Kurdish regional government has not seen oil law.

This is quite surprising that the cabinet would pass the law without even showing it to the Kurdish regional government. If there are sections with which the Kurds do not agree it will not likely pass the legislature. I wonder why it was able to pass the cabinet quickly?

Regional Kurdish govt says it's not seen Iraq oil law
Wed Jul 4, 2007 8:26AM BST
BAGHDAD (Reuters) - The local government in Iraq's northern region of Kurdistan said it had yet to see a draft hydrocarbon law approved by the cabinet in Baghdad, possibly complicating passage of the landmark legislation.

Parliament was expected to start debating the law on Wednesday, Shi'ite Prime Minister Nuri al-Maliki told a news conference on Tuesday, describing the bill as the "most important" law in Iraq.

Washington has pushed Iraq for months to speed up passage of the law and other pieces of legislation, which are seen as vital to curbing sectarian violence and healing deep divisions between majority Shi'ites and minority Sunni Arabs.

But the Kurdistan Regional Government (KRG), a key party to the negotiations, said it had neither seen nor approved the draft.

"We hope the cabinet is not approving a text with which the KRG disagrees because this would violate the constitutional rights of the Kurdistan region," the KRG said in a statement obtained on Wednesday.

Iraq's cabinet originally approved the draft in February but faced stiff opposition from the regional government in largely autonomous Kurdistan, which felt it was getting a raw deal.

The law decides who controls the world's third-largest oil reserves, aims to provide a legal framework for attracting foreign investment and sets up a new state oil company to oversee the industry. The final draft has not been made public.

The Kurds had previously said some of the law's annexes were unconstitutional because they wrested oilfields from regional governments and placed them under the new state oil firm.

Most reserves are in the Kurdish north and Shi'ite south, underscoring the need for equitable distribution to ensure Sunni Arab provinces in central Iraq get a fair share of revenue.

A companion law that covers revenue sharing would be approved by the cabinet this week and submitted to parliament next week, Iraqi officials have said.

The Kurds approved the revenue-sharing component in June, agreeing to take 17 percent of all oil revenue.

Thamir Ghadhban, an energy adviser to Maliki, said on Tuesday that a new Federal Oil and Gas Council would sort out the disputed annexes after parliament approved the law.

The council would allow regions to negotiate with oil firms but the central government would need to approve contracts, Iraqi officials in Baghdad have said.

(Additional reporting by Peg Mackey in London)


© Reuters 2006. All rights reserved. Editorial Handbook which requires fair presentation and disclosure of relevant interests.

Sadr Bloc and Sunnis object to Oil Law

I wonder if we will hear anything about the debate in the legislature? The oil unions are also opposed to the draft oil law. The next article posted shows that the Kurdish regional government did not even see the draft before it was passed by cabinet! If the Kurds are opposed then the game is up.

Sadr bloc joins Sunnis in rejecting Iraq oil law by Joseph Krauss
Thu Jul 5, 8:25 AM ET



BAGHDAD (AFP) - Followers of Iraqi Shiite cleric Moqtada al-Sadr on Thursday joined a growing chorus of Sunni Arab, Kurdish and Shiite opposition to a draft oil law backed by Washington.

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His opposition, apparently motivated by anger at the idea of US and British oil firms snapping up contracts after their countries invaded Iraq, promises to feed a fierce debate but will not necessarily derail the legislation.

"You cannot have both the Kurds and the Sadrists on the outside," said Joost Hiltermann, Iraq analyst at the International Crisis Group.

Nevertheless, "the oil law is one of the benchmarks that has a chance of success. It may not require the agreement of the Sadrists if there is agreement between the Supreme Council, the Dawa Party, and the Kurds."

"This is the same coalition that has essentially ruled Iraq since January 2005," Hiltermann added, referring to the Supreme Iraqi Islamic Council, a powerful Shiite party, and Prime Minister Nuri al-Maliki's Dawa party.

Amended draft legislation on the crucial distribution of oil wealth in Iraq was approved by Maliki's cabinet on Tuesday and could go to parliament for review as early as next week.

Oil exports are Iraq's single most important source of revenue, even after more than four years of insurgent attacks on oil facilities.

Its proven reserves, estimated at 115 billion barrels, are thought to be the third largest in the world, but since the March 2003 US-led invasion production has tumbled from 3.5 million barrels per day to around two million.

Sadr's supporters said they would not support any law that would allow firms "whose governments are occupying Iraq" -- a reference to the United States, Britain and their coalition allies -- to sign Iraqi oil deals.

"The most serious problem with the law is the production-sharing agreements, which we categorically reject," said Nassar al-Rubaie, spokesman for Sadr's 32-member parliamentary bloc.

Such agreements, which provide for foreign oil companies to share investment and profits with the state, would "undermine Iraq's sovereignty in the short run and will strip it of its sovereignty in the long run", he added.

The Kurdish Regional Government, on the other hand, has demanded that the new oil law accommodate contracts it has already signed with foreign companies to exploit oil in northern Iraq.

"The Sunni extremists and the Shiite extremists are against this law without even discussing it," Kurdish MP Mahmud Othman told AFP.

"They don't want any foreigners involved in the oil sector even though we need foreign companies to help us invest and develop these resources."

The dispute could set the stage for a realignment of Iraqi politics, with the Sadr bloc gathering a nationalist front to overrule the Kurds and pass a law that would limit foreign involvement in the country's oil industry.

"If there were a new coalition of nationalists that incorporated the Sadr movement and the Dawa party and Fadhila that could overcome the Supreme Council and the Kurdish parties," Hiltermann said.

The Supreme Iraqi Islamic Council, the Dawa party, and Fadhila, a smaller Basra-based party, all appear to support the bill.

Othman said as long as the new draft does not deviate from the draft the Kurds signed in February they would likely stay on board.

But if the bill passes amid boycotts by both the Sadr movement and the main Sunni parties it would do little to heal the country's war wounds.

"It should be discussed when all the blocs are there, because this concerns everyone, every citizen," Othman said. "These people should discuss it and if they have different points of view they should talk about them."

Juan Cole on Cheney's visit to Iraq

Interesting that the Iraqi parliament is powerless to get US to withdraw! Again the lack of sovereignty in Iraq is transparent. Does Bush think that Cheney still has credibility and clout in Iraq? Ill bet no one let him go hunting in the green zone!

Cheney Greeted by Mortars, Demonstrations:
Iraqi Parliament pleads for US withdrawal

Al-Hayat writes in Arabic that US Vice President Dick Cheney was greeted, on his surprise visit to Baghdad, by a rain of mortar shells on the Green Zone and by protests in several cities organized by Puritan Shiite followers of cleric Muqtada al-Sadr. One could have added the bombing in Irbil, the seat of close US ally Massoud Barzani, the Kurdistan leader.

Aljazeera is alleging that high on Cheney's agenda is getting the new petroleum bill passed through parliament. That legislation is certainly one of the four benchmarks the Bush administration has pushed on the al-Maliki government, and given Cheney's background as CEO of Halliburton, it is plausible that the oil bill looms large in his visit. It is probably behind his scolding of Iraqi parliamentarians for even considering a two-month hiatus this summer.

Cheney arrived a day after a majority of Iraqi parlimentarians signed a petition in favor of the withdrawal of US troops from Iraq. Actually, last fall 131 signed a similar petition. By the rules of the Iraqi parliament, such petitions have no force. The sense of those deputies was communicated to a committe, which promised to report out the resolution to the entire parliament, which it apparently never did. So, Tuesday's move shows a 10% rise in commitment to the principle of withdrawal over 6 months ago, but may be no more consequential. A petition is not a vote, and is a sign of how powerless the parlimentarians feel.

Why Iraqis cannot agree on Oil Law

This leaves out some of the issues. It does not even mention production sharing agreements although it does note that some worry about control of Iraqi oil by foreign companies. This is obviously written in such a way as to completely minimize the role of foreign interests in drafting the law. It does give some of the reasons why the Kurds and Sunnis object to the law. Of course the oil union's disagreement is simply ignored. Typical of much stuff written for western consumption.


Why Iraqis Cannot Agree on an Oil Law

Author:
Lionel Beehner, Staff Writer

May 9, 2007
o Introduction
o What is contained in the draft oil bill?
o Why has it been so difficult to draft an oil law?
o What are the main points of contention?
o How much oil does Iraq have?
o Why has oil production stalled?
o What is the likelihood of the oil law passing parliament soon?
Introduction

Disagreements over oil and revenue sharing threaten to unravel hopes for a political breakthrough and national reconciliation in Iraq. A draft oil law has drawn criticisms from Iraq’s Sunnis, who prefer a stronger role for the central government, and from Kurds, who prefer a stronger role for the regional authorities. The majority Shiites have sought to mollify the Sunnis by keeping control of Iraq’s oil sector in Baghdad, not the provinces. The role of outside investors, as well as the classification of old versus new oil fields, also divides Iraqi politicians. Oil, of course, is the country’s most vital resource, accounting for 95 percent of government revenue. Yet output has fallen well short of Baghdad’s production targets, mostly due to corruption, poor security, and lack of investment.
What is contained in the draft oil bill?

The bill drafted in February gives overall planning responsibilities to the federal oil and gas council and the Iraq National Oil Company (INOC), a state-run company to be established once the bill is passed. Representatives from regional authorities can be part of the council and sit on INOC’s board. The bill also divvies up revenue from both existing and future oil fields based on regional population. However, four annexes introduced in recent weeks by the Iraqi oil minister, Hussein al-Shahristani, a Shiite, cede greater control of management of current oil fields and existing contracts to INOC.

The Kurds argue these annexes were drafted without their input and violate the constitution, which states that Baghdad, together with regional authorities, will determine the management of untapped fields. According to the annexes, 93 percent of Iraq’s proven petroleum reserves will be under the purview of INOC, leaving just 7 percent to regional authorities. “Kurdish dissatisfaction stems from its objection to a state-run, relatively unaccountable oil company that’s given almost all of Iraq’s proven reserves,” says Jonathan Morrow, legal adviser to the Kurdistan Regional Government’s natural resources minister. The draft bill is supposed to be signed into law no later than May 31, but experts doubt the Iraqi government will meet that deadline. “Unless these annexes that describe the distribution of revenue and role of ministry of oil and INOC are resolved, the hydrocarbon law in and of itself will not change anything,” says Frank Verrastro, director of the energy program at the Center for Strategic and International Studies.
Why has it been so difficult to draft an oil law?

Iraq’s Kurds and Sunni Arabs oppose the draft law for different reasons. The Kurds say it cedes too much control to Baghdad’s oil ministry and INOC. The Kurds want more regional autonomy to develop and pocket the revenues from existing and new fields on their territory, as well as those near the northern city of Kirkuk, which is under de facto Kurdish control. Moreover, they prefer greater authority to bypass Baghdad and sign contracts with foreign companies. The Sunnis, who reside mainly in regions lacking in major oil reserves, favor a hydrocarbon law that distributes revenue more evenly and according to need. Tariq Shafiq, one of the draft oil law’s principal authors, told United Press International the regions don’t have the “necessary institutions” or “required expertise” to manage their oil fields without the assistance of the central government and will become overly reliant on foreign companies.
What are the main points of contention?
o Revenue sharing. The precise distribution of revenues from Iraq’s oil production remains undecided and, according to Morrow, there has been “not one single negotiation for revenue sharing in Iraq.” The constitution is vague on the subject; Article 111 states simply that “oil and gas are the ownership of all the people of Iraq,” while Article 112 calls for a distribution of revenues “in a fair manner in proportion to the population,” taking into account regions deprived by Saddam’s regime that would be first in line for payments.
o The classification of new versus old oil fields. Kurds maintain that under the Iraqi constitution new production will be under the control of regional authorities. But Verrastro says the definition of “new” varies from region to region. Kurds, he says, would classify a new well in an old field as “new,” as well as any incremental exploration of existing fields.
o The role of foreign companies. Iraqis disagree over whether to allow foreign companies to develop their country’s untapped oil fields. Sunnis in particular are worried it would erode Iraqi sovereignty and redistribute oil revenues away from Iraqis and into foreign hands. But many experts say outside investors are needed to stimulate development of Iraq’s dilapidated oil infrastructure. “There’s a question if the [Iraq National Oil] Company has enough heft without foreign help,” Verrastro says.
How much oil does Iraq have?

Iraq's proven oil reserves are estimated to be around 115 billion barrels, making them the world’s third largest after Saudi Arabia’s and Canada’s. The bulk of Iraq’s known oil reserves lie primarily in the Kurdish-controlled north and Shiite-controlled south around Basra. But because of sanctions, neglect under Saddam, and lack of investment, Verrastro reckons less than 20 percent of the country has been fully explored. He estimates undiscovered reserves could be anywhere from 155 billion to over 230 billion barrels. “Iraq’s western desert” (PDF)—which is Sunni controlled—“is considered to be highly prolific but has yet to be explored,” writes Amy Myers Jaffe, an energy expert at Rice University’s James A. Baker III Institute for Public Policy. The bulk of Iraq’s known reserves lie around Basra in the south and Kirkuk in the north.
Why has oil production stalled?

In the run-up to the April 2003 war in Iraq, the Bush administration predicted that within five years Iraq would be producing 6 billion barrels of oil per day, more than enough to pay for its reconstruction. Verrastro says the White House failed to account for the devastated state of Iraq’s pumps and pipes, due to years of neglect, mismanagement, and financial stress caused by sanctions. He estimates that Iraqi oil production, currently around 2 million barrels per day, will not reach 4 million barrels per day until 2010. Production shortages over the past few years are mostly due to poor maintenance, corruption within the oil ministry, and a lack of security that has fueled smuggling and sabotage.

There has been virtually no development of new fields since the April 2003 invasion of Iraq, according to Jaffe. Many experts say the problem dates back to the onset of severe UN sanctions in 1991. Even during the oil-for-food program, which started in the late 1990s, Iraq’s oil infrastructure was badly neglected. The Brookings Institution’s Iraq Index estimates about four hundred insurgent attacks have targeted Iraqi oil infrastructure since 2003.

Another problem is the flight of trained technicians needed for Iraq’s oil industry. Jaffe points to “a looming gap in technical and managerial expertise,” combined with the “intimidation of key experts.” Many of the industry’s most capable technocrats under Saddam either fled Iraq or are of retirement age, says Verrastro.
What is the likelihood of the oil law passing parliament soon?

It depends on whether Iraq’s various factions are willing to make difficult political compromises. “I’m less confident now,” says Kenneth Katzman, a Middle East expert with the Congressional Research Service. “The Kurds have always had problems with the law but what I’m worried about really is the Sunni threat to pull out of the parliament entirely.” Most experts believe the Iraqis will not meet the May 31 ultimatum. “We’ve seen deadlines pass before so I don’t see what’s so magical about May 31,” says Verrastro. Morrow says it is possible for the oil bill to be passed without the annexes (which are voted on as a bloc, not individually) by summer, thus requiring more rounds of talks before parliament signs off on the revenue-sharing bill and other provisions. U.S. officials have made an oil law one of their main benchmarks to gauge political progress in Iraq.
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