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Analysis: Deeper than an oil law in Iraq

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by Ben Lando
Dubai, United Arab Emirates (UPI) Sep 10, 2007
Both Iraq's federal government and the Kurdistan Regional Government are upset by each other's efforts in reaching a deal on a national oil and gas law and have announced moves to develop the oil sector without it.

Neither has given up, however, on the hydrocarbons law, a tool that will both govern development of resources that bring in nearly all the government's revenue and allow various factions to air their wants and find a compromise.

"If for any political reason the law is delayed, we'll go ahead and start discussions with international oil companies," Iraqi Oil Minister Hussain al-Shahristani said Saturday at an Iraq oil conference in Dubai, United Arab Emirates.

On Sunday, on the sidelines of the Iraq Petroleum 2007 summit, organized by The CWC Group, he said tenders for projects in Iraq's vast oil and gas sector "will be announced in due time." He didn't say exactly which fields or exploration blocks, but they are included in the first phase of a five-year plan he outlined over the weekend, he said.

"The Ministry of Oil is entitled to sign any contract that is for the best benefit to the country," he said. The government has been holding out for the federal law, but it appears pressure is wearing the patience thin.

The same goes for the KRG, which on Saturday announced it signed a production-sharing contract with an Iraqi-based subsidiary of Hunt Oil Co. of Dallas and Impulse Energy Corp.

"Any contract that has been signed by anybody other than the Ministry of Oil now before the new law is legislated has no standing as far as the government of Iraq is concerned," Shahristani said Sunday of the deal. The KRG has signed a handful of oil and gas exploration and development deals with private firms, all of which have been condemned by Baghdad.

Shahristani said only the first four deals, struck prior to reaching agreement on a federal oil law, would carry any water with him. They would be reviewed by a federal oil and gas council established by the law to ensure they comply with it.

"We are not really looking for any blessing from others because we don't need any of it," KRG Natural Resources Minister Ashti Hawrami said in a telephone interview from Iraq. "Instead of undermining KRG's achievements we would like to encourage others to work with us on the federal law to make some real progress in all the country."

Without a new federal oil law, which has been in negotiations for more than a year, Iraq relies on legislation instated in the 1980s, which Shahristani says gives him the right to sign new deals. Hawrami said the 2005 constitution gives the Kurdistan region the right to pass its own oil law, which it did last month, and sign deals as well.

"Our recently enacted regional oil and gas law has nullified any other law before it. That is our constitutional right and we have done that," he said, adding more deals are in the pipeline. "But, that only applies to the Kurdistan region, and the rest of Iraq is still governed by the old laws."

The debate is more complex than merely negotiating laws and interpreting a constitution. There are layers of mistrust and fear fomented by decades of violent, strongman power wielded mostly along sectarian lines by Saddam Hussein. Such tension has been exacerbated by the past four plus years of an occupation that sought to use sectarian categories or roles to bring a slice of power to Iraq's Shiite and Sunni Arabs and Kurds. But succeeding in being inclusive, the new form of government is also fractured along such identities.

The oil law, in turn, is not simply legislation governing the third-largest proven reserves of oil in the world. Oil sales funded more than 90 percent of government last year, so the oil is a base for power in Iraq. Agreeing on how to share and/or divvy that power (the extent of federalism in the new Iraq) and best develop the crude source of the power (the extent international investors can enter the longtime nationalized oil sector) is a litmus test.

The Bush administration and Congress included passage of an oil law as a benchmark for Iraq's government (although the benchmark language referred to an oil law that decides how the oil revenue is to be shared, which will be decided in a separate revenue-sharing law). They said passing the law would lead to reconciliation.

As negotiations over the law turn tense, widening the gap between political players and creating the real or perceived need for unilateralism, it appears the law itself could be the proving ground for intra-Iraqi cooperation. It's a decisive and divisive issue for Iraq, suffering from daily violence and a dwindling quality of life; it may not fit in an occupying power's cynical timeframe.

Indeed, backroom talks have seen successes. But soon after surfacing, deals break down or are found to be incomplete. In February an agreement was announced, but now neither the Kurds nor the central government can agree on changes each side wants or has made. Both still say they want to find a solution. That's a feat considering the pressure being applied not only by the United States, other governments and institutions like the International Monetary Fund, but internally as well.

The Iraqi government is becoming weaker every day citizens experience long hours without electricity, long lines for fuel and hopes of restored healthcare, water, sewage and education systems. That, along with the violence, is spurring fighting between parties, even those allied by ethnicity or religion.

The oil unions in the south are so worried they'll lose jobs and the country its natural resource that they vowed Sunday to strike if the law passes. They feel it gives too much to the international oil companies, which are putting pressure on the government as well. Thousands of top officials of the global oil industry attended two Iraq energy conferences in Dubai over the past eight days, urging attending Iraqi government officials to move faster.

"Iraqis have yet to agree on the shape of the country they live in. They need to agree on how to share resources and how to share power," Yahia Said, director of Middle East and North Africa at the Revenue Watch Institute, said during the final panel discussion at Sunday's summit. "It's a matter that needs to be discussed and debated. żż Iraqis need time and space to do that."


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