Sharing the oil cake?

While some regard the new Iraqi oil law as oil on troubled waters, others consider it a squander of the world’s third largest oil reserves

The Iraqi cabinet approved last month a draft oil law that aims to equitably share profits from its oil revenues among the country’s ethnic groups. The new law, which was prepared by a three-member Iraqi cabinet committee dominated by the Kurds and the Shiites, allocates oil revenues between Iraq’s 18 provinces based on their population numbers. It was approved by the cabinet after Kurdish cabinet members had given up their insistence on Kurdish autonomy in oil exploration and production.
Expected to be ratified soon by the Iraqi parliament as main factions leaders in the government have approved it, the draft law specifies that up to two-thirds of Iraq’s known reserves would be developed by multinational companies, under contracts lasting for 15 to 20 years. This policy would represent a turning point for Iraq’s oil industry, which has been dominated by the public sector for more than three decades. Also, it would be a departure from normal practice in the Middle East.
As a matter of fact, the bill sparked a wide-scale controversy inside and outside Iraq. The new law is set to grant foreign oil companies long-term contracts for which they have been awaiting for decades. For the Iraqi government officials, the law is “a gift to all the Iraqi people”, as Prime Minister Nouri Al-Maliki described it. He stressed that it would encourage the bringing together of all component parts of the Iraqi people. “This law has been based on our national interest,” he added.
Also, Dalmay Khalilzad, American Ambassador in Iraq, lavished praise on the new law. “Under the national hydrocarbon law approved last week by Iraq’s Council of Ministers, oil will serve as a vehicle to unify Iraq and will give all Iraqis a shared stake in their country’s future,” Khalilzad said. “This is a significant achievement for Iraqis’ national reconciliation. It demonstrates that the leaders of Iraq’s principal communities can pull together to peacefully resolve difficult issues of national importance,” he added. The effective and equitable management of oil resources is critical to economic growth as well as to developing a greater sense of shared purpose among Iraqi communities, according to Khalilzad.
International analysts also expressed their hope that the new law would pave the way for a sustainable unity in the war-torn country that is on the verge of civil war. They argue that the draft law will help foreign companies worm their way into the Iraqi oil industry, from which they have been away during the past four years of violence.
On the other hand, however, Iraqi oil experts, labour unions and international campaigners were rattled by the new law. They argue that oil production should remain in the hands of Iraqis. In their view, it financially legalizes “unfair” types of contracts that will put Iraq in long-term contracts that can go up to thirty-five years and cause the loss of hundreds of billions of dollars. According to local labour leaders, transferring ownership to foreign companies, as the new law stipulates, would furnish the American administration with a pretext to continue occupation on the grounds that those companies will need protection. “The new law will annul Law No. 80 issued by [late President] Abdel-Kareem Qassem in 1961 by virtue of which 95% of fields that were under the control of foreign companies were withdrawn and then nationalized in 1972,” said former general manager of Iraqi Oil Marketing Company Diaa Al-Bakkaa. “Therefore, approving this dubious law under these turbulent circumstances will negatively affect the future of Iraqi economy and people,” he added.
Al-Bakkaa added that the law would help foreign companies to control the country’s oil reserves. “There is an article in the law that gives foreign companies the right to compete with their local counterparts to attain exploration and production contracts, which of course will be in the favour of the former which have the expertise and the technology to win most of the contracts,” he stressed.
Other Iraqi pundits argued that the new law entitles American and British companies to 20% profit rate by virtue of 30-year contracts, a case that is unprecedented in the history of all oil-rich countries.
In many seminars held in Baghdad and Amman, Iraqi oil experts voiced their fears concerning the new law. They revealed that an American consultant company, Bearing Point, put the draft of this law under the instruction of the American administration. They also accused Khalilzad of pressuring the Iraqi government to approve this “dubious” law, and would exert more pressures on parliamentarian blocs to pass it.
On their part, Iraqi labour unions sent a letter in Arabic to Iraqi President Jalal Talbani on 8 February urging him to reconsider this kind of agreement. “Production-sharing agreements are a relic of the 1960s,” said the letter. “They will re-imprison the Iraqi economy and impinge on Iraq’s sovereignty since they only preserve the interests of foreign companies. We warn against falling into this trap.”
Labour groups have also criticised the process of drafting the law and warned that the bill is designed in favour of American and British multinationals that it could end up increasing political tensions in the war-ravaged nation. In a recent speech given by Hassan Juma, head of the Iraqi Oil Labour Union, which was published on the union’s website, he called on the Iraqi government to consult with Iraqi oil experts and to “get their opinion before indulging Iraq into an ocean of dark injustice.”
With an estimated 115 billion barrels of accessible reserves, Iraq has the third largest oil reserves after Saudi Arabia and Iran. Therefore, the sharing of oil has been a major cause of strife between Iraq’s Shiite majority and Kurds and Sunni Arabs. Most of the oil fields are located in the Shiite- dominated south, while most of the reserves are in the Kurdish north. And since the US-led invasion in 2003, production has decreased from 3.5 million barrels per day to approximately two million.

By Mohamed El-Sayed


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