Siemens can continue to hope for a billion-dollar contract in iraq

Siemens can continue to hope for a billion-dollar contract in Iraq

Siemens remains in the race for a billion-euro deal to expand iraq’s power grids.

Despite massive interventions by president donald trump, the munich-based company still has a chance against its US rival general electric (GE) – after it initially appeared that the americans had the edge. On sunday, siemens came decisively closer to its goal of being allowed to expand power capacities in the war-ravaged country: in baghdad, ceo joe kaeser signed a declaration of intent to that effect, as the company and the government announced.

The step, which is important for siemens, had been on the brink of collapse in the days before. The "financial times" had reported increased pressure from the united states on the government in baghdad. Among other things, he says, weapons deliveries have been promised. The financial service bloomberg wrote that senior washington officials had warned prime minister haider al-abadi to risk relations between the two countries if a contract went to siemens.

But the german side had also put in a lot of effort. Just a few weeks ago, kaeser had traveled to iraq with the parliamentary secretary of state in the federal ministry of economics to promote the project in person. In addition to creating thousands of jobs, siemens promised support in the fight against corruption as well as in the education of iraqis and the construction of schools and clinics. These are all final elements to help build a new iraq, kaeser said at the signing of the declaration of intent.

However, this does not mean that the order will automatically go to siemens. GE also announced on sunday that it had signed a series of "principles of cooperation". According to industry insiders, this means that both plans are still in the running. The iraqi ministry of electricity described the agreement with siemens as "the starting point for a long-lasting cooperation". GE was also told that the plans were a possible basis for future contracts.

Parliamentary state secretary thomas bareib, who accompanied siemens chief kaeser on the iraq trip, expressed optimism. Siemens had presented a convincing overall concept. "Germany and iraq want to further expand our reliable partnership."

At 14 gigawatts, the U.S. Company’s expansion plans exceed those of the german company. GE also promises to create up to 65,000 new jobs and save iraq up to three billion U.S. Dollars a year.

Although iraq is one of the world’s richest countries, the population suffers from poor electricity supply. Especially when iraqis turn on air conditioners everywhere in the hot summer months, with temperatures reaching 50 degrees, the power is constantly out. Since the fall of long-time ruler saddam hussein in 2003, all governments have failed to improve the situation decisively. One main reason: rampant corruption.

People’s frustration over shortages, including of water and other public services, has erupted in protests in recent weeks. In the southern city of basra, center of national oil demand, many iraqis took to the streets. Clashes with security forces leave people dead and injured. The eleven-gigawatt project in the case of siemens was run over four years. According to the company, about half of the current power generation capacity in the war-torn country is at stake.

In just over two years, this was the second major project that siemens had landed in the middle east for its power plant division. A few months ago, the group completed the construction of three new gas and steam turbines in egypt with a power generation capacity of 14.4 gigawatts – just two years after winning the eight-billion-euro contract. This was good publicity for the current project.

The munich-based company’s struggling power plant division is expected to benefit from the deal. Overcapacities in coarse turbines and the general structural change in the energy supply towards renewable sources are causing problems for the business area. In order to cut costs, the group’s top management agreed with the general works council and the IG metall union to cut around 6,900 jobs worldwide, some 2,900 of them in germany.

Whether an iraqi deal – rumored to be worth a high single-digit billion figure – will change that is questionable. The management board is trying to distinguish between the issues of job cuts and rough orders. The agreement with employees applies despite a possible iraq deal, said human resources chief janina kugel jungst. The trade unions also conceded that such a deal was unlikely to halt the long-term negative trend.

For GE, defeat in iraq exacerbated problems. As a former innovation leader and flagship of the u.S. Economy, the company has been in free fall for years because of these and other difficulties. The 125-year-old u.S. Industry icon recently replaced its unsuccessful top manager john flannery – the second change of manager in just 14 months.

Obviously, even the pressure of US politics could not prevent the agreement with siemens. Harsh criticism of the interference came from the federation of german industries (BDI). "This kind of enforcement of the "america-first" doctrine in the global competition of multinational companies is unacceptable," said managing director joachim lang to the "welt am sonntag" newspaper.

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