New Oil Law is not in Iraq's interest

This article by an Iraqi summarises some of the main problems in the new Iraqi oil law that still has not passed parliament. The article is from Gulfnews.
New oil law is not in Iraq's interest
By Mohammad Akef Jamal, Special to Gulf News
Published: September 30, 2007, 00:33


Iraq's draft oil and gas law, which was approved by the Iraqi government in April and which is scheduled for parliamentary approval, is one of the most dangerous laws issued since the occupation of the country began in 2003.

The permanent constitution, passed in 2005, is another dangerous document that threatens the future of Iraq.

Some chapters of the draft oil law are based on the constitution, which is opposed by a large number of Iraqis. Many Iraqi politicians and lawmakers see the law as a major threat to Iraq's national interests.

Lawmakers and politicians from various ethnic, political and sectarian backgrounds have expressed deep reservations about the new law.

The Council of Ministers, which approved the Bill, is one of the three executive branches of the Iraqi government. Yet, it was formed after an election held under difficult circumstances in a country under foreign occupation.

However, no positive changes have yet to be seen since the start of the political process and the formation of the government of Nouri Al Maliki.

On the contrary, it had added fuel to the fire in the war-ravaged country and made a bad situation worse, taking the country to the point of no return. The new oil law is expected to play a negative role in shaping the future of Iraq.

Lawmakers must lay down flexible laws that encourage foreign investors to invest in Iraq, while preserving the national interest and giving Iraq the upper hand in controlling its natural wealth without depriving investors of their rights. This is simply because Iraq has had a record of disputes with foreign oil companies since the discovery of oil in the early 20th century.

The same scenario is taking place in Iraq following the government's approval of the new oil law. Iraqi workers in oil companies have engaged in confrontations with the Iraqi police, protesting at the new law.

In Basra, workers were involved in confrontations with Iraqi policemen and called for a civil strike last month.

In the 1960s, all political forces called for regaining Iraq's national control over its oil production. The struggle led to the passing of Law No 80 for 1961 through which Iraq managed to regain 99 per cent control over its oil fields.

Many lawmakers and oil experts have examined the technical aspects of the new oil law. They have unanimously expressed deep reservations, considering the law a step backward for Iraq whose oil revenues constitute 90 per cent of its annual budget.



Technical aspects

Here it is extremely important to highlight the negative technical aspects of the law. Al Maliki's government and the parliament must take into consideration Iraq's national interest and the future of its oil industry before endorsing it.

First, the law is a step towards - for the first time - privatising the oil sector.

Second, it establishes a framework for unusual commercial ties with foreign oil firms by giving these firms generous terms under long-term contracts that could last for 30 years without being changed.

The law could benefit foreign oil companies at the expense of the Iraqi people, deny Iraq economic security, create greater instability, and move the country further away from peace.

Third, it contains contradicting provisions.

For example, article No 111 of the permanent constitution states that oil and gas are owned by all the people, while the new law stipulates that oil and gas are owned by the Iraqi people in all the regions and provinces.

Authority

This contradiction is open to misinterpretation and gives provinces the authority to negotiate and conclude contracts with other parties and submit them to the Supreme Council, which is based on a sectarian quota system.

Under article No 1, the law may spark differences between provinces over their rights of handling oil fields, which exist in these provinces.

The controversy and exchange of accusations between the province of Kurdistan and the ministry of oil on the heels of signing the contracts with oil companies by Kurdistan, is another example.

Fourth, the law stipulates in its article No 6 that the powers of the Iraqi National Oil Company do not exceed the management and operation of existing oil fields and developing the discovered ones.

Even worse, the Iraqi oil company will not have the right of exploration for oil without obtaining a licence for that, just like other foreign companies.

Obviously, the new law does not provide protection to the national oil company and considers it unqualified to compete with foreign companies.

Fifth, the law does not oblige foreign companies to abide by a timetable to produce oil.

This allows these companies to influence global markets and apply political pressure on Iraq, causing harm to development plans in the country.

Sixth, it does not oblige these foreign countries to pledge not to use Iraqi oil to apply political or economic pressure on other countries.

Furthermore, the so-called exploration risk contracts are the most dangerous part stipulated in this law, because drilling for oil takes place in tough areas like deserts and seas.

This gives these oil companies the right to gain 40 per cent of the extracted oil.

Finally, the law is a fruit of the sectarian quota system installed by the occupation, while the Iraqi citizen is the victim of this odious system based on sectarian affiliation, and not on qualification or loyalty to the nation.

Therefore, in Iraq's interest, the parliament should not rush this law through, as this would shape the future of Iraq and its future generations, who have the right over their country's oil wealth.

The Iraqi parliament is required to pass this real test and place Iraq's supreme interest above other considerations.



Mohammad Akef Jamal is an Iraqi writer based in Dubai.