money was pegged towards the British pound. By 1959 Iraqi national wealth had turned out to be more and more coupled with oil. Oil was priced and traded globally in terms of the US currency, so the Iraqi currency peg was altered to the US currency and remains so to this day. With the introduction of financial sanctions after the initial US Gulf War, financial circumstances deteriorated dramatically in Iraq. Inflation spiraled to an annual rate of more than 1000% by early 1993, unemployment expanded to more than 50% and the worth of the Iraq money fell considerably. Throughout 1994, the dinar was valued at about 2,500 per 1 US currency. In an effort to help the new money, a range of actions had been launched including a new law in 1996 to allow citizens to use bank accounts in a foreign currency.
Following the second Gulf War, new arrangements had been created to take effect on 15 October 2003 to issue a brand new Iraqi note and also to control the Iraqi dinar exchange rate. Because those new arrangements have been launched, the Iraqi dinar value has steadily increased. The present exchange rate is 1,170 dinars for 1 US dollar. Data published by the US Central Intelligence Agency points out that the quantity of Iraqi dinars needed to purchase a US dollar was 1,475 dinars (on average) throughout 2005, 1,255 throughout 2007 then down to 1,170 in 2009. The exchange rate today remains near 1,170 dinars per US dollar. Iraq recently quantified its proven crude oil reserves at 143 billion barrels, compared to Saudi Arabia with 265 billion barrels of proven reserves. The nice part about these reserves are that they are easily available and as a result the oil has a low cost to produce. Roughly 95% of all Iraqi export value is derived from crude oil. As political stability returns to Iraq and with increases to its economic system expanding, its crude oil manufacturing should rise as well to ensure that this national wealth spreads broadly amongst Iraqi citizens.The Iraqi currency value will likely rise considerably as peace and prosperity take hold.
When Will the Dinar Revalue?
Everybody is expecting a revaluation for the Iraq money. Revaluation is the term used to indicate an increase of value for certain currency. And because of this expectation, the people who have been investing in Iraqi Dinar are growing in numbers.
There have been lots of disputes and arguments regarding the possible revaluation of Iraq’s currency. There are a group of people who are not convinced that the country will recover from a great loss but there are also some individuals who have predicted that the currency of Iraq will rise if given enough time. So, when will the Dinar revaluation specifically be if there is any? We are still uncertain but we can observe some events which are currently happening in Iraq.
To answer the puzzling question we have, we may try to observe the current situation and events happening in Iraq over the last few years from the war it had with its former government. If we can determine its activities for a couple of months or years, we may be able to gather some inclinations and hypothesis about the possible revaluation of Iraq’s currency. The events might help us draw conclusions regarding the anticipated Dinar revaluation.
The first event that gives hope to the currency’s revaluation is the lifted sanctions and the approval of the Iraq’s Parliament for the second term of Prime Minister Nouri al-Maliki. A new government leader means a new hope for change. This can be a good indication for a more liberal government for Iraq. And a liberal government can be a great indication of open foreign investments.
The second event that motivates lots of Dinar investors is the signing of contracts between oil companies and other neighboring nations with Iraq for expected oil reserves. And oil can be a great factor for a country to boom in its economic status. Oil is a worldwide demand that can be a great door for Iraq’s economic growth. Oil reserves means expanding resources and spreading industrial opportunities.
And lastly, Iraq has started participating in international market and foreign trades in developing its oil wells and some undiscovered oil reserves. If there is foreign involvement in the stock exchange then a boom in the economic status is to be expected. For Iraq, this could mean opportunity and to foreign investors this could mean another pot of gold.
Because of these ongoing possible events happening in Iraq, more and more people are driven to the possible revaluation of Iraq money. Although the New Iraqi Dinar is not yet openly traded in the international currency exchange market, its revaluation is highly expected. These positive events have been the strongholds for Dinar investors for the anticipated phenomenon that they call as Dinar revaluation.
We may not know the exact date of Iraq’s currency’s revaluation still, with all the positive and promising events happening in Iraq we can draw a conclusion that its increase in value is not far. Dinar investors can be confident in their venture. And maybe, we can venture in this promising opportunity as well.
The Great Molasses Flood
What if the terrorist had been successful last Friday in their attack on Abqaiq, the world’s largest oil processing facility? Abqaiq (some spell it Abiqaiq) is located at the southern end of the Abqaiq oil field about 25 miles west of the Arabian Gulf.
The immediate $2.00 price per barrel rise after the attack is an indicator. The price went up even though production was not interrupted. The world would have gone into panic mode if the attack were successful. The price of oil would have made last year’s oil price swindle look like the “good old days.”
Al-Qaida claimed responsibility for the attack geared to drive the infidels out of Saudi Arabia. They will be back, possibly by air as with the WTC Towers. Mortar, rocket, or artillery fire could raise havoc.
Oil facility attacks by terrorist have been far more successful in Iraq. The Iraqi oil lines are long and exposed and easy to disrupt. Iraq oil production is continually hampered.
It’s good the Abqaiq attack failed. If it had succeeded, in light of that production has already been curtailed in Iraq by terrorist and Venezuelan Dictator Hugo Chavez has threatened to stop oil shipments to the U.S., a movement by greedy oil companies to put oil prices completely and permanently out of sight would be as unstoppable as the great molasses flood.
For those who don’t know about the Great Molasses Flood in which on January 1919, a wave of over 2 million gallons of molasses swept through Boston, killing 21 and injuring 150, see http://www.snopes.com/horrors/freakish/molasses.htm.
I salute the Saudi guards that stopped the attack and offer condolences to the families of the two guards that died from wounds suffered during the fire fight.