Abu Dhabi, UAEMonday 19 March 2018

Magnate with more in sight than oil in his homeland, Iraq

From its base in Sharjah, the Crescent Petroleum empire is quietly doing major work as part of the rebuilding of the oil and gas sector in the country where Hamid Jafar, the family's patriarch, was born.

The battered inhabitants of the brave, new, democratic Iraq must be wondering what could hit them next. Nearly six months after their enthusiastic participation in national elections, Iraq still has no legitimate government.

More than seven years after the US removed Saddam Hussein, the country's infrastructure remains in tatters and most Iraqis receive less than two hours of electricity a day from the national power grid - a situation that is sparking violent protests. One veteran fixer trying to end the chaos has roots in Iraq but a business group headquartered in Sharjah, his home of more than four decades. Sharjah's Crescent Group, which is chaired by the Baghdad-born Hamid Jafar, may be the only non-Iraqi company that simultaneously has energy-related business interests in the country's semi-autonomous Kurdish region and the rest of Iraq.

Crescent Group's flagship company Crescent Petroleum and its Sharjah-based affiliate Dana Gas three years ago signed a gas development deal with the regional government of Kurdistan. For that they have been blacklisted by the Iraqi central government from bidding on energy projects elsewhere in Iraq, including those related to the country's biggest oilfields. The caretaker government in Baghdad deems oil and gas contracts signed unilaterally with the Kurds as "illegal".

Nevertheless, the Pearl Petrolem joint venture between Crescent Petroleum and Dana, which now also includes Austria's OMV and Hungary's MOL, has persisted in developing two Kurdish gas and condensate fields. It supplies gas free of charge to a pair of Jordanian-built power plants, selling only the gas liquids produced from the field for profit. The power developments were the region's first since the 1930s, when Hamid Jafar's father, Dhiya Jafar, ordered the construction of two hydroelectricity projects in the mountains of Kurdistan while he was Iraq's development minister.

Pearl's project has made Kurdistan the only part of Iraq with a reliable electricity supply. Meanwhile, two other Crescent affiliates, Uruk Engineering and Contracting and Uruk Project Development, are providing oilfield services and building power stations and fertiliser plants in the rest of Iraq. The general manager of the Dubai-based Uruk Group is Jafar Jafar, a nuclear physicist and Hamid Jafar's elder brother, who headed Iraq's nuclear programme under Saddam Hussein.

These days, Mr Jafar, 63, keeps a low public profile, preferring to leave the day-to-day running of his family's regional business empire to the next generation. His sons Majid, 34, and Badr, 31, are the public faces of Crescent Petroleum. Both are executive directors. Badr is also the chief executive of the sister enterprise Crescent Investments and chairman of two affiliates, Pearl and Gas Cities, which he founded. Majid chairs the corporate governance and remuneration committee of the board of Dana Gas, the publicly traded affiliate and partner of Crescent Petroleum.

It is Hamid Jafar, however, whose body language reveals how completely at ease he is in the company of foreign political leaders and local royalty. It was to the elder Jafar that Sheikh Sultan bin Mohammed, Crown Prince and Deputy Ruler of Sharjah, and the Russian deputy prime minister Igor Sechin gravitated ahead of a joint-venture signing ceremony in Sharjah in June, the trio posing for group photographs before ceding the podium to Badr Jafar. Russian state news agencies began their coverage of the recent high-level meeting in Moscow between Crescent officials, the Russian prime minister, Vladimir Putin, and the Iraqi former prime minister Dr Ayad Allawi by linking the names of Hamid Jafar and Mr Putin.

Hamid Jafar is a director of Abraaj Capital, the biggest private equity firm in the MENA and south Asian region. Crescent Investments owns a chunk of Abraaj. The late Northcutt Ely, a US lawyer whose international clients included Sheikh Khalid bin Mohammed Al Qasimi, the Sharjah Ruler assassinated in 1972, in a speech remembered Hamid Jafar as the sheikh's personal adviser. According to Mr Ely, the young Iraqi was "wise beyond his years" and helped defuse an international crisis. Iranian forces occupied Sharjah's Abu Musa island, just before the UK's 1971 withdrawal from what was then the Trucial Coast cleared the way for the UAE to emerge as a nation. Hamid Jafar brokered a deal to ensure that Sharjah retained title to oil and gas off the disputed island, a crucial source of wealth for the emirate at the time.

Crescent Petroleum still holds the concession for the Mubarak oilfield near Abu Musa that it acquired from the US company Buttes Oil and Gas in the 1970s. In recent years, it has won concessions to develop an offshore gasfield shared between Sharjah and Ajman and to explore for oil and gas in the entire onshore territory of Sharjah. In a deal for which Hamid Jafar credits Badr, and which occasioned Mr Sechin's recent visit to Sharjah, Crescent is exploring the onshore concession in partnership with the big Russian state-owned oil producer Rosneft.

Having influenced affairs leading to the birth of his adopted country, Hamid Jafar may now be advising Dr Allawi on how to make the nation of his birth whole. Both men are secular Shiite Muslims who have lived outside Iraq, which means they may have similar outlooks. Both may view political compromise with Iraq's main Kurdish parties as necessary for a stable, prosperous Iraq. In Kurdistan, the regional government and Pearl want to take their gas business further by developing exports to generate revenue for the whole of Iraq. The big German utility RWE has agreed to help develop routes to market for Kurdish gas, prompting a furious response from Baghdad.

"The export of crude oil, gas and their derivatives are exclusively under the authority of the oil ministry and the central government in Baghdad and State Oil Marketing Organisation,"Asim Jihad, the Iraqi oil ministry's spokesman, said last month. "Any contracts signed outside of that legal framework are considered void and illegal." Exporting gas from Iraq is controversial because of the severe electricity shortages outside Kurdistan. But the Kurds blame those on mismanagement.

"We will not wait on orders from a ministry that has no production and is as unsuccessful as the oil ministry of Iraq, which wasted billions of dollars without providing any electricity and energy services during all the past years," the regional government said on Monday. "We will continue with the successful oil policy of the Kurdistan government, from which we are able to provide electricity and oil production."

The impasse illustrates why Mr Jafar may be discreetly trying to shape the next Iraqi government by working behind the scenes with the Kurds and Dr Allawi, whose Iraqiyya bloc narrowly won the most seats in the March election. One of the main obstacles to Kurdish-Arab reconciliation in Iraq is the stance that the current prime minister Nouri al Maliki and his oil and electricity minister Hussain al Shahristani have taken towards the Kurdish oil and gas contracts. Ironically, Uruk's Jafar Jafar was imprisoned for a year under Saddam's regime for sticking up for a colleague who had been thrown in jail. The colleague was Dr al Shahristani.

What unifies these disparate players - Dr al Shahristani, Dr Allawi and both current generations of the Jafar family - is a deep caring about the future of Iraq on more than a commercial level. "I believe in the principles of social entrepreneurship. We need to start thinking about our triple bottom lines in business, that is, people, planet and profit," Badr Jafar, the youngest of the group, said last year.


* This article has been amended to correct the relationship of Jafar Jafar and Hamid Jafar.