The new Iraqi oil bill could cause more turmoil in the already war-torn country
Four years have passed since Iraq was occupied by America and its allies. Since then, the country’s oil policies have not been set yet. In February, however, a draft law was approved by the Iraqi cabinet to regulate the exploration and the legal framework that would govern the industry during the years to come.
Stating that up to two-thirds of Iraq’s known reserves would be developed by multinational companies under contracts lasting for 15 to 20 years, the draft law was seen as a turning point for Iraq’s oil industry, which has been dominated by the public sector for more than three decades. Also, it was considered to be a departure from normal practice in the Middle East.
Nevertheless, the bill then sparked a wide-scale controversy inside and outside Iraq. For some experts, the draft law was set to grant foreign oil companies long-term contracts for which they have been waiting for decades. In addition, the proposed draft, experts opposed to the new law argue, would give supremacy and most of the oil revenues for multinational companies, rather than the Iraqi people. On the other hand, the majority of Iraqi government officials saw the law as “a gift to all the Iraqi people”, as Prime Minister Nouri Al-Maliki described it, stressing that it would encourage reconciliation among all component parts of the Iraqi people.
Having been sent to the parliament for ratification, and then returned to the cabinet for the introduction of some amendments earlier this month, the law is still triggering controversy among different circles. Kurdistan’s oil minister slammed the draft law, asking all factions to trash it. Even some ministers inside the government voiced their concerns. “First, I fear that chaos might sweep the industry, which will greatly harm the country, and is something we are definitely not in need of amidst all these chaos afflicting the country,” said minister of planning Ali Baban. “The problem with the [proposed] law is that it doesn’t give [the government] in Baghdad a clear-cut right to reject contracts signed in other governorates or regions which, according to the proposed law, have a role in signing such contracts,” he pointed out.
While Baban saw the draft law as a step in the wrong direction, Hamza Al-Gohari, a veteran Iraqi oil expert, concurred. “There is no reason to invite foreign companies to have production partnership contracts, since all what these companies do is only to open coordination offices,” he said. “In fact, all what we need is a national private sector that could provide highly specialized oil services,” he noted.
Economist Ali El-Shammaa criticized the law, saying that the proposed law didn’t allow the Iraqi companies to refine or produce oil derivatives. “By forming a united council to run the oil sector, [the law] boosts sectarianism,” he said. In this manner, El-Shammaa views the law as canceling the role of the oil ministry, which is supposed to shoulder the responsibility of implementing oil policies.
Anwar Al-Saadi, an economist, is of the opinion that the bill will not give enough opportunity to the Iraqi private sector to invest in the industry. “The bill doesn’t give privileges to the Iraqi private oil sector to face American and British companies. But what is really dangerous about this bill is that it allows the government to introduce changes to the boundaries of oil producing regions or setting up new regions, a matter that will rekindle old ethnic and factional problems,” he added.
On the other side, oil minister Hussein Al-Shahrastani vehemently supported the enforcement of the new law. “I have never seen a law, other than the constitution, that have been thoroughly discussed on all levels like this law,” he noted. “All reservations will be taken into consideration when the parliament discusses the proposed law. Only the parliament has the final decision and can amend, remove or add to the draft law,” he stressed.
Indeed, the destiny of the bill lies now in the hands of Iraqi MPs. Prime Minister Al-Maliki will have to secure the support of the majority of the 275 member-strong parliament to pass the bill. Given that the thirty MPs loyal to the influential Shiite cleric Muqtada Al-Sadr are opposing the draft law — saying that the draft law should ban the signing of contracts with companies from countries that still have troops in Iraq — it will be difficult for Al-Maliki to garner enough support. And with the Kurdistan government in northern Iraq and the Sunni Arab politicians opposing the draft law for different reasons, the ratification process is doomed to stumble.
Aggravating the situation, an MP and member of the parliament’s oil and gas committee responsible to reviewing the draft law resigned from the committee, asking other MPs to reject “this law that is detrimental to the country’s future, and which supports the interests of international companies on the expense of the people of [Iraq].” The resigned MP, Osama A-Nejaifi, said that the draft law is “a repeated copy” of the old draft law that was rejected by the parliament in February. He went as far as describing the draft law as “a death blow to the future of the Iraqi economy.”
According to the new bill, a new Oil and Gas United Council (OGUC) would assume the daunting task of outlining the oil industry policies. “It will be responsible for outlining policies, oil fields development plans, contract models as well as instructions concerning negotiating and signing contracts,” he said. The OGUC will be presided over by the prime minister. It will also consist of concerned ministers of oil, finance, planning, natural resources in Kurdistan, the governor of the central bank, as well as representative from every governorate that produces more than 100 thousand barrels per day.
Meanwhile, American pressures on Iraqi factional leaders and politicians have mounted in an attempt to reach an agreement over the proposed law. Having failed to honor its promise of peace and stability in the country that has the third largest oil reserves, the American administration is ostensibly trying to achieve any success on the economic front by enacting the new law.
With an estimated 115 billion barrels of accessible reserves, Iraq has the third largest oil reserves after Saudi Arabia and Iran. Most of the oil fields are located in the Shia-dominated south, while most of the reserves are in the Kurdish north. And since the US-led invasion in 2003, production has fallen from 3.5 million barrels per day to approximately two million.
The fear now is that in case all the factions failed to agree on the draft law, all oil facilities might turn into a new target for insurgents.

By Mohamed El-Sayed