Tab B.

 

 

 

CREDIT STRUCTURE

 

 

The OC should view the Development Fund for Iraq (DFI) as the ultimate source of repayment for letters of credit issued or confirmed by the OC for the initial twelve [12] month contract term.  While Iraq’s private sector will be able to use the Trade Bank of Iraq (Trade Bank or TBI) to facilitate imports as well as exports, this volume is expected to be low.

 

Under United Nations Security Council Resolution (UNSCR) 1483, ninety-five percent of the proceeds of all Iraqi export sales of petroleum, petroleum products and natural gas, are required to be deposited into the DFI account.  This account is held at the US Federal Reserve Bank of New York. 

 

The DFI account is controlled by the Administrator of the Coalition Provisional Authority (CPA).  DFI funds are to be used in a transparent manner for the benefit of the Iraqi people.  The CPA established the Program Review Board (PRB), which reports directly to the Administrator of the CPA.  Among the PRB’s duties are to recommend expenditures of resources from the DFI.   It is important to note that the DFI account was granted certain privileges and immunities, set forth in paragraph 22 of UNSCR 1483.    For more information on the CPA, DFI, and Board refer to Regulations 1-3 at <www.cpa-iraq.org/regulations>.  Under no circumstance will the CPA be the obligor under any transaction entered into by the TBI.

 

Credit enhancement programs through working arrangements with the Export Credit Agencies and appropriate bilateral and multilateral agencies are possible.  Some ECAs have indicated a willingness to consider providing credit insurance or payment guarantees for payments due in relation to Iraqi imports.  For example, the Export-Import Bank of the United States recently announced that its support may be available for certain transactions, including those in which the primary source of repayment is the DFI.  This will apply only to exports originating in the United States, but export promotion agencies from other countries are expected to propose similar programs.  Certain bilateral and multi-lateral agencies have indicated a willingness to provide similar support for trade, without regard to country of export origin, but with similar reliance on repayment from the DFI.