Who are the real beneficiaries of Iraq’s oil law?


Brown Milk

Iraq’s oil revenue-sharing law, one of the main “benchmarks” set for the Iraqi government by the Bush administration, was introduced as a key step toward uniting Iraq’s religious and ethnic groups. But now some analysts say the law could further escalate sectarian tensions in the war-torn country.

The law, drafted by Iraqi and U.S. officials, is strongly backed by the Bush administration, the Congress and the Iraq Study Group, whose 2006 report said such a law was needed to “create a fiscal and legal framework for investment" in the oil industry, where Iraq is considered a key player as it holds the world's second-largest proven oil reserves after Saudi Arabia. But the oil law’s status as a benchmark for progress in Iraq is stirring debate in Baghdad and Washington, according to an article on the Christian Science Monitor.

The Bush administration is angered by the Iraqi government’s perceived foot-dragging in passing the oil law. But the oil legislation is being closely examined in the United States as the Democrat-controlled Senate inches closer to drafting a new war-funding bill that includes benchmarks for progress in Iraq. Some American officials started to question the substance of the oil bill, particularly whether it really aims at easing Iraq’s sectarian tensions or granting international firms a substantial role in the country’s vast oil fields.

"While we can't confirm it, there are enough reports out there that appear to indicate that undue, unfair preference and the influence of our oil companies are part of the Iraqi hydrocarbon law, and if that is true, that is not correct," says Rep. Joe Sestak, a former admiral and defense adviser to the Clinton administration. "The aim of benchmarks is to help the process along, but we need benchmarks that are appropriate for the Iraqis and the Americans – not just our economy but our ideals."

Many in the U.S. and Baghdad express fears that the draft oil law says little about sharing oil revenues among Iraqi Shias, Sunnis and Kurds, and a lot about setting up a framework for investment that would benefit foreign companies and harm the Iraqis over the long term. Opposition intensified this week after a coalition of oil industry watchdog groups and peace activists called on House Speaker Nancy Pelosi and Senator Harry Reid to dismiss the Iraqi oil law as a benchmark for progress in Iraq. "If Democrats are perceived to be advocating withdrawal [of U.S. troops] only after access to Iraqi oil has been assured, this will do little to reassure critics," says Steve Kretzmann, executive director of Oil Change International, a watchdog group.

Hasan Jum'a Awwad, head of the Iraqi Federation of Oil Unions, reiterated this view last week in an open letter to Democrats in which he urged U.S. Senators “not to link withdrawal [of U.S. troops] with the oil law, especially since the U.S. claimed that it came to Iraq as a liberator and not in order to control Iraq's resources."

In Baghdad, many Iraqi lawmakers say the oil law is too complex and they shouldn’t be rushed to finish it. It should be last issue, not the first, to be resolved, they argue. The Iraqi cabinet passed the draft law on Feb. 26 and was expected to submit it to parliament by March 15. The Bush administration wanted Iraqi MPs to approve the entire oil package by the end of this month, but the draft law hasn’t even been sent to parliament yet.

Iraqi opponents of the oil bill say it doesn’t address the issues that Washington claims it does. "The actual draft law has nothing to do with sharing the oil revenue," says former Iraqi oil minister Issam Al Chalabi. It aims at setting a framework for investment by foreign oil companies, including favorable production-sharing agreements that are typically used to reward companies for taking on risk, he says.

"We know the oil is there. Geological studies have been made for decades on these oil fields, so why would we let them [international firms] have a share of the oil?" Chalabi wonders. "Iraqis will say this is solid proof that Americans have staged the war ... because of this law."

Oil industry analyst Fadel Gheit of Oppenheimer & Co. Inc., who reviewed the official Arabic version of the draft law and the unofficial English translation, says that both drafts are ambiguous and seem to be written in a hurry. He also raised concerns over a condition that stipulates that the Iraqi government should create a new Federal Oil and Gas Council that must include foreign partners, saying that the stipulation did "raise a red flag.”

Under the draft law, the council should carry out Iraqi oil policies and set criteria for foreign companies working in the industry. "Why shouldn't Iraq use Iraqi nationals to decide how the contracts will be awarded? They have oil engineers. Use the best brains in the country and, hopefully, they will do what is in the best interest of the country," Gheit says. "Otherwise, there's an impression that American companies are telling Iraqis what to do."

While acknowledging that Iraq needs foreign investment to help modernize its oil industry, Gheit said the oil law won’t ease the concerns of international companies who are reluctant to send their engineers into a nation in turmoil. "It's very difficult for oil companies to recruit people willing to work in the Iraqi oil fields. It's mayhem," he says.

Mohammed al-Dynee, an Iraqi MP representing the Iraqi Front for National Dialogue, a Sunni group, is currently in Washington in an attempt to persuade Congress to drop calls for the oil law. “The U.S. talks about the sovereignty of Iraq, but why are they getting involved in this oil law?" he says. "Even if this law can pass, which I doubt, it will remain ink on paper and will not be implemented on the ground."

By Emma Sabry

Who are the real beneficiaries of Iraq’s oil law?