A US official today criticized an oil deal between Texas-based Hunt Oil Company and Iraq’s Kurdistan Regional Government (KRG), saying it had “needlessly elevated tensions” in Iraq.
Hunt had been advised by the US State Department not to sign the deal before the Iraqi parliament passed a national oil bill that will share out the country’s lucrative oil revenues, but it went ahead anyway, a US embassy official in Baghdad told reporters.
The contract signed earlier this month was declared “illegal” by Iraqi Oil Minister Hussein al-Shahristani, sparking a war of words with the KRG, which told him to stop meddling in its affairs and said he should be sacked.
The KRG passed its own oil law in August and immediately entered into the exploration deal with Hunt.
The US embassy official, who would not be named, told a media briefing the signing of contracts by the KRG while a controversial national oil bill is still before parliament was undermining national unity.
“We think that these contracts have needlessly elevated tensions between the KRG and the Iraqi government,” said the official.
“Both parties share a common interest in the passage of a national law on hydrocarbons and energy sharing. We are pushing all parties to negotiate in good faith and knock off the things that will undermine national unity.”
The official said the future of the contract signed for Hunt to prospect for oil in Iraq’s northern autonomous Kurdish region was far from certain.
“We advise companies that they could incur significant political and legal risk by signing contracts with any party before the national law is passed,” said the embassy official.
Iraq’s oil infrastructure has been hit by decades of under-investment as a result of successive Gulf wars, 13 years of UN sanctions and the rampant insecurity that followed the US-led invasion in 2003.
The Hunt Oil contract is the first major deal since UN sanctions were imposed on Iraq when it invaded Kuwait in 1990.
No details of the contract have been released but the Dallas company, which has links with the White House, has said it would begin its geological survey work in the province of Dahuk, near Iraq’s northwestern border with Turkey, by the end of this year and would begin drilling in 2008.
Washington regards passage of the oil legislation as key to efforts at national reconciliation in the country, which is wracked by an insurgency and sectarian violence.
The draft law was passed by Prime Minister Nuri al-Maliki’s national unity cabinet in July but faces tough passage in the 275-seat legislature, where the Kurdish bloc has 53 seats.
The US official said there was strong expectation that the law would pass through parliament before the end of the year.
“Provided it has the support of the Kurdish parties, it could be adopted fairly quickly,” he added.