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Dana Gas, the privately owned gas company based in Sharjah, is not dropping its arbitration against Iraq’s Kurdistan Regional Government (KRG) despite the resumption of a small, partial payment of funds owed by Erbil.
Dana Gas said on 23 October it had received $18mn from Erbil, which appears to have bowed to a court order to resume payments, or risk damaging its reputation as a safe haven for foreign investors (MEES, 24 October).
In July, the London Court of International Arbitration ordered the KRG to pay arrears to Dana Gas and Crescent Petroleum, its largest shareholder, and maintain payments till the case runs its course. The ruling sets a precedent for foreign contractors in the Kurdish region, many of whom are yet to be paid their costs after Baghdad cut off federal funds. With Iraq’s 2014 federal budget still to be approved (see p14) and transfers from Baghdad yet to resume, the KRG is overstretched and can ill afford to pay the hundreds of millions of dollars it owes to foreign operators. The KRG’s decision to pay what is a token amount several months after the court’s interim ruling, may have been motivated by fear that some of the dozens of foreign investors in the region might take flight should it fail to honor its legal obligations.
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