The former chief executive of Iraq's largest state-owned bank who was removed from his job amid allegations of corruption has vowed to clear his name.
Hussein al Uzri said the charges of "financial irregularities" made by the government were a cover for a political manoeuvre at the Trade Bank of Iraq (TBI) to push through a US$6 billion (Dh22.03bn) deal with a South Korean power company. Mr al Uzri left the country on June 2 and now lives in a secret location.
Nouri al Maliki, the Iraqi prime minister, ordered a judicial inquiry into the bank on June 2 after a committee including representatives from the finance ministry and the audit authority reported violations at the institution.
The investigators asserted that a number of loans had been issued to Iraqi companies without any collateral or guarantees.
"I want to clear my name. I deny these allegations," said Mr al Uzri. "This was a political move, [the government] wanted to have somebody close to them to be the head of the bank. I do intend to return to Iraq once I clear my name and receive an explanation about what happened."
Iraqi authorities issued an arrest warrant for Mr al Uzri shortly before the appointment of Hamdiya al Jaf, a branch manager at the state-controlled Rafidain Bank, to succeed him on June 6.
Iraq needs $70bn to jump-start its economy and rebuild its infrastructure after years of conflict, with the TBI expected to play a role in the financing of projects.
TBI was set up in 2003, and under Mr al Uzri it established lines of credit with 134 banks including JPMorgan, Deutsche Bank and Standard Chartered. The bank reported an 18 per cent increase in profit to $361 million for last year.
The row between Mr al Uzri and the government centred on the financing of a $6bn deal with South Korea's STX to instal 29 diesel-fired power generators across the country.
Mr al Uzri said he lost his job after he refused to sign letters of credit linked to the deal. Signing the letters "would have put the future of the bank at risk", he said.
"The STX deal had something to do with it because it was one of the questions of the hour at the time," Mr al Uzri said. "I basically told them how it could be done, and not the way they wanted it to be done, or to do such deals. My priority was the bank itself, TBI, and Iraq and the reputation of both."
Mr al Uzri said one of the charges against him was that the bank had issued loans improperly.
"They claimed that some loans were made without collateral, but we were the ones who introduced modern credit policy in Iraq, when the existing credit policy still relied on real estate as collateral, but that system is not sustainable when financing for projects of such magnitudes in the country," he said. "Our ratio of non-performing loans were quite low and within international standards."
Another member of the TBI board came to Mr al Uzri's defence in a statement this week.
"The bank is the success story of Iraq, linking the international financial community with the local banks in Iraq," said Sir Claude Hankes, a legal adviser and board member. "Unlike any other Iraqi institution, it has brought international experience and has been independently run."
The change at the high-profile bank comes after many Iraqis, encouraged by popular uprisings across the Arab world, have staged demonstrations since February to demand improvements in public services including electricity and call for an end to corruption.
The government invested a great deal of political capital in the deal with STX as a means of addressing the chronic power shortages at the root of some of the protests.
"What is happening is very political, and tactical. The prime minister needed a short-term win as the … promise of overcoming corruption in the ministries has not turned out as positively as he would have hoped," said Kyle Stelma, the managing director at Dunia Frontier Consultants in Dubai.
But the deal apparently could not have gone through without a sovereign guarantee on the letter of credit.
"For a sovereign backing, the ministry of finance would have had to have the approval of the country's parliament. According to the constitution, only the parliament can approve indebtedness if it's not in the budget," said a legal source involved in the negotiations.
Now that Mr al Uzri has been removed, Iraqi authorities expect the deal to go through.
"We are trying to reach an agreement with STX by paying $200m up front, the equivalent of 5 per cent of the contract, for the generators in addition to a letter of credit to be issued by Trade Bank of Iraq," said Mussab al Mudaris, the spokesman for the ministry of electricity in Baghdad.
Iraq still faces electricity blackouts eight years after the US-led invasion that ousted Saddam Hussein from the presidency. The country is able to produce only 7,000 megawatts (mw) of electricity versus demand of 14,000mw, according to the electricity ministry.