Oil Grab in Iraq
By Antonia Juhasz and Raed Jarrar
02/27/07 "FPIF"
-- --- While
debate rages in the United States about the military in Iraq, an
equally important decision is being made inside of Iraq--the
future of Iraq’s oil. A new Iraqi law proposes to open the
country’s currently nationalized oil system to foreign corporate
control. But emblematic of the flawed promotion of “democracy”
by the Bush administration, this new law is news to most Iraqi
politicians.
A leaked copy of the proposed
hydrocarbon law appeared on the Internet last week at the same
time that it was introduced to the Iraqi Council of Ministers.
The law is expected to go to the Iraqi Council of
Representatives within weeks. Yet the Internet version was the
first look that most members of Iraq’s parliament had of the new
law.
Many Iraqi oil experts, like
Fouad Al-Ameer who was responsible for the leak, think that this
law is not an urgent item on the country's agenda. Other
observers and analysis share Al-Ameer's views and believe the
Bush administration, foreign oil companies, and the
International Monetary Fund are rushing the Iraqi government to
pass the law.
Not every aspect of the law is
harmful to Iraq. However, the current language favors the
interests of foreign oil corporations over the economic security
and development of Iraq. The law’s key negative components harm
Iraq’s national sovereignty, financial security, territorial
integrity, and democracy.
National Sovereignty and Financial Security
The new oil law gives foreign
corporations access to almost every sector of Iraq’s oil and
natural gas industry. This includes service contracts on
existing fields that are already being developed and that are
managed and operated by the Iraqi National Oil Company (INOC).
For fields that have already been discovered, but not yet
developed, the proposed law stipulates that INOC will have to be
a partner on these contracts. But for as-yet-undiscovered
fields, neither INOC nor private Iraqi companies receive
preference in new exploration and development. Foreign companies
have full access to these contracts.
The exploration and production
contracts give firms exclusive control of fields for up to 35
years including contracts that guarantee profits for 25-years. A
foreign company, if hired, is not required to partner with an
Iraqi company or reinvest any of its money in the Iraqi economy.
It’s not obligated to hire Iraqi workers train Iraqi workers, or
transfer technology.
The current law remains silent
on the type of contracts that the Iraqi government can use. The
law establishes a new Iraqi Federal Oil and Gas Council with
ultimate decision-making authority over the types of contracts
that will be employed. This Council will include, among others,
“executive managers of from important related petroleum
companies.” Thus, it is possible that foreign oil company
executives could sit on the Council. It would be unprecedented
for a sovereign country to have, for instance, an executive of
ExxonMobil on the board of its key oil and gas decision-making
body.
The law also does not appear to
restrict foreign corporate executives from making decisions on
their own contracts. Nor does there appear to be a “quorum”
requirement. Thus, if only five members of the Federal Oil and
Gas Council met--one from ExxonMobil, Shell, ChevronTexaco, and
two Iraqis--the foreign company representatives would apparently
be permitted to approve contacts for themselves.
Under the proposed law, the
Council has the ultimate power and authority to approve and
re-write any contract using whichever model it prefers if a "2/3
majority of the members in attendance" agree. Early drafts of
the bill, and the proposed model by the U.S. advocate very
unfair, and unconventional for Iraq, models such as Production
Sharing Agreements (PSAs) which would set long term contracts
with unfair conditions that may lead to the loss of hundreds of
billions of dollars of the Iraqi oil money as profits to foreign
companies.
The Council will also decide the
fate of the existing exploration and production contracts
already signed with the French, Chinese, and Russians, among
others.
The law does not clarify who
ultimately controls production levels. The contractee--the INOC,
foreign, or domestic firms--appears to have the right to
determine levels of production. However, a clause reads, “In the
event that, for national policy considerations, there is a need
to introduce limitations on the national level of Petroleum
Production, such limitations shall be applied in a fair and
equitable manner and on a pro-rata basis for each Contract Area
on the basis of approved Field Development Plans.” The clause
does not indicate who makes this decision, what a “fair and
equitable manner” means, or how it is enforced. If foreign
companies, rather than the Iraqi government, ultimately have
control over production levels, then Iraq’s relationship to OPEC
and other similar organizations would be deeply threatened.
Democracy and Territorial Integrity
Many Iraqi oil experts are already referring to the draft law
as the "Split Iraq Fund," arguing that it facilitates plans for
splitting Iraq into three ethnic/religious regions. The experts
believe the law undermines the central government and shifts
important decision-making and responsibilities to the regional
entities. This shift could serve as the foundation for
establishing three new independent states, which is the goal of
a number of separatist leaders.
The law opens the possibility of the regions taking control
of Iraq’s oil, but it also maintains the possibility of the
central government retaining control. In fact, the law was
written in a vague manner to help ensure passage, a ploy
reminiscent of the passage of the Iraqi constitution. There is a
significant conflict between the Bush administration and others
in Iraq who would like ultimate authority for Iraq’s oil to rest
with the central government and those who would like to see the
nation split in three. Both groups are powerful in Iraq. Both
groups have been mollified, for now, to ensure the law's
passage.
But two very different outcomes are possible. If the central
government remains the ultimate decision-making authority in
Iraq, then the Iraq Federal Oil and Gas Council will exercise
power over the regions. And if the regions emerge as the
strongest power in Iraq, then the Council could simply become a
silent rubber stamp, enforcing the will of the regions. The same
lack of clarity exists in Iraq's constitution.
The daily lives of most people in Iraq are overwhelmed with
meeting basic needs. They are unaware of the details and full
nature of the oil law shortly to be considered in parliament.
Their parliamentarians, in turn, have not been included in the
debate over the law and were unable to even read the draft until
it was leaked on the Internet. Those Iraqis able to make their
voices heard on the oil law want more time. They urge postponing
a decision until Iraqis have their own sovereign state without a
foreign occupation.
Passing this oil law while the political future of Iraq is
unclear can only further the existing schisms in the Iraqi
government. Forcing its passage will achieve nothing more than
an increase in the levels of violence, anger, and instability in
Iraq and a prolongation of the U.S. occupation.
Raed Jarrar Iraq Project Director for
Global Exchange. He is
an Iraqi blogger and architect. He runs a blog called "Raed
in the Middle." Antonia Juhasz is the Ida Tarbell Fellow at
Oil Change International, a
Visiting Scholar with the Institute
for Policy Studies, and author of
The Bush Agenda:
Invading the World, One Economy at a Time
(HarperCollins, April 2006).
For More Information
For more information and steps to take action visit:
http://www.priceofoil.org.
Detailed background information can be found at:
http://raedinthemiddle.blogspot.com,
http://www.TheBushAgenda.net, and
http://www.globalexchange.org.
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